How to calculate CUSTOMS DUTY and VAT when importing from China to the UK. In this video, I show you how to find the customs commodity code for the product you are importing and then how to calculate the landed cost.
When starting an Amazon FBA business it is vital you know the landed cost of products so that you can calculate profit margins accurately. New Amazon sellers often struggle to calculate accurate profit margins as it can be tricky to work out the landed cost of a product.
To calculate the landed cost for a product you will need the following information:
• Cost of Goods (COG) - This will the cost you pay to the supplier for manufacturing the goods
• Freight & Insurance Costs - This is how much you will pay for shipping and insurance
• Customs Commodity Code - This dictates what percentage customs duty and import VAT you will pay on the import
• HMRC Exchange Rate - The Costs of Goods needs to be converted from its original currency to the destination currency e.g. from USD to GBP.
The monthly HMRC Exchange Rate for imports can be found here:
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You can find the product customs commodity code classification here:
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Below is an example of how to calculate your landed cost, this will help you accurately work out your profit margins and ROI (return on investment).
1) Take the Cost of Goods in its original currency e.g. $5000
2) Divide it by the HMRC exchange rate (currently $1.4146 to £1):$5000/1.4146 = £3,534.57
3) Add freight and insurance costs:£2,000 + £3,534.57 = £5,534.57
4) Apply customs duties to this total:
For 5%... £5,534.57 x 1.05 = £5,811.30 (or multiply by 0.05 for customs only £276.73)
5) Apply VAT to this total:
For 20%... £5,811.30 x 1.20 = £6,973.56 (or multiply by 0.20 for VAT only £1,162.26)
6) Divide this total by the number of units you have ordered to get your Landed Cost
For 500 units… £6,973.56 / 500 = £13.95 Landed Cost
If you are using DDP shipping then your landed cost will be the unit cost your supplier gives you (this cost covers freight, customs & VAT).
How do you calculate your landed cost? Let us know in the comments! !
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