Common mistake: Importers focus only on the product price (FOB) and overlook the total landed cost. Reality: The product itself is typically only 50-70% of your total landed cost. Calculate every component accurately to protect your profit margins.
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Calculate Your Total Landed Cost
Total Landed Cost Formula
TOTAL LANDED COST = Product Cost (FOB) + International Shipping + Insurance + Customs Duties & Taxes + Customs Broker Fees + Inland Transportation + Additional Costs
Understanding Each Cost Component
1. Product Cost (FOB)
50-70% of total
Supplier price delivered to a Korean port (Busan or Incheon)
- FOB: Most common, you arrange shipping
- CIF: Supplier includes freight + insurance
- EXW: Cheapest, you handle everything
2. Shipping Cost
10-20% of total
Freight from a Korean port to your destination country
- Ocean FCL: $2,000-$6,000 per container
- Ocean LCL: $50-$150 per CBM
- Air: $4-$8 per kg
3. Insurance
0.5-1.5% of value
Covers loss or damage to your cargo during transit
Always recommended, especially for first orders and high-value shipments
4. Customs Duty
0-30% (usually 0% with FTA)
Tax on imported goods, set by your product's HS code
Korea's 21 FTAs covering 59 countries eliminate most duties to the USA, EU, UK, Canada, and Australia
5. Customs Broker
$150-$300 per shipment
Files your customs entry and pays duties on your behalf
Essential for first-time importers and complex shipments
6. Inland Transport
$200-$1,000
Trucking from the arrival port to your warehouse
Varies with distance, shipment size, and fuel surcharges
Shipping Method Quick Reference
| Method | Transit | Cost | Best For |
|---|---|---|---|
| Ocean FCL | 14-35 days | $2,000-$6,000 | >15 CBM volume |
| Ocean LCL | 20-40 days | $50-150/CBM | <15 CBM volume |
| Air Freight | 3-7 days | $4-8/kg | Urgent, high-value |
| Express | 2-4 days | $8-15/kg | Samples, <100 kg |
Real-World Examples
Example 1: K-Beauty Skincare (Seoul → Los Angeles)
Product FOB: $6,000
Volume: 8 CBM | Weight: 250 kg
| Product (FOB) | $6,000 | 70.4% |
| Ocean LCL (8 CBM × $150) | $1,200 | 14.1% |
| Insurance (1%) | $60 | 0.7% |
| Customs Duty (KORUS FTA) | $0 | 0% |
| Customs Broker | $250 | 2.9% |
| Inland Transport | $300 | 3.5% |
| Misc. Fees | $480 | 5.6% |
| TOTAL | $8,290 | 100% |
Per Unit: $8.29 | Suggested Retail: $25-30 (3x markup) | Margin: 67-72%
Example 2: Electronics (Busan → New York)
Product FOB: $15,000
Volume: 18 CBM | Weight: 1,200 kg
| Product (FOB) | $15,000 | 75.0% |
| Ocean FCL 20ft | $3,200 | 16.0% |
| Insurance (1%) | $150 | 0.8% |
| Customs Duty (KORUS FTA) | $0 | 0% |
| Customs Broker | $300 | 1.5% |
| Inland Transport | $450 | 2.3% |
| Quality Testing (UL/FCC) | $800 | 4.0% |
| Misc. | $85 | 0.4% |
| TOTAL | $19,985 | 100% |
Per Unit: $39.97 | Suggested Retail: $99-129 | Margin: 60-69%
Cost Optimization Strategies
1. Use FTA Benefits
Save 5-30% on duties
Request a Certificate of Origin from your supplier ($30-50). It can save thousands of dollars in duty on every shipment.
2. Choose Right Container
FCL cheaper if >15 CBM
At 15 CBM, LCL runs about $2,250 while an FCL 20ft container is around $2,200. Consider ordering more to fill a full container.
3. Avoid Peak Season
Save 30-50% on freight
Ship in the low season (Feb-Apr) when ocean rates bottom out. Avoid the Oct-Dec peak rush before Lunar New Year.
4. Compare Forwarders
Save 20-30% on shipping
Get five or more quotes. Rates on the same route can vary by $700 or more, adding up to thousands in annual savings.
Common Calculation Mistakes
Mistake 1: Using FOB for duty calculation
Wrong: FOB × duty rate
Right: (FOB + freight + insurance) × duty rate
Impact: under-calculating the dutiable value leads to surprise costs at clearance
Mistake 2: Forgetting VAT/GST
The EU, UK, Australia, and Canada charge 10-27% VAT or GST on (CIF + Duty)
This is a major cost that importers routinely forget to budget for
Mistake 3: Not calculating volumetric weight
Air and express carriers charge by whichever is higher: actual or volumetric weight
Light but bulky products cost far more to ship than their scale weight suggests
Key Takeaways
- Product cost = only 50-70% of total landed cost
- Always calculate TOTAL before ordering
- FTA can save 5-30% on duties - don't ignore it
- Get 3-5 freight quotes - prices vary 20-30%
- FCL is cheaper if volume >15 CBM
- Budget 10% contingency for unexpected costs
- Retail price must be 2.5-5x landed cost for viability
Accurate cost calculation = foundation of profitable importing.
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