Landed USA Price List - Selling in America with Landed Cost
To calculate the landed USA price, you need to add up the following components:
- EXW Product Price (raw materials, processing, margins);
- International shipping/transportation Italy - United States;
- American customs duties and import taxes;
- Customs clearance costs, duties, (air)port handling;
- Insurance, risk of damage, loss;
- Operational costs/overhead (management costs, packaging, documentation, currency exchange, bank commissions).
For the American customer, then, the landed cost represents the final price, what you might call a turnkey price, to receive the product in America fully available without the American customer having to worry about any additional costs.
Topics covered on this ExportUSA website page:
And that's where the competitive advantage of quoting using a landed USA price list lies: The American customer has no risk on the final price of the goods because all risks are borne by the seller. The underlying contractual commitment of the landed USA price, in fact, is to deliver to the destination chosen by the American customer a product free of charges and constraints and fully usable by the American customer for resale or different uses.
Calculating the landed cost and having a landed USA price list is surely a prerequisite for selling in America and is a powerful commercial lever for competing in America. In other words, for companies interested in the American market, the Landed Cost is not an option, it's a necessity.
Often, it is confused with the selling price + shipping costs but, as we have seen, in reality, calculating the landed USA price includes a whole series of costs that must be added to the EXW - ex works - price of a product before it reaches the American customer.
It goes without saying that calculating the landed USA price requires shipping with Incoterm DDP - Delivery Duty Paid as it specifically involves providing the American buyer with a final price that includes both transportation costs and customs clearance costs and the payment of American customs duties.
The error, the urban legend, of the EXW as an alleged competitive advantage is persistent. Some sources, and not a few companies, claim that using Ex Works delivery makes the product more competitive. But it's an illusion: the Incoterm used does not change the total costs, it only changes the distribution of costs between the seller and the buyer, but not the total cost of the product delivered to its destination. In any case, this total cost will have to be borne by the buyer: it's an alibi for those who don't want to calculate it. If you offer a quote with an EXW price but the American customer then has to incur very high costs for transportation, customs clearance, and handling, your low price ends up being a competitive disadvantage.
For the American customer, the risk dimension is more important than the price. The way the American legal system is structured means that the risk component includes several aspects all related to non-compliance with the regulations governing trade in America, as well as the supply chain and sales on the American market: Import procedures, calculation and payment of customs duties, product compliance with various regulatory areas [FDA for example, or FCC, USDA etc.], seller compliance with anti-money laundering regulations and commercial sanctions, taxation and tax compliance [think, for example, of the obligation to pay sales tax].
Each of these regulatory areas represents a risk: Non-compliance turns into liability and liability turns into damage and damage turns into a cost [in terms of compensation for damages and legal fees]. There may also be other sanctions beyond monetary damage; think, for example, of being blacklisted by the FDA.
The US legal and sanction system takes all aspects related to the issue of liability very seriously and legal action is very swift. Therefore, the American customer does everything possible to transfer the risks to the seller. In this sense, the landed USA price with incoterm DDP is the ideal solution.
The risk issue for the American customer is now exacerbated by all the changes that have occurred and are ongoing regarding duties for importing to the USA. It is an area where changes are still ongoing and it is also difficult to understand what the state of the art of customs legislation regarding imports to the USA is. Uncertainty still reigns and uncertainty = risk. That's why today, more than ever, calculating the landed USA price is vitally important for selling in America.
EXW Price Italy $1,000,000
Total costs $9000
Landed USA Price: $9000 + $150,840 = $159,840
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This article was inspired by the latest issue of the FaireExport newsletter by our friend Roberto Coppola. Those who wish to subscribe to the newsletter can do so from this page:
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