Carriage Paid To (CPT) Explained: A UK Guide
08/07/2026
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What is CPT? Carriage Paid To (CPT) is an Incoterms 2020 rule that applies to all modes of transport. The seller pays the cost of
What is landed cost?
Landed cost is the total cost of getting a product from a supplier’s factory to your door in the UK. It includes the product price, international freight, insurance, import duty, import VAT, customs clearance fees, and inland delivery, every cost you pay before the goods are in your warehouse and ready to sell.
If your supplier has sent you a price and you are wondering whether it is a good deal, you need to calculate your landed cost first.
The supplier’s price is only the starting point. By the time goods arrive at your warehouse in the UK, you will have paid for freight, insurance, customs duty, VAT, a customs broker, and delivery from the port. On a £10,000 order from China, those costs can add £3,500 to £4,500 before you have sold a single unit.
This article explains every component of landed cost in plain English, with a full worked example using realistic UK numbers.
Landed cost is the complete cost of importing goods, from the moment you place an order with your supplier to the moment those goods arrive at your UK premises.
It is called “landed” cost because it represents the cost of goods once they have “landed” in your country and reached your door. Everything in between, shipping them across the world, clearing them through UK Border Force, paying the taxes, is included.
The formula is:
Landed cost = Product cost + International freight + Insurance + Import duty + Import VAT + Customs clearance fees + Inland delivery
Some shipments also attract additional costs: port storage, demurrage charges, currency conversion fees, or inspection fees. A complete landed cost calculation captures all of these.
The single rule to remember: your supplier’s quoted price is almost never your landed cost. The gap between the two is where importers lose money.
Here is the trap that catches new importers.
A supplier quotes you £10,000 for a container of goods. That sounds manageable. You add a markup and start selling. Then the invoices arrive, the freight forwarder, the customs broker, HMRC, and your margin has disappeared.
This happens because importers confuse the supplier price with the cost of goods. They are not the same thing.
If you price your products based on the supplier quote alone, you will undercharge. If you undercharge consistently, you trade at a loss. This is one of the most common financial mistakes in import businesses, and it is entirely avoidable.
Landed cost calculation fixes this. It gives you one number that represents the true cost of each unit in your warehouse. From that number, you can price accurately, compare suppliers fairly, and protect your margins.
Landed cost is also the number that banks, accountants, and investors care about when they assess the value of your stock.
Every landed cost calculation is built from the same eight components. Some will be larger than others depending on your product, your supplier, and your route.
1. Product cost
The price your supplier charges for the goods. This is the foundation of the calculation. The currency your supplier invoices in matters, if you pay in US dollars or euros, you carry exchange rate risk.
2. International freight
The cost of moving goods from the origin country to the UK. This includes origin port charges, the main ocean or air freight, and destination port handling. Freight rates fluctuate, they can double or halve in a matter of months. Always get a current quote.
3. Cargo insurance
Marine cargo insurance covers your goods against loss or damage during transit. The cost is typically 0.2% to 0.5% of the cargo value. It is optional but strongly recommended. Without insurance, you bear any loss entirely.
4. Import duty
The tax charged by HMRC on imported goods, based on your product’s commodity code and the country of origin. Rates vary widely, from 0% on many goods to 12% or more on some categories. You must find the correct rate for your specific product.
5. Import VAT
UK VAT at 20% is charged on most imports, calculated on the customs value plus duty plus freight. VAT-registered businesses can reclaim this through their VAT return, so the cash flow impact is temporary, but the upfront cost still needs to be funded.
6. Customs clearance fees
The fee charged by your customs agent or freight forwarder to prepare and submit the import declaration to HMRC. Typically £75–£200 per entry, though complex shipments cost more.
7. Inland delivery
The cost of moving goods from the UK port. Felixstowe, Southampton, Tilbury, to your warehouse or final destination. This varies enormously depending on distance and whether you use your own transport or a haulier.
8. Other charges
Port handling fees, THC (Terminal Handling Charges), document fees, and any inspection or examination fees charged by UK Border Force. These are smaller items, but they add up.
The best way to understand the calculation is to work through a real example.
Scenario: A UK importer buys 500 units of a consumer electronics product from a supplier in China. The supplier’s EXW price is £10,000. The goods are shipped by sea in a 20-foot container to Felixstowe.
