Landed Cost of a Machine from China: How to Calculate It
- ✓First, make both quotations the same Incoterm
- ✓The formula, in one line
- ✓Freight is per shipment, not per machine
Every week a buyer sends me two quotations for the same machine and asks which one is cheaper. In most cases they are comparing the wrong numbers: one quotation is FOB, the other is delivered to a port on the other side of the country, and neither shows what the machine actually costs when it is standing on site. Landed cost is the only number that can be compared.
This is the worksheet I use before advising a buyer to sign: every line that goes into the landed cost, a worked example with real proportions, and the three numbers you should get in writing before the deposit leaves your account.
Run the numbers yourself with the calculator →
1. First, make both quotations the same Incoterm
FOB, CIF and door-to-door quotations are not the same product and cannot be compared line by line. Ask every supplier to quote the same term, FOB is the easiest common base, and then add your own local costs yourself. If a supplier only quotes door-to-door, ask for the breakdown, not just the total.
2. The formula, in one line
Landed cost equals FOB price, plus international freight, plus insurance, plus import duty on CIF, plus VAT or sales tax on CIF plus duty, plus destination port charges, plus inland transport and offloading, plus commissioning and first spare parts. Everything else is a detail of one of those lines.
3. Freight is per shipment, not per machine
A 40-foot container has a fixed cost whether you fill it or not. One machine in one container can add 10 to 15 percent to the FOB price; two machines in the same container can bring that down to 6 to 8 percent each. Ask for the machine dimensions before you decide, and check whether it fits with the mast or conveyor folded.
4. Insurance is small and worth taking
Marine insurance is usually around 0.3 to 0.5 percent of the CIF value. On a $34,000 shipment that is roughly $130. Refusing it to save $130 is a bad trade when one bent hydraulic cylinder costs more than the premium for the whole container.
5. The HS code decides your duty
Duty is charged per HS code, not per machine description. Get the code in writing from your customs broker before you compare prices, then apply your country's tariff to the CIF value. A wrong code found at the port means storage, penalties and delays that cost more than the duty itself.
6. Tax is charged on CIF plus duty
Import VAT or sales tax is calculated on the CIF value plus the duty, not on the FOB price. This is why a machine with 10 percent duty and 11 percent tax does not land 21 percent over FOB, it lands closer to 22 to 23 percent over, before freight and port charges are counted.
7. Port charges and inland transport
Terminal handling, documentation, storage and the release fee are charged by your port, not by the supplier. Then comes inland transport: a lowbed trailer, a crane or forklift to unload, and road permits if the load is oversized. Take a written quote from a local transporter using the machine dimensions, not an estimate from memory.
8. Commissioning and the first spare parts
The machine does not earn money until it is assembled, wired, filled and tested. Budget for an installation and commissioning engineer, and for the first set of wear parts, jaw plates, hammers, screens, blades or dies, ordered with the machine while the container is still being loaded. Ordering them later costs a second freight bill.
9. Compare the final number, not the FOB price
Two suppliers quoted $28,000 and $31,000 FOB. The cheaper machine needed a larger container, extra inland permits and imported spare parts; the landed cost came out $1,800 higher than the more expensive one. Put every line in one column and compare only the bottom line.
The rule I use on every quotation
Before recommending a supplier, I put the FOB price, freight, insurance, duty, tax, port and inland costs into one table and show the buyer the landed number per machine, not the factory number. If a quotation cannot be broken down into these lines, it is not a quotation yet, it is a suggestion.
Frequently asked questions
What is the difference between FOB and CIF?
FOB means the seller delivers the machine onto the ship at the Chinese port; you pay freight and insurance. CIF means the seller also pays freight and insurance to your destination port. Neither includes duty, tax, port charges or inland transport, which is why both can hide the real cost.
Where do I find the duty rate for my machine?
Ask your customs broker for the HS code first, using the machine technical specification sheet, then check your national tariff for that code. Duty is set by machine type and country, so a jaw crusher and a batching plant rarely share a rate. Do not let the supplier guess the code.
Is a door-to-door quote from the supplier worth it?
It is useful if it is itemised: FOB, freight, insurance, duty, tax, port and inland transport shown separately. If it is a single number with no breakdown, you cannot check it, and you cannot compare it with another supplier.
Is it cheaper to ship two machines in one container?
Almost always yes for the freight line. Two machines in one 40-foot container can cut the freight per machine by 30 to 40 percent. Check the dimensions carefully first: the shipment is only worth it if both machines fit with the parts folded and crated.
Which exchange rate should I use in the calculation?
Use the rate on the day you expect to pay, not the rate on the day you signed, and add a 2 to 3 percent buffer. Currency movement between the deposit and the balance is a real cost line, especially on shipments that take two months.
Why is my landed cost higher than the quotation?
The usual causes are storage or demurrage at the port, a crane that was larger than planned, road permits for an oversized load, a second freight bill for spare parts ordered late, and currency movement. Each one is avoidable with a written local quote before the machine ships.