Getting a total landed cost may seem overwhelming, but it does not need to be. In fact, calculating a landed cost can be simple, as long as you understand your products and the tools you are using to calculate a total landed cost.
Decoding landed cost
Perhaps the most important thing to know about landed cost is that it is more than just duty and taxes. Zonos’™ total landed cost calculation includes duty and taxes as well as any other charges that might be incurred, depending on the shipping carrier and service level used.
What makes up a total landed cost?
- DDP (Delivery Duty Paid) fee
- Advancement fee
- Brokerage fee
- Local currency
- Other fees
Each country taxes differently. Some countries have a general consumption tax typically referred to as VAT (Value Added Tax) but also as GST (Goods and Services Tax). Australia and Canada both have GST; Canada also has HST, PST or QST, depending on the province. Even VAT and GST can be calculated differently, depending on the destination. For example, in the EU, VAT is calculated on the entire order total, including VAT on shipping costs and duty costs. Zonos will calculate the appropriate tax rate by country, including when de minimis value affects the calculation. Some destinations, e.g. Hong Kong, do not have taxes applied to their imports.
Duty is a type of tax typically determined by the HS code for the imported item. Zonos will dynamically assign your items an HS code in the Zonos Checkout or Zonos API. In many cases, eCommerce orders will incur taxes but not duty. One example would be imports under the de minimis duty to the EU but not under the de minimis VAT. Another example would be an item that receives preferential treatment on duty, because the item is manufactured in a country where a free trade agreement (e.g., NAFTA) is in place with the destination country.
In small package shipping, DDP (Delivery Duty Paid) is a loosely used term to describe the process of billing duties and taxes back to you as a shipper. Both DHL and UPS charge a DDP fee, but FedEx does not. In the case of international mail and parcel providers e.g. DHL eCommerce, RR Donnely, APC Logistics, and Landmark, they do not charge a DDP fee in most cases. Confirm with your provider what fees you are getting charged, and you can waive or reduce them in the Zonos platform.
|Carrier||DDP description||DDP fee|
|UPS||Duty and Tax Forwarding Surcharge||$15 USD|
|DHL||Duties and Taxes Paid (DTP)||$15 USD|
|FedEx||Bill Duty and Tax to Shipper||$0|
Many carriers’ customs brokers will pay the duty and tax in advance to local customs and charge a fee for fronting the cash. Shippers will use different terms for basically the same service, and in most cases, they will charge a minimum amount (in the destination currency) as well as a percentage of the amount of money they fronted. These fees can be very frustrating to shoppers, because they are not well disclosed by the carriers or online retailers.
to-may-toe or tomato
to-mah-toe? Just to make it “super easy”, each shipping carrier uses different terminology to describe their advancement fee. To help you decode advancement fees, below is a cheat sheet for shippers and their jargon for an advancement fee. This information can help with asking for the right international fee waivers in a negotiation with a carrier like UPS, FedEx, or DHL.
|Carrier||Advancement term||Service level|
|UPS||Bond Fee||Shipments to Canada|
|UPS||Disbursement Fee||Express, Saver, Expedited|
|FedEx||Advancement Fee||All services|
|DHL||Payment Deferment||DHL Express|
The impact of advancement fees on your international customers’ imports can be very high. In some cases, it can be higher than the taxes, duty, or both combined. Also to compound the issue, these charges are also subject to VAT. In the UK, FedEx will charge ￡12 (15.87 USD) plus VAT on the fee so it can be very cost prohibitive if you do not waive these fees. Below are some examples of these fees.
|Carrier and fees||Destination||Minimum amount or percentage|
|FedEx Advancement Fee||United Kingdom||2.5% of the advance or ￡12 GBP, whichever is greater|
|UPS Disbursement Fee||France||2.5% of the advance or €14 EUR, whichever is greater|
|DHL Payment Deferment||Japan||2% of the advance or ¥1000 YEN, whichever is greater|
Zonos Landed Cost calculates the different advancement fees by carrier, country, and currency. These fees are charged by the carrier in the destination country (e.g. UPS France); many times, the carrier’s duty and tax API’s do not calculate these fees.
Whether or not you bill duties and taxes to you as a shipper or let your customer pay these charges, they are billed either way. If you can negotiate a discount on the advancement fee, we recommend sending shipments DDP, because it typically only applies to your negotiated agreement with that carrier. If you have a negotiated advancement fee, and the shipment is sent DDU (Delivery Duty Unpaid), the end customer will likely still get the book rate on the advancement fee.