Work through each cost component in sequence.
Step 1: Start with the product cost. This is your supplier’s invoice value, converted to sterling if invoiced in another currency.
Step 2: Add origin charges. Under EXW, you pay for everything from the factory door, inland haulage in China to the port, and origin port handling.
Step 3: Add international freight. Get a quote from your freight forwarder for ocean freight including all surcharges.
Step 4: Add cargo insurance. Calculate 0.3% of the insured value.
Step 5: Calculate customs value. For HMRC, the customs value is typically the CIF value. Cost + Insurance + Freight.
Step 6: Apply the duty rate. Find your commodity code on the UK Global Online Tariff and apply the duty rate to the customs value.
Step 7: Calculate import VAT. VAT is 20% of (customs value + duty).
Step 8: Add customs clearance fees. Your customs broker’s charge for preparing the declaration.
Step 9: Add inland delivery. The cost from Felixstowe to your warehouse.
Step 10: Total everything. That is your landed cost.
| Cost Component | How Calculated | Example Amount (£) |
|---|---|---|
| Product cost (EXW) | Supplier invoice | £10,000 |
| Origin inland haulage (China) | Factory to port of loading | £250 |
| Origin port handling / THC | Origin terminal fees | £180 |
| International ocean freight | 20ft container, China to Felixstowe | £1,400 |
| Cargo insurance | 0.3% of £11,830 (cargo + freight) | £36 |
| Customs value (CIF) | Product + freight + insurance | £11,866 |
| Import duty | 5% of £11,866 (example rate) | £593 |
| Import VAT | 20% of (£11,866 + £593) | £2,492 |
| Less: VAT reclaim (if VAT registered) | (reclaimed on next VAT return) | (−£2,492) |
| Customs clearance fee | Agent charge, per entry | £150 |
| UK port handling / THC | Destination terminal handling | £220 |
| Inland delivery (Felixstowe to warehouse) | Haulier quote | £450 |
| Total landed cost (ex-VAT reclaim) | £13,241 | |
| Effective uplift on EXW price | +32% |
In this example, the landed cost is 32% above the EXW supplier price, before any profit margin. If the importer had priced products based on the £10,000 supplier quote, they would be selling at a loss.
Note that import VAT is shown separately because VAT-registered businesses reclaim it. If your business is not VAT registered, add the full £2,492 to your landed cost, making the total £15,733, or a 57% uplift on EXW.
Import duty is a tax charged by HMRC on goods imported into the UK. The rate depends on two things: what the goods are, and where they come from.
Finding your commodity code
Every product imported into the UK must be classified under a 10-digit commodity code. This code determines the duty rate. You can find your code using the UK Global Online Tariff at trade-tariff.service.gov.uk on GOV.UK.
Be precise. Two products that seem similar can have different commodity codes and different duty rates. A classification error can result in underpaying duty, which HMRC may pursue, or overpaying, which costs you money unnecessarily.
Duty rates vary widely
Some goods attract 0% duty. Others attract 3.5%, 5%, 6.5%, or higher. Textiles, footwear, and ceramics can attract rates above 10%. Always check before you buy.
Country of origin matters
The UK has trade agreements with many countries that reduce or eliminate duty. If your goods qualify as originating in a country covered by a UK Free Trade Agreement, you may be able to claim a reduced or zero rate. This requires a proof of origin document, typically a supplier’s declaration or a certificate of origin.
Post-Brexit, UK duty rates are set independently and are not identical to EU rates.
How duty is calculated
Duty = Customs value × Duty rate
The customs value is not simply the product cost. It is normally the CIF value, cost of goods plus insurance plus freight to the UK port. This is set out in HMRC’s customs valuation rules.
Import VAT is charged at 20% on most goods brought into the UK. It is calculated on a slightly different base than import duty.
The VAT calculation base
Import VAT = (Customs value + Import duty) × 20%
Using the worked example: (£11,866 + £593) × 20% = £2,492.
VAT-registered businesses can reclaim it
If your business is VAT registered, import VAT is not a permanent cost. You report it on your VAT return and reclaim it in the same or following period.
You can use HMRC’s Postponed VAT Accounting (PVA) scheme. Under PVA, you account for import VAT on your VAT return rather than paying it at the port, eliminating the cash flow hit entirely.
