What is Product Landing costs?

One of the challenges for the Importer is to know their Product Landing costs of the Imported items that he is purchasing. What is Product landing costs and why arriving at this costs and its components are important? How it helps?

The reasons are many and lets try to explain here.

One of the Challenges is how to arrive at the Total Landing Costs and what to consider? Few costs components are as below.

1. Product purchase price
2. Product Customs duty paid to the Customs Department.
3. Logistics and other holding costs
4. Charges like Bank or Support Charges
5. Important is the “Shipment” or “Transport charges” – How to arrive at them and how to divide this costs into the Item level?

Second challenge is, the involvement of multiple parties / vendors in this engagement and each one of them have different currencies to pay.

What is Product Landing Costs for each Supplier / Vendor Payments? It’s unique challenge to address.

As per the UAE Customs, you need to capture the below details at the time of reporting an Import.

The Order would contain the detail like

• Suppliers Details and country with Currency.
• Airway Bill / Bill of Lading with Dates
• Port of Landing and Port of Discharge
• Assessable Value before the Landing costs
• VAT Taxes applied (Reverse taxes at UAE)
• Product details with Units of measurement and the Unit price. Any discount offered is also captured.
• Currency Exchange rates –The rate fluctuation can kill all your profit margins. So be careful here to fix the rates with Bank before agree to send the money.
• There are some more factors needed to be considered with Supplier as these costs might be borne by Client.
  • Insurance cost from Supplier location to the Port of landing.
  • Shipment charges/ Containers fees.

There are cases, where a Courier company like DHL, Fedex couriers, clears the Customs and charge you a figure to Pay. So the landing costs has one components to add.

Landing Cost process: How to calculate landed cost of imported goods? Landed Cost formula in Excel

We import a Machine form India to Dubai, UAE. Now the port of landing is Dubai, where the Customs would clear the process and release the Machine. Having a Landed cost formula in Excel helps to calculate the value easily.

So lets put the details one by one.

Below is the Landed Cost formula with details.

1. Supplier quote shows
   • Product name and HSN codes
   • Cost of the Product is – USD 5,000
   • Sea Insurance – $ 150.00
   • Sea Freight – $174.00
   • So total product cost for Assessable value is = $5,324.00
   • Port of Discharge – Mumbai, India.
   • Port of landing – Dubai, UAE.
   • Exchange rate between USD and AED = AED 3.75 per dollar.
2. Now you paid 100% advance money to supplier and send the materials.
3. Now the material is landed at Dubai, UAE Customs.
   • We have to get an assessable value of the item = $5324 (This changes depending on how the items are treated and also includes Insurance and Freight)
   • Exchange rate is AED 3.75 per USD. So the assessable value in AED = AED 19,965.00
   • VAT 5% – Reverse Charge (RCM) is calculated on this  = AED 998.25
4. Now local logistics charges
   1. Local logistic charges – AED 100.00
   2. Local insurance and others – AED 124.00

Now the total landed cost (In local currency) of Machine is (Landed Cost of a Machine based on above values)

Product cost + Sea Insurance + Sea Freight + Customs / Taxes + Local logistics + Local Insurance = AED 19965.00 + AED 998.25 + AED 100 + AED 124  = AED 21,187.25

So total landed Cost = AED 21,187.25

Above calculation looks simple when you are doing only one Import order and you can do the calculations manually. What happens the business involved that needs to be doing this again and again?

So ACTouch.com created an ERP Software with a facility to find the Landing Cost and helps to know the actual cost of the product. We have done the ERP in such a way that it can also handle the payment to multiple vendors at a time.

If you look at the above scenarios, we have to pay for multiple parties against a Single Goods Receipt note, but different amounts.

1. Indian Supplier and its payment.
2. Freight and Insurance company (Sea freights)
3. Customs with VAT 5%
4. Local Logistic party
5. Local Insurance party.

Check our Product Landing Cost calculator to get benefitted

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What is important is, the same data is generated and added to UAE VAT Returns form that need a value called “Landed Costs” details.

To know more Email: sales@actouch.com

Additional Articles to Read

1. ERP Go live check list
2. Finished Goods and Its production costing
3. ACTouch also supports those companies that use VAT Sales taxes and its business practices.