UPS and FedEx both have brokerage fees on ground shipments into Canada. UPS Standard to Canada charges a brokerage fee called “Entry Preparation Fee”, and FedEx charges a “Clearance Entry Fee”.
|Carrier service||Shipment value (CAD)||Entry preparation fees|
|UPS Standard to Canada||$60.01 CAD - $100 CAD||$19.95 CAD|
|FedEx Ground to Canada||$60.01 CAD - $100 CAD||$19.30 CAD|
UPS and FedEx do not charge brokerage fees on international air shipments into Canada, but as outlined, they will still charge advancement fees. To see an example of how brokerage fees can impact a landed cost, refer to our Zonos UPS Brokerage Fee Calculator.
Zonos Landed Cost also calculates currencies’ mid-market foreign exchange (FX) rates to help get a landed cost. This is important to know how this helps in getting an appropriate landed cost and how it can cause a slight difference in the calculated landed cost at checkout vs. the actual billed landed cost.
A landed cost calculator must take currency fluctuations into account, because many of the clearance fees are in the local currency.
- If an order is completed today, and you ship the order via DHL Express to Japan a few days later, the advancement fee you calculate at checkout may be $8.79 USD (1 JPY = .008791 USD).
- If the shipment for the order cleared customs one week later, and the exchange rate was .008587 USD, then the USD amount is now $8.56 USD.
Most of the time, the FX fluctuations are minor and do not have a significant impact on the total landed cost, but this can cause discrepancies when you reconcile the duty and tax bill as you will win some and lose some. The only way to eliminate the risk of currency fluctuations is to use a landed cost guarantee service such as the Zonos Landed Cost Guarantee. Note that, as with any guaranteed service, profit margins are built into the cost. Be sure to ask the right questions to any provider offering a landed cost guarantee to understand the additional costs built into the guaranteed landed cost.
There are other less frequently charged carrier or customs fees that can be accrued on an international shipment. Additional line-item fees are charged by UPS and FedEx for having an entry that goes over five tariff lines. Government bureaus like the FDA may have fees that could be applied to shipments. If you are aware of a fee that could be charged on your import, please notify us to ensure the correct landed cost calculation.
Landed cost calculation breakdown example
The following amounts are needed in this example to calculate a landed cost shipment to the UK with a generic carrier.
- Product total = $180 USD
- Shipping total = $30 USD
- VAT = 20%
- Duty rate = 4.5%
- UK Advancement Fee = 11.00 GBP or 2.5% whichever is greater
- DDP Fee = $15 USD
- 1 USD = 0.76 GBP British pound sterling
|Line item||US dollar||British pounds|
|4.5% Duty on Product||$8.10 USD||￡6.16 GBP|
|4.5% Duty on Shipping||$1.35 USD||￡1.03 GBP|
|20% VAT on Product||$36 USD||￡27.36 GBP|
|20% VAT on Shipping||$6 USD||￡4.56 GBP|
|20% VAT on Duty Charge||$1.89 USD||￡1.44 GBP|
|11 GBP Advancement Fee||$14.47 USD||￡11 GBP|
|20% VAT on Advancement Fee||$2.89 USD||￡2.20 GBP|
|$15 USD DDP Fee||$15 USD||￡11.40 GBP|
|Total Landed Cost||$85.71 USD||￡65.14 GBP|
Questions to ask when looking for a duty and tax calculator
- Do you require a harmonized code?
- If yes, to the 6-digit or 10-digit?
- Can your API or Checkout calculate duty without a harmonized code?
- Do you calculate a total landed cost, not just duty and tax?
First, customers want and expect a better shopping experience without the surprise of additional costs when your product arrives at the doorstep. Showing a total landed cost removes the unknown for your international customers, giving them a superior customer experience.
Second, get as many of these carrier fees reduced or waived as possible. Unfortunately, many carrier representatives are not even aware of all of these fees. In many cases, your ability to understand these fees and address them will allow you to negotiate a reduction or removal of them and will result in higher conversion, happier customers, and reduced customer service headaches.
Can I see the breakdown of landed cost at the checkout?
Yes, to see a breakdown of the landed cost inside of a Zonos Checkout you must first be logged in. After logging in, get a shipping quote and make sure duty and tax are paid with that shipping method. Then, in the checkout, click on the “Show/Hide Tax Breakdown” on the bottom left-hand corner of the page to see a breakdown of the taxes, duty, brokerage, and other fees.
Can I see a breakdown of a landed cost on a completed order?
Yes, go to the order in the Zonos back-end. Next, click on the words “duty & tax” underneath the order total, and you will be shown the cost breakdown.