The price on a machinery quote is rarely the price you pay. A quote of USD 42,000 FOB is the cost of the machine at the Chinese port; it is not the cost of a machine that is unloaded, cleared, installed and running in your plant. The gap is usually large enough to change which supplier wins, so calculate the landed cost before you compare quotes, not after you have paid the deposit.
What is landed cost, and why compare it instead of the quote?
Landed cost is the total of every charge needed to get the machine from the factory gate to a working position on your floor. Two quotes with the same headline price can differ by thousands once the Incoterm, packing, and what is left out of each quote are counted. The Incoterms guide shows where each party's responsibility ends; this article turns that into a number.
The landed cost formula
Landed cost = goods price + international freight + insurance + import duty + destination port and customs charges + inland delivery + unloading and positioning + installation and training + first spare parts + payment costs. Import VAT or GST belongs in the cash-flow plan, but in most countries a VAT-registered company can reclaim it, so keep it on a separate line.
Worked example: a machine quoted at USD 42,000 FOB
The figures below are an illustration with stated assumptions, not a quote: one machine in a 20-foot container, a 5% duty rate and 20% VAT. Replace each line with your own forwarder quote and your country's customs tariff.
| Cost line | USD | How it is estimated |
|---|---|---|
| Machine, FOB Chinese port | 42,000 | Supplier quote |
| Ocean freight | 2,400 | Forwarder quote for your destination port |
| Cargo insurance | 147 | 110% of goods plus freight, at an assumed 0.3% rate |
| Import duty (5%) | 2,227 | Rate times the CIF value of 44,547; confirm the HS code |
| Destination port and document charges | 650 | Terminal handling, delivery order, documents |
| Customs broker | 300 | Declaration and clearance fee |
| Inland trucking | 700 | Port to your plant |
| Unloading and positioning | 900 | Crane or forklift and rigging crew |
| Installation and training | 1,200 | Remote guidance or a visiting engineer |
| First-year spare parts | 1,500 | Wear items and a few critical spares |
| Bank charges and exchange spread | 210 | About 0.5% of the goods price |
| Landed cost, excluding VAT | 52,234 | About 24% above the FOB price |
| Import VAT (20%), usually reclaimable | 9,355 | Rate times CIF value plus duty; a cash-flow item |
In this illustration the machine costs about 24% more than the FOB figure before VAT, and the cash you need on arrival is closer to USD 61,589. The percentage will differ for your route and product, but a landed cost well above the quote is normal, not a sign that something is wrong.
Which lines are most often forgotten?
- Unloading and positioning. A multi-ton machine cannot be moved by hand. Check the weight and the lifting points before arrival; the packing and receiving guide covers this.
- Voltage and control conversion. A transformer, a different plug or a control language change is a real cost if it is not in the quote. See voltage, frequency and control language.
- Spare parts and warranty terms. A cheap quote that excludes the first spare kit is not cheaper. See warranty and spare parts.
- Demurrage and storage. If paperwork is late, the container accrues daily charges at the port.
- Cost of money. A long lead time with a large deposit ties up capital before the machine produces anything.
How do duties and freight change the answer?
Duty depends on the HS classification and the rules of your country, and classification mistakes are costly, so agree the code with your customs broker before shipping. Tariff policy can change; our note on tariff changes and machinery exports explains why you should check the current rate at the time of shipment. Ocean freight also moves from quarter to quarter, as described in the freight article, so a freight line quoted months ago should be refreshed before you commit.
How to use landed cost when comparing suppliers
- Ask every supplier to quote on the same Incoterm and the same scope: same options, same spare kit, same packing.
- Put each quote into one table with the lines above and mark every line that is "not included" instead of leaving it blank. Reading a quote line by line shows what usually goes missing.
- Get one forwarder quote and one customs-broker estimate, and use them for all suppliers so the comparison is fair.
- Add a contingency of 5% to 10% for lines you could not confirm.
- Compare the totals. A supplier who is 4% more expensive on FOB but includes spares, voltage conversion and training may be the cheaper choice overall.
Checklist before you pay the deposit
- Incoterm and named port written in the order.
- HS code and duty rate confirmed with your broker.
- Freight and insurance quotes less than 30 days old.
- Voltage, plug and control language confirmed in writing.
- Installation, training and spare parts either priced or consciously excluded.
- Budget for VAT cash flow and demurrage buffer.
If you send us your target model, destination country and port, we can ask the factory to quote on a consistent basis and help you build the comparison. Use the quote form to start.