Write it as: landed cost per unit equals (goods value + freight + insurance + total duty + MPF + HMF + brokerage + domestic freight) divided by units. Total duty is itself a sum: customs value multiplied by each applicable rate in the stack, the MFN base and every Chapter 99 layer, added together. Nothing in the stack compounds; each layer prices off the same customs value, which is the one mercy in the arithmetic.
The errors that hurt live in omissions, not in the maths. Models forget the harbour maintenance fee on ocean freight, price MPF as a flat guess instead of 0.3464 percent of value subject to its minimum and maximum, or apply duty to the freight inclusive price when US customs value generally excludes international freight. Each omission is small per unit and enormous per year.
Take 20,000 cotton T-shirts invoiced at 4 dollars each: goods value 80,000 dollars. Ocean freight and insurance 6,000 dollars. Customs value stays 80,000. MFN duty at 16.5 percent is 13,200 dollars. Add a 12.5 percent forced labour Section 301 layer on the same value: 10,000 dollars. Suppose the older China list rate for the line adds a further amount in your own check; in this example we will keep the stack at those two layers and say so, which is what an honest worked example does.
Fees and services: MPF at 0.3464 percent of 80,000 is about 277 dollars, inside its cap. HMF at 0.125 percent of value is 100 dollars. Brokerage and entry costs 250 dollars, domestic delivery 1,800 dollars. Total landed: 80,000 plus 6,000 plus 23,200 duty plus 277 plus 100 plus 250 plus 1,800 equals 111,627 dollars, divided by 20,000 units: 5.58 dollars per shirt against a 4 dollar invoice price. The stack alone added 1.16 dollars of that.
The duty stack, 29 percent combined in this example, is larger than the entire freight bill and larger than most gross margin negotiations with the supplier will ever win back. A five percent invoice discount on this order saves 4,000 dollars. Misclassifying the shirts into a line ten points lower, if the goods genuinely belonged there, would save 8,000, and a sourcing shift that removes one Chapter 99 layer saves 10,000. Buyers should spend their negotiating hours where the arithmetic says the money is.
It also teaches the danger of the single rate habit. A model carrying only the 16.5 percent MFN rate understates this container's cost by 10,000 dollars, fifty cents a shirt, which on a retail price built from that model is the whole profit. When a competitor's price looks impossibly low, check their stack assumptions before you assume they found a cheaper factory.
Take your most recent Form 7501 and rebuild the example with its real lines: the Chapters 1 to 97 rate, each Chapter 99 line, the fees as assessed. Compare the result with the landed cost your system booked. Differences between the entry's truth and the system's number, repeated across a year of entries, are either a costing bug or a classification problem, and both are worth finding in a spreadsheet rather than in an audit.
Keep the worked example with the entry file. Six months from now, when someone asks why this product's landed cost jumped between two shipments of identical shirts, the sheet with every line shown answers the question in one reading.
Keep reading: Returns freight in landed cost: the leg the model always forgets to charge, DAP in the landed cost model: the duties your customer pays still cost you.
Per unit landed cost equals goods value plus freight and insurance, plus total duty, plus fees like MPF and HMF, plus brokerage and domestic delivery, all divided by units. Total duty is the customs value multiplied by each rate in the stack, the MFN base and every applicable Chapter 99 layer, summed. Layers do not compound; each prices off the same customs value.
For US imports, customs value generally excludes international freight and insurance, so duty is calculated on the value of the goods themselves. Freight still belongs in landed cost, because you paid it, but it sits in its own line of the formula, not inside the duty base. Models that duty the freight inclusive price overstate duty on every shipment.
The merchandise processing fee is 0.3464 percent of the entered value, subject to minimum and maximum caps per entry. The harbour maintenance fee is 0.125 percent of the value of commercial cargo shipped through US ports, and applies to ocean shipments. Both are small beside a stacked duty bill and both are routinely forgotten in home built cost models.
Because the stack interacts with fees, freight, and unit counts in ways a rate table hides. A worked example on a real value shows the duty stack outweighing the freight bill and rivalling the product margin, which is the insight that changes sourcing behaviour. Rerun the same arithmetic on your own latest entry summary for the number that applies to you.