Ask most Chinese manufacturers what their product costs and they'll give you the FOB price. Ask them what it costs to sell profitably in the U.S. and many don't actually know. This gap is where U.S. market entries fail. Here are the 8 cost layers you must calculate before you price a single unit.
Why FOB Price Is Only the Beginning
FOB (Free on Board) is the price to get your goods to the port of export in China. But your U.S. customer isn't buying from a Chinese port. Between that port and their door, costs stack up in ways that can easily add 40–80% to your unit cost — sometimes more.
The 8 Cost Layers
1. Ocean Freight
Cost per container varies dramatically by route, season, and market conditions. During peak shipping periods, rates can triple. Always budget for a range, not a fixed number. Per-unit freight cost depends on how densely your product packs into a container.
2. Import Duties and Tariffs
Every product has an HS (Harmonized System) code that determines the duty rate. For Chinese goods, this now includes Section 301 tariffs on top of the standard rate — often totaling 25% or more of the declared customs value. Misclassifying your product to get a lower rate is a federal customs violation.
3. Customs Brokerage Fees
A licensed customs broker files your formal entry with CBP. Fees vary but typically run $150–$400 per shipment plus ISF (Importer Security Filing) fees. This is non-optional for formal entry shipments.
4. Port Fees and Drayage
After your container clears customs, it needs to be moved from the port to your warehouse. Drayage (trucking) costs depend on distance and whether the port is congested. Los Angeles port drayage to a nearby warehouse typically runs $400–$900 per container.
5. 3PL Receiving and Storage
Your warehouse charges for unloading containers, checking in inventory, and storing it. These fees are typically per-pallet or per-unit. Monthly storage adds up fast for slow-moving SKUs.
6. FBA Prep (if applicable)
If you're selling through Amazon FBA, every unit needs to be prepared to Amazon's specifications — labeled, packaged, and sometimes poly-bagged or bundled. This labor cost is often overlooked entirely.
7. Amazon or Retail Fees
Amazon takes a referral fee of typically 8–15% depending on category, plus fulfillment fees. Retail buyers (Walmart, Target, Costco) have their own margin requirements, usually 40–55% of the retail price, plus compliance fees, chargebacks, and co-op advertising.
8. Returns and Damaged Inventory
Budget 3–8% of revenue for returns in most categories, higher for apparel and electronics. Every returned unit has a cost — processing, refurbishment or disposal, and the original shipping that can't be recovered.
A Real Example: $10 FOB Product
| Cost Layer | Per Unit Estimate |
|---|---|
| FOB Price (China) | $10.00 |
| Ocean freight (per unit) | $0.85 |
| Import duty (25% Section 301) | $2.50 |
| Customs brokerage (per unit) | $0.12 |
| Drayage + port fees | $0.18 |
| 3PL receiving + storage | $0.45 |
| FBA prep | $0.60 |
| True Landed Cost | $14.70 |
| Amazon FBA fulfillment fee | $4.25 |
| Amazon referral fee (15%) | $3.75 (on $25 retail) |
| Total Cost to Sell at $25 | $22.70 |
| Net Margin | $2.30 (9.2%) |
A product that looks like it has 60% gross margin at FOB often ends up with 9% net margin after all cost layers. You must model this before entering the U.S. market — not after your first shipment arrives.
How TLT Commerce Group Can Help
One of the first things we do with every new client is build a true landed cost model for their specific product, shipping route, and sales channel. Many manufacturers have avoided expensive mistakes by doing this analysis before committing to their first U.S. shipment.
- True landed cost analysis before your first U.S. shipment
- HS code classification and duty rate verification
- Freight rate negotiation and container optimization
- Los Angeles 3PL with transparent, competitive per-unit rates
- Full customs clearance management through licensed brokers