Introduction
The unit price on a supplier quote is usually the smallest number in a China sourcing project. Buyers who plan around unit price alone are usually surprised by the total.
This article breaks down the real cost line items, so a first-time buyer can build a landed-cost estimate that survives contact with reality.
1. Unit Price
The number a supplier quotes for the product itself, at the specified quantity. This depends on materials, complexity, order volume, and negotiation. It is only the starting point.
2. Tooling Or Setup Costs
For custom products, factories often charge for moulds, tooling, or first-run setup. This is a one-time cost, but on a small first order it can double the effective unit price.
3. Sampling Costs
Samples typically cost 3–10× the unit price. Most factories charge for samples, some credit the cost back against a production order, some do not. Budget for at least two sample rounds.
4. Inspection Fees
Third-party pre-shipment inspection typically costs $200–400 per inspection day, depending on the inspection company and location. For most orders this is money well spent.
5. Shipping
Freight cost varies by mode (air / sea / express), volume, and season. For sea freight, a 20-foot container from South China to the US West Coast can range from $2,000 to $8,000 depending on market conditions.
6. Import Duties And Taxes
Duties are charged by the destination country, based on product category (HS code) and country of origin. A common mistake is to assume duties are optional; they are not.
7. Quality Reserve
Even a well-inspected shipment will have some defective units. Reserve 3–5% of the unit price as a quality allowance — used to cover replacements, refunds, or negotiation with the supplier.
Building A Realistic Landed Cost
Total landed cost per unit = unit price + (tooling / order size) + (sampling / order size) + (inspection / order size) + shipping per unit + duties per unit + quality reserve.
For most first-time orders, the unit price is 55–70% of the landed cost. Planning against just the unit price is planning against 60% of the real number.
FAQ
How much extra should I budget beyond the unit price? For a first small order, plan for landed cost to be 40–80% higher than unit price. As order volume grows, the fixed costs (sampling, tooling, inspection) get diluted per unit.
Is FOB or DDP a better term for small buyers? DDP (delivered duty paid) shifts more responsibility to the supplier and is simpler for a first-time buyer, but usually costs more. FOB (free on board) is cheaper but requires you to manage freight and customs.
Do sourcing partners add cost or reduce it? A sourcing partner adds a service fee but usually reduces total cost by finding better suppliers, negotiating on the buyer’s behalf, and preventing quality losses.
Get A Realistic Cost Estimate
Cost estimates work best when they are built against a specific product. If you would like Hansen to build a landed-cost estimate for your product, start a project.