Understanding Landed Cost: A Complete Guide for UAE Importers

When importing goods into the UAE, the price you pay your supplier is just the beginning. The true cost—your landed cost—includes numerous additional expenses that can significantly impact your margins. This guide breaks down every component you need to consider.

What is Landed Cost?

Landed cost is the total price of a product once it arrives at your warehouse door. It includes:

Product cost (ex-works price)
International freight
Insurance
Customs duties
Local charges
Handling and storage
Last-mile delivery

Understanding your true landed cost is essential for:

Accurate pricing to maintain margins
Supplier comparison on a like-for-like basis
Profitability analysis by product and origin
Duty optimization strategies

Landed Cost Formula

Landed Cost = Product Cost + Freight + Insurance + Duties + Taxes + Fees

Let's break down each component.

1. Product Cost

The base price from your supplier, typically quoted as:

EXW (Ex-Works): You arrange everything from factory gate
FOB (Free on Board): Supplier delivers to port of origin
CIF (Cost, Insurance, Freight): Supplier pays freight and insurance

Important: Always clarify what's included in your supplier's quoted price to avoid surprises.

2. International Freight

Freight costs vary based on:

Sea Freight Factors

Container type (20ft, 40ft, 40ft HC, reefer)
Origin port to Jebel Ali/other UAE ports
Shipping line and service level
Seasonal demand fluctuations
Fuel surcharges (BAF)

Air Freight Factors

Chargeable weight (actual vs volumetric)
Origin airport
Airline and service type
Dangerous goods handling
Peak season surcharges

Current benchmark (2025):

Sea freight China to UAE: USD 1,500-2,500 per 40ft container
Air freight: USD 3-6 per kg depending on origin

3. Insurance

Marine cargo insurance typically costs 0.3%-0.5% of CIF value. Coverage options:

Institute Cargo Clauses (A): All-risk coverage (recommended)
Institute Cargo Clauses (B): Named perils only
Institute Cargo Clauses (C): Basic coverage

For fresh produce, consider additional cold chain breakdown coverage.

4. UAE Customs Duties

UAE customs duties are calculated on CIF value:

Standard Rates

General goods: 5% of CIF value
Tobacco: 100%
Alcohol: 50%
Some food items: 0% (check HS code)

Duty Exemptions

GCC-origin goods (with proper documentation)
Free Trade Agreement partners
Re-export arrangements
Free zone to free zone transfers

Additional Fees

Customs processing fee: AED 100-500
Inspection fees: If selected for examination
Storage: If goods aren't cleared within free period

5. VAT Implications

UAE VAT at 5% applies to:

CIF value + customs duty
Payable at import (recoverable if VAT-registered)

Example calculation:

CIF Value: AED 100,000
Customs Duty (5%): AED 5,000
Subtotal: AED 105,000
VAT (5%): AED 5,250

6. Local Charges

Often overlooked costs include:

Port Charges

Terminal handling charges (THC): AED 500-1,500 per container
Documentation fees: AED 100-300
Delivery order fees: AED 150-250

Clearance Charges

Customs broker fees: AED 300-800 per shipment
Agency fees: AED 200-400

Inland Transport

Port to warehouse: AED 300-1,500 depending on location
Reefer generator hire: AED 200-400 per day

7. Hidden Costs to Watch

Don't forget these commonly missed expenses:

Demurrage: Charges for keeping containers beyond free time
Detention: Charges for late container return
Storage: Warehouse fees if goods aren't moved quickly
Quality inspection: Third-party testing if required
Fumigation: May be required for certain origins
Label compliance: Arabic labeling requirements

Sample Landed Cost Calculation

Scenario: Importing fresh apples from South Africa

Component	Amount (AED)
Product cost (10 MT @ AED 4/kg)	40,000
Sea freight (reefer container)	8,000
Insurance (0.4% CIF)	200
CIF Value	48,200
Customs duty (0% for apples)	0
VAT (5%)	2,410
THC and port charges	1,200
Customs clearance	500
Inland transport	800
Cold storage (2 days)	600
Total Landed Cost	53,710
Landed Cost per kg	AED 5.37

Optimizing Your Landed Cost

1. Negotiate Better Incoterms

Moving from FOB to CIF shifts freight risk but may cost more. Calculate both scenarios.

2. Consolidate Shipments

Full container loads (FCL) are more economical than less-than-container (LCL) for larger volumes.

3. Explore Free Zone Benefits

Importing through free zones can defer duties if re-exporting.

4. Review HS Classifications

Proper classification can mean the difference between 5% duty and 0%.

5. Plan for Seasonality

Book freight early during peak seasons to avoid premium rates.

Tools for Landed Cost Management

Our TradeOS™ platform includes a landed cost simulator that:

Calculates real-time landed costs from any origin
Compares scenarios across suppliers and routes
Tracks actual vs estimated costs over time
Identifies cost-saving opportunities

Request a demo to see how TradeOS™ can optimize your import economics.