If you are not VAT registered
If your business is below the £90,000 VAT threshold or you are just starting out, you cannot reclaim import VAT. It becomes a real, permanent cost. A £10,000 order attracting £593 duty and £2,492 VAT means paying nearly £3,000 to HMRC before selling a single unit.
Zero-rated goods
Some goods are zero-rated for VAT, certain food items, books, children’s clothing. These attract 0% import VAT. Check HMRC’s website for a full list.
Freight is one of the largest components of landed cost, and one of the most variable. A rate from six months ago may bear no resemblance to today’s market.
Sea freight
Ocean freight is quoted per container, typically a 20ft (TEU) or 40ft (FEU) container. The rate varies by trade lane, shipping line, time of year, and global market conditions. During COVID-19, rates from China to the UK surged by over 500%. They later fell sharply. Always get a current quote.
Beyond the base freight rate, expect surcharges: BAF (Bunker Adjustment Factor) for fuel costs, PSS (Peak Season Surcharges), and CAF (Currency Adjustment Factor). These are real costs and must be included.
Air freight
Air freight is much faster but majorly more expensive, typically 4–6 times the cost of sea freight on a weight basis. It suits high-value, low-weight goods or when speed is essential. It is rarely cost-effective for bulk or heavy consignments.
Origin charges
If your goods are shipped on EXW terms, you also pay origin costs: inland haulage from the factory to the port, and origin port handling (THC at origin). These can add £300–£600 or more to a standard container from China.
Destination charges
At the UK end, you pay destination THC and any port congestion surcharges. Budget £150–£300 per container at major UK ports.
LCL shipments
If your shipment is too small to fill a container, you ship LCL, your goods share a container with other importers’ cargo. LCL is priced per cubic metre and typically costs more per unit than FCL for larger volumes. LCL also attracts additional charges: consolidation fees, deconsolidation fees, and handling.
Cargo insurance protects your goods against loss or damage during transit. It is not mandatory under UK law, but shipping thousands of pounds of goods without it is a major financial risk.
What marine cargo insurance covers
All Risks cover, the standard level for most importers, covers physical loss or damage to cargo from virtually any external cause during transit, including during loading and unloading.
What it does not cover
Standard policies exclude inherent vice (goods deteriorating due to their own nature), delay, and certain war risks, though war risk cover can be added.
The cost
Marine cargo insurance is typically 0.2%–0.5% of the cargo value (normally CIF plus 10%). For a £12,000 insured value, that is £24–£60 per shipment. It is the cheapest risk management tool in the importer’s toolkit.
Who arranges it
Under CIF or CIP Incoterms, the seller arranges and pays for insurance to the named destination. Under FOB or EXW, the buyer must arrange their own cover. Never assume your freight forwarder has automatically insured your goods, they have not unless you have explicitly requested and paid for cover.
Every commercial import into the UK requires a customs declaration submitted to HMRC through the Customs Declaration Service (CDS). You can submit this yourself if you have the software and training, but most importers use a licensed customs agent or freight forwarder.
Standard entry fees
A standard customs entry fee, covering preparation and submission of the import declaration, typically costs £75–£200 per entry. The exact fee depends on the complexity of the shipment, the number of commodity codes, and the agent’s pricing.
Additional charges
On top of the basic entry fee, agents may charge:
Port examination fees
UK Border Force can choose any consignment for physical examination. If your goods are examined, you pay the examination fee, typically £200–£500 or more, plus any storage costs during the examination. You cannot predict or avoid a UKBF examination. Build a contingency into your costs.
Getting goods from the UK port to your warehouse is the final leg of the journey, and a cost that new importers sometimes forget entirely.
Port to warehouse haulage
A standard full container delivery from Felixstowe to a Midlands warehouse will cost roughly £350–£600 depending on distance. The South East costs less; Scotland or Northern Ireland costs considerably more. Get haulage quotes specific to your route before finalising your landed cost.
Container hire
Shipping lines provide the container for the sea voyage. Once unloaded at the UK port, you have a set number of “free days” to return it, typically 5–7 working days. Exceed the free days and you pay container detention charges: £50–£100 per day or more. Return the container promptly.
