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Landed costs: Hard to solve but vital to get right

A Rubik's cube solved correctly

Not all surprises are good surprises – especially when unexpected costs are involved.

Bill Ansley, vice president of UPS® Trade Management Services, says landed costs are the "Rubik's Cube® of shipping." "It's sometimes hard to solve, but important to get it right. Estimate too high and lose sales, estimate too low and lose margin or risk upsetting your customers," he explains.

Knowing what landed costs are is key to your efforts. Landed cost is the total price of a product once it arrives at your customer's door. It includes the original price of the product, transportation costs and hidden costs, such as applicable duties, taxes, insurance, currency conversion and fees. Without a complete landed cost, you and your buyer might be in for a surprise.

Ansley advises that providing the full, accurate landed cost up front can "enable accurate pricing and, most importantly, avoid uncomfortable surprises for your customers." When the complete costs are shared up front, you can reduce cart abandonment and returns, resulting in a better customer experience and the potential for repeat sales.

Many global transportation companies provide tools to calculate landed costs for international shipments. In addition to basic address information, be sure you know the value of the goods being shipped and the Harmonized Tariff Code. These two pieces of information will be used to calculate the required duties and taxes for the import country.

TIP: Harmonized tariff codes are the standard international reference for classifying products for duty and clearance. Items are grouped into broad categories and refined into narrow groups. Selecting the most specific tariff code available to describe your product can help minimize duties.

"When exporting your products to international markets, you have to expect that in most cases there will be additional costs to bring your product to that market in the form of duties, taxes and clearance costs through the government agencies regulating imports," says Ron Shepherd, global operations manager for UPS Trade Management Services."

He suggests choosing a shipping company that can help clarify these costs and understand what options you have to get your product to market at the lowest possible cost while being compliant. "Too often, companies just expect that those costs 'are what they will be' and not look to an expert for advice in understanding what options they have," Shepherd says.

UPS provides the tools and expertise for you to calculate landed costs right on your website. Estimate the cost of international shipments, including duties, customs fees, taxes and UPS shipping rates, to avoid surprising your customer at delivery or when the bill arrives.

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