Landed Costing

1
Landed Costing

• As Customs Brokers, the Value Added Services that
  we are being asked to provide is increasing every
  year.
• Landed Cost Analysis or Landed Cost Reports is
  one of these areas, where special attention is
  required.

2
Landed Cost

• The definition of Customs Value is defined in the
  Act, and calculated by the compile system in most
  instances.
• Landed Costs analysis however requires further
  calculations that run parallel to and join the
  customs value calculations of goods.
• Landed Cost of goods involves the calculation of
  all costs and expenses in arriving at a unit
  value of goods generally at the importers
  warehouse.

3
Landed Cost

• When considering the requirements of a landed
  costing, the inclusion or exclusion of GST must
  be established. Where the importer is entitled
  to an input tax credit for the GST, it will be
  excluded from the unit Landed Cost.
• Where the importer is not entitled to an input
  tax credit, the GST must be included in the
  calculation of the landed cost, as it forms part
  of the cost of goods.
• As a separate exercise, the VOTI must be
  calculated, and used to establish the GST of the
  line unit price, where the importer is not
  entitled to an Input Tax Credit.
• Generally the compile entry factor is used as the
  basis of customs value within the landed cost
  report.
• The Duty is calculated on the Customs Value on a
  per item basis, and then the duty figure is
  included in the Landing Charges for that
  particular line.

4
Landed Cost

• All charges that are excluded from Customs Value
  and are part of the cost of landing the goods
  must be included in the landed cost unit price.
• Be aware of any discounts or commissions that are
  not allowable or do not form part of the Customs
  Value for landed cost purposes.
• In generating the Landed Cost, the actual Customs
  Duty must be included, as a figure based on the
  Customs Value.

5
Landed Cost

• Some importers may require the apportionment of
  freight or other landing charges other than by
  value. E.g. Cubic area or weight of individual
  item. This requires that each product have their
  dimensions or weight available on a per unit
  basis.
• The rate of exchange to be used for the
  calculation of the costs of goods may be based on
  a Forward Exchange Contract, or other financial
  or commercial rate available to the importer.

6
Summary

• Calculation of a Landed Cost is a commercial
  exercise, and therefore the basis of calculation
  of CV must only be used to establish the Customs
  Duty payable per item.
• Apportionment of freight charges and other
  landing costs can be conducted by different
  methods, not just by reference to the value.
• The Landed cost unit may vary between commodities
  due to the nature of the goods.
• All landed costs should include a variance
  mechanism to ensure that the input figures have
  been apportioned correctly.