Drayage for LCL
For LCL shipments, goods are consolidated and deconsolidated at a container freight station (CFS). You pay a handling fee at the CFS and then arrange onward delivery to your premises.
These are the costs that do not appear on any quotation but show up on the invoice. For new importers, they are a painful surprise.
Demurrage
Demurrage is the charge levied by the shipping line when a container is not collected from the port within the allowed free time. Free time is typically 5–7 working days from the container being discharged. After that, charges accumulate daily.
Demurrage rates at UK ports commonly run £100–£200 per day. A container left two weeks beyond free time can generate demurrage of £1,000–£2,000, more than the freight cost itself.
Demurrage usually results from customs clearance delays, documentation errors, or slow communication. The fix is preparation: have your documents ready, appoint your customs agent in advance, and ensure they know the vessel ETA.
Port storage
Separate from demurrage, port storage is charged by the port or terminal operator once goods are moved off the quayside. Storage accrues separately and adds another daily cost.
Bank charges and currency conversion
If you pay your supplier in a foreign currency, you pay a conversion fee on every transfer. Bank exchange rates are typically worse than interbank rates by 1–3%. On a £50,000 annual spend with suppliers, that is £500–£1,500 a year leaving your business through the exchange rate spread.
Using a specialist FX provider. Wise, Equals, Currencies Direct, rather than a high street bank typically saves a major amount. Currency is a landed cost worth optimising.
Supplier compliance costs
Some importers face costs for pre-shipment inspection, product testing, or certification fees, particularly for goods subject to UK product safety regulations. These are real costs that belong in your landed cost model.
Incoterms are standardised international trade terms that define who, seller or buyer, is responsible for each stage of the journey from factory to final destination.
The Incoterm in your supplier contract determines where your costs start. This has a direct impact on how you calculate landed cost.
EXW (Ex Works): The seller does nothing beyond making goods available at the factory. The buyer pays for everything: inland haulage in the origin country, export customs clearance, freight, insurance, UK import clearance, and UK inland delivery.
FOB (Free on Board): The seller pays for haulage to the origin port and export clearance. Risk transfers when goods are loaded on the vessel. The buyer pays for ocean freight, insurance, UK import clearance, and UK inland delivery.
CIF (Cost Insurance Freight): The seller pays for ocean freight and minimum insurance to the named UK port. The buyer pays for UK import clearance and inland delivery. Risk still transfers at the origin port, the buyer bears transit risk even though the seller arranges freight.
DDP (Delivered Duty Paid): The seller pays for everything including UK import duty and delivery to the buyer’s door. The buyer’s price is close to their landed cost, but the seller’s logistics and duty estimates are built into the price. Verify that duty and VAT are genuinely included.
Practical impact
If your supplier quotes EXW, your landed cost calculation must include every cost from the factory door. If they quote FOB, origin costs are already in the supplier’s price. Run the full calculation regardless of the Incoterm, the goal is always a complete picture of total cost.
EXW is the Incoterm that catches the most importers out.
An EXW price is the lowest possible price a supplier can quote. It covers only the goods themselves. Every other cost, haulage from the factory, export customs clearance, freight, insurance, UK import duty, VAT, customs fees, and delivery to your warehouse, is the buyer’s responsibility.
Because the EXW price is a low, clean number, it is tempting to treat it as your cost of goods. It is not.
The numbers tell the story
On a £10,000 EXW order from China, realistic total landed costs, including all freight, duty, clearance, delivery, and irrecoverable VAT for a non-VAT-registered business, can reach £14,500–£15,700. That is a 45–57% uplift on the EXW price.
For a VAT-registered business reclaiming import VAT, the landed cost uplift is still typically 25–35% above EXW, depending on the product and duty rate.
The supplier comparison problem
EXW also makes it harder to compare suppliers fairly. Supplier A quotes £9,500 EXW from Guangzhou. Supplier B quotes £11,000 FOB from Ningbo. The EXW comparison looks better, until you add the origin costs that EXW requires the buyer to cover. Calculate the landed cost of both quotes before comparing. The supplier price is not the cost.
Landed cost is your cost of goods. Every pricing decision starts here.
