Factory FOB production
Fabric, yarn, dyeing, cut-and-sew labor, trims, labels, polybags, cartons, origin export clearance.
Apparel finance guide
How to Calculate the True Landed Cost of Clothing Production
A factory quote is not the cost of bringing a garment to your warehouse. Add freight, insurance, duties, port fees, brokerage, inland delivery, and launch overhead before judging margin.
Direct answer
Landed Cost Is the Warehouse-Door Cost
The practical equation is: Landed Cost = FOB production + international freight + cargo insurance + customs duties + port and brokerage fees + inland delivery. Divide the total by sellable garments to get the true landed cost per unit.
FOB production price
+ Ocean or air freight
+ Marine cargo insurance
+ Customs duty and tariffs
+ Terminal, brokerage, and security fees
+ Port-to-warehouse delivery
= True landed cost
+ Ocean or air freight
+ Marine cargo insurance
+ Customs duty and tariffs
+ Terminal, brokerage, and security fees
+ Port-to-warehouse delivery
= True landed cost
The six cost pillars
What Belongs in an Apparel Landed-Cost Model
Do not stop at the factory line item. Each layer can alter the retail margin or cash requirement.
International freight
Ocean FCL/LCL is usually economical at roughly $0.30–$1.50 per garment but may take 20–40 days; air can add $3–$8+ per garment and takes roughly 3–7 days.
Cargo insurance
Marine cargo coverage is commonly estimated at 0.3%–0.6% of insured value, often CIF value plus 10%.
Customs duties
Classify the garment under the right HS chapter: Chapter 61 for knitted apparel and Chapter 62 for woven apparel. Rates depend on destination, fiber, construction, and origin preference.
Port and brokerage fees
Terminal handling, customs entry, security fees, inspection, and broker disbursements sit outside the factory quote.
Inland delivery
Port-to-warehouse trucking, de-stuffing, palletizing, and 3PL receiving complete the door cost.
Incoterms
Where Responsibility Moves from Seller to Buyer
EXW
Buyer manages origin transport, export, freight, insurance, duties, and delivery.
FOB
Factory covers manufacturing and export loading; buyer controls main freight and destination costs.
CIF
Seller covers ocean freight and insurance; buyer still pays destination fees, duty, clearance, and delivery.
DAP
Seller delivers to the named place; buyer pays import duty, VAT/GST, and formal import entry.
DDP
Seller assumes manufacturing, freight, insurance, duty, tax, and delivery obligations.
Fenalt standardizes DAP for small-batch courier shipments and FOB designated port of export for containerized bulk sea freight, giving the quote a clear cost boundary.
Worked example
1,000 French Terry Hoodies from Bangladesh to Rotterdam
The example below uses the draft’s 400 GSM hoodie scenario and shows why landed cost is higher than FOB even when preferential duty is 0%.
| Expense | Shipment total | Per garment |
|---|---|---|
| Factory FOB production | $12,000.00 | $12.00 |
| LCL freight and surcharges | $645.00 | $0.645 |
| Marine insurance | $55.64 | $0.056 |
| EU customs duty under EBA | $0.00 | $0.00 |
| Port and clearance fees | $485.00 | $0.485 |
| Inland warehouse delivery | $320.00 | $0.32 |
| True landed cost | $13,505.64 | $13.51 |
At $13.51 per hoodie, the true landed cost is 12.6% above the $12.00 FOB quote. Without the 0% preferential duty, a 12% tariff would add about $1.52 per garment and raise the model to roughly $15.03 per unit.
Margin protection
Five Hidden Costs That Change the Answer
Sampling amortization
Two prototype iterations and courier can add $2.50–$4.00 per garment on a 100-unit capsule.
Laboratory testing
REACH, OEKO-TEX, or CPSC testing can cost $300–$1,200 per fabric colorway.
Demurrage and detention
Missing documents, wrong HS codes, or non-compliant labels can trigger daily container fees.
Volumetric air freight
Bulky fleece and puff garments may be billed by dimensional weight rather than scale weight.
FX slippage
Commercial bank conversion spreads can add 2%–4% when invoices are settled in another currency.
Questions and answers
Landed Cost FAQs
What is the difference between FOB and landed cost?
FOB is the production and origin-export price up to the named export port. Landed cost adds freight, insurance, duty, clearance, port fees, and final delivery to the receiving warehouse.
How do I calculate landed cost per garment?
Add every shipment-level cost to the production total, then divide by the number of sellable garments. Include sampling and compliance costs when they are part of that product launch.
Which Incoterm is easiest for a small batch?
DAP is often practical for small-batch courier shipments because delivery is arranged to the named place while the buyer remains responsible for import duties and taxes. DDP shifts more customs responsibility to the seller and must be quoted carefully.
How can preferential trade reduce landed cost?
Qualifying origin under frameworks such as EBA, DCTS, or the EU-Turkey Customs Union can reduce the duty component to 0% in relevant lanes, subject to the applicable rules and documentation.
What hidden costs should brands budget for?
Prototype amortization, laboratory testing, demurrage, detention, volumetric air-freight charges, and foreign-exchange conversion spreads can all raise the real unit cost.
Plan with transparent economics
Quote the Cost That Actually Reaches Your Warehouse
Fenalt can help model production, freight, compliance, and delivery terms before you commit capital.