Offshore sourcing cost-down: what actually moves landed cost

The unit price is the number everyone negotiates. Landed cost is the number that decides the year.

Filed under Partner factories and landed cost

The short answer: landed cost is unit price plus everything it takes to get a good part onto your shelf. Duty, freight, packaging, yield loss, rework, inspection and the tool itself all sit in that number. A cost-down that only attacks unit price often moves cost from one line to another.

The lines that make up landed cost

Unit price. Tooling, spread over the parts it will make. Packaging and cartons. Freight and insurance. Duty and customs fees, set by the classification and the legal origin of the goods. Inspection. Scrap and rework. Inventory carried while goods are on the water.

Duty depends on origin, and origin is a legal fact

Duty is set by the tariff classification and by where the article was last substantially transformed, not by the port it sailed from. Lightly processing or relabeling goods does not change origin. Get a classification ruling or a customs broker's written view before you plan savings around duty, and keep the paperwork that proves where the part was made.

Where cost-down usually comes from

Design changes that remove a secondary operation. A tool built for the real volume, not the first order. Packaging that ships more parts per carton. A partner factory whose normal work matches the part, so yield is higher from the first lot. Fewer surprises at inspection.

A review you can run this week

List every line above for one product. Mark the ones you know and the ones you are guessing. The guessed lines are where the next saving, or the next surprise, is hiding. This is general guidance, not legal or customs advice.

Straight answers

What is landed cost?

Unit price plus tooling, packaging, freight, insurance, duty and fees, inspection, yield loss and carrying cost: everything it takes to put a good part on your shelf.

Does shipping through a different port change duty?

No. Duty follows the tariff classification and the legal origin of the goods, which is where the article was last substantially transformed, not the port of departure.

How this note was made: researched and drafted with AI assistance, checked against the sources listed below and edited at JCH Design & Manufacturing.