How Much Does It Cost to Source Products from China?
TL;DR: Total landed cost = Product cost (30–50% of retail) + Shipping (5–15%) + Duties/taxes (5–25%) + Certification (2–8%) + Agent fees (5–10%) + Miscellaneous (2–5%). For a typical $20 retail product, expect to pay $4–$8 per unit landed, giving you a 60–80% gross margin.
Landed Cost Formula
Landed cost is the total cost of getting a product from a Chinese factory to your warehouse, ready to sell:
Landed Cost = Product Cost + Shipping + Customs Duties + Certification + Agent Fee + Insurance + Misc
Cost Breakdown by Component
| Component | % of Retail Price | Example ($20 product) | Notes |
|---|---|---|---|
| Product cost (FOB) | 20–40% | $4.00 – $8.00 | Factory gate price including packaging |
| Ocean freight | 3–10% | $0.60 – $2.00 | $2,000–$5,000 per 20ft container |
| Customs duties | 0–25% | $0 – $2.00 | Varies by HS code and destination country |
| Certification | 1–5% | $0.20 – $1.00 | Amortized over first order quantity |
| Agent fee | 5–10% | $0.20 – $0.80 | Sourcing agent commission on FOB value |
| Insurance & misc | 1–3% | $0.10 – $0.40 | Cargo insurance, bank fees, customs broker |
Real-World Cost Examples
Example 1: LED Desk Lamp (US market)
- FOB price: $6.50/unit (1,000 units)
- Sea freight: $1.20/unit (LCL shipment)
- US customs duty: $0.49/unit (3.9% for HS 9405.40)
- Section 301: $0 (excluded category)
- FCC testing (amortized): $0.35/unit
- Agent fee (8%): $0.52/unit
- Total landed: $9.06/unit → Retail $29.99 → 70% gross margin
Example 2: Bluetooth Speaker (US market)
- FOB price: $12.00/unit (500 units)
- Sea freight: $1.80/unit (LCL)
- US customs duty: $0 (0% for HS 8518.22)
- Section 301: $3.00/unit (25% tariff)
- FCC ID + UL (amortized): $1.50/unit
- Agent fee (8%): $0.96/unit
- Total landed: $19.26/unit → Retail $49.99 → 61% gross margin
Hidden Costs to Watch For
- Sample costs: $100–$500 per product (sometimes refunded against first order).
- Tooling/molds: $500–$10,000 for custom molds (one-time cost).
- Quality failures: Budget 2–5% for defective units and returns.
- Currency fluctuation: RMB/USD can shift 3–5% over a production cycle.
- Demurrage and detention: Port storage fees if containers aren't picked up promptly.
- Re-certification: Product design changes may require re-testing.
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