Landed CostingLanded Costing

As Customs Brokers, the Value As Customs Brokers, the Value Added Services that we are Added Services that we are being asked to provide is being asked to provide is increasing every year.increasing every year.

Landed Cost Analysis or Landed Landed Cost Analysis or Landed Cost Reports is one of these Cost Reports is one of these areas, where special attention is areas, where special attention is required. required.

Landed CostLanded Cost

The definition of Customs Value is defined in The definition of Customs Value is defined in the Act, and calculated by the compile the Act, and calculated by the compile system in most instances.system in most instances.

Landed Costs analysis however requires Landed Costs analysis however requires further calculations that run parallel to and further calculations that run parallel to and join the customs value calculations of goods.join the customs value calculations of goods.

Landed Cost of goods involves the Landed Cost of goods involves the calculation of all costs and expenses in calculation of all costs and expenses in arriving at a unit value of goods generally at arriving at a unit value of goods generally at the importers warehouse.the importers warehouse.

Landed CostLanded Cost When considering the requirements of a landed costing, the When considering the requirements of a landed costing, the

inclusion or exclusion of GST must be established. Where inclusion or exclusion of GST must be established. Where the importer is entitled to an input tax credit for the GST, it the importer is entitled to an input tax credit for the GST, it will be excluded from the unit Landed Cost.will be excluded from the unit Landed Cost.

Where the importer is not entitled to an input tax credit, the Where the importer is not entitled to an input tax credit, the GST must be included in the calculation of the landed cost, GST must be included in the calculation of the landed cost, as it forms part of the cost of goods.as it forms part of the cost of goods.

As a separate exercise, the VOTI must be calculated, and As a separate exercise, the VOTI must be calculated, and used to establish the GST of the line unit price, where the used to establish the GST of the line unit price, where the importer is not entitled to an Input Tax Credit.importer is not entitled to an Input Tax Credit.

Generally the compile entry factor is used as the basis of Generally the compile entry factor is used as the basis of customs value within the landed cost report.customs value within the landed cost report.

The Duty is calculated on the Customs Value on a per item The Duty is calculated on the Customs Value on a per item basis, and then the duty figure is included in the Landing basis, and then the duty figure is included in the Landing Charges for that particular line.Charges for that particular line.

Landed CostLanded Cost All charges that are excluded from All charges that are excluded from

Customs Value and are part of the cost Customs Value and are part of the cost of landing the goods must be included in of landing the goods must be included in the landed cost unit price.the landed cost unit price.

Be aware of any discounts or Be aware of any discounts or commissions that are not allowable or do commissions that are not allowable or do not form part of the Customs Value for not form part of the Customs Value for landed cost purposes.landed cost purposes.

In generating the Landed Cost, the actual In generating the Landed Cost, the actual Customs Duty must be included, as a Customs Duty must be included, as a figure based on the Customs Value.figure based on the Customs Value.

Landed CostLanded Cost Some importers may require the apportionment Some importers may require the apportionment

of freight or other landing charges other than by of freight or other landing charges other than by value. E.g. Cubic area or weight of individual value. E.g. Cubic area or weight of individual item. This requires that each product have their item. This requires that each product have their dimensions or weight available on a per unit dimensions or weight available on a per unit basis.basis.

The rate of exchange to be used for the The rate of exchange to be used for the calculation of the costs of goods may be based on calculation of the costs of goods may be based on a Forward Exchange Contract, or other financial a Forward Exchange Contract, or other financial or commercial rate available to the importer.or commercial rate available to the importer.

SummarySummary Calculation of a Landed Cost is a commercial Calculation of a Landed Cost is a commercial

exercise, and therefore the basis of calculation of exercise, and therefore the basis of calculation of CV must only be used to establish the Customs CV must only be used to establish the Customs Duty payable per item.Duty payable per item.

Apportionment of freight charges and other Apportionment of freight charges and other landing costs can be conducted by different landing costs can be conducted by different methods, not just by reference to the value.methods, not just by reference to the value.

The Landed cost unit may vary between The Landed cost unit may vary between commodities due to the nature of the goods.commodities due to the nature of the goods.

All landed costs should include a variance All landed costs should include a variance mechanism to ensure that the input figures have mechanism to ensure that the input figures have been apportioned correctly.been apportioned correctly.