The pricing formula
Sell price = Landed cost per unit ÷ (1 − target gross margin %)
If your landed cost per unit is £27 and you target a 40% gross margin:
Sell price = £27 ÷ 0.60 = £45.00
Gross profit = £45.00 − £27.00 = £18.00 per unit (40% gross margin)
Calculate per-unit landed cost
Divide the total landed cost for the shipment by the number of units. If 500 units have a total landed cost of £13,241, the landed cost per unit is £26.48. Round up slightly to build in a buffer.
Build in a contingency
Experienced importers build a 5–10% contingency into their landed cost before pricing. Freight markets move. Exchange rates shift. Demurrage happens. A small buffer prevents one expensive shipment from wiping out your margin for the quarter.
Review it regularly
Your landed cost changes every time you import, freight rates change, exchange rates move, and duty rates can change. Do not set a product price based on one calculation and never revisit it. Recalculate on every major shipment.
Use it for supplier comparison
Run the landed cost calculation for every supplier you consider. The cheapest EXW price is not always the cheapest landed cost. Location, freight costs, origin handling charges, and duty rates all affect the final number.
What is the formula for landed cost?
Landed cost = Product cost + International freight + Insurance + Import duty + Import VAT + Customs clearance fees + Inland delivery. Some shipments also include demurrage, port storage, bank conversion fees, and inspection fees.
Is import VAT part of the landed cost?
Yes, import VAT is a real upfront cost and is included in landed cost. VAT-registered businesses reclaim it on their VAT return, so it is sometimes shown separately. If you are not VAT registered, it is a permanent cost that must be fully included.
What is customs value, and why does it matter?
Customs value is the value HMRC uses as the basis for calculating import duty. In most cases it is the CIF value, cost of goods plus insurance plus freight to the UK port. Getting the customs value wrong leads to an incorrect duty calculation.
How do I find the duty rate for my product?
Use the UK Global Online Tariff at trade-tariff.service.gov.uk. Enter a description of your product to find its 10-digit commodity code, and the tariff shows the applicable duty rate for the country of origin. If you are unsure, a licensed customs broker can classify your goods correctly.
What is the difference between landed cost and total cost of ownership?
Landed cost covers the cost of importing goods to your premises. Total cost of ownership is broader, it includes landed cost plus warehousing, selling, returns, and after-sales costs. Landed cost is the foundation for pricing; total cost of ownership is the fuller picture for business planning.
Can I reduce my landed cost?
Yes. Common strategies include negotiating freight rates by consolidating shipments; checking whether your goods qualify for a reduced duty rate under a UK Free Trade Agreement; using Postponed VAT Accounting to eliminate the VAT cash flow cost; and comparing customs agent fees across providers. Even small improvements in each area compound over a year of imports.
What happens if I underestimate my landed cost?
Your pricing will be too low and your gross margin will be lower than expected. In a competitive market, this can mean trading at a loss on every shipment. The most common error is using the supplier’s EXW or FOB price as a proxy for cost of goods without accounting for all additional costs.
Does landed cost include profit margin?
No. Landed cost is your cost. Your selling price is set above the landed cost by your target margin. Confusing cost and price is the root of most import pricing errors.
Landed cost is the total cost of importing goods from a supplier’s factory to your UK premises, product cost, freight, insurance, import duty, import VAT, customs clearance fees, and inland delivery.
Your supplier’s quoted price, especially an EXW price, is not your landed cost. The gap between the two is typically 25–60% depending on the product, origin country, and duty rate.
Import duty is calculated on the customs value (normally CIF value) at a rate determined by your product’s commodity code. Find your rate on the UK Global Online Tariff before committing to an order.
Import VAT is 20% of customs value plus duty. VAT-registered businesses reclaim this on their VAT return. Non-VAT-registered businesses pay it as a permanent cost.
Freight costs vary majorly by route, time of year, and market conditions. Always use a current quote, not a rate from a previous shipment.
Hidden costs: demurrage, port storage, currency conversion, are real and common. Build a 5–10% contingency into your landed cost model.
Incoterms determine where your costs start. EXW means you pay for everything. Understand the Incoterm in your supplier contract before calculating your landed cost.
Use landed cost per unit as the foundation for pricing. Divide total landed cost by number of units, then apply your target gross margin to arrive at your sell price.
Recalculate your landed cost on every major shipment. Freight markets move, duty rates can change, and exchange rates shift. A stale calculation will cost you money.
This article is part of a learning path — return to explore more topics.
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