Short answer: The landed cost of an imported product is not just the supplier's invoice price: freight, insurance, customs duty, excise, customs clearance fees, broker services, inland transport and exchange differences all add to it. If these extra costs are not allocated correctly across products, some items are sold at a loss and others end up overpriced. The landed cost feature in an ERP calculates import cost automatically, with the same rules every time.
Importers in Uzbekistan often estimate cost by eye: they multiply the dollar price on the invoice by the exchange rate and add a rough 20–30%. At small volumes this works. But once the range grows to hundreds of SKUs, shipments arrive by different transport and duty rates vary by product type, the "rough percentage" starts quietly eating profit. This article explains how landed cost is built up, how to allocate costs and what automation changes, with a worked example.
What is landed cost?
Landed cost is the total of all costs incurred to get a product from a foreign supplier into your own warehouse, ready for sale.
It usually includes:
- The product price paid to the supplier.
- International freight and insurance.
- Customs duty and, for excisable goods, excise tax.
- Customs clearance fees and broker services.
- Terminal, storage and certification costs.
- Inland transport from the border or terminal to the warehouse.
- Bank charges and currency conversion differences.
Import VAT is a separate issue. According to PwC, the VAT rate in Uzbekistan is 12%, and on imports the tax base is the customs value plus duty and excise (PwC Tax Summaries). The rate was cut from 15% to 12% from 2023 (Kun.uz, 2023). For a VAT-registered company, import VAT is usually recoverable and does not enter product cost, but it ties up working capital when it is paid. For more on VAT, see Odoo and VAT in Uzbekistan.
Why does landed cost matter so much in Uzbekistan?
Uzbekistan is landlocked. According to the UN, landlocked developing countries face trade costs almost double those of coastal countries (UN OHRLLS, 2024). That means logistics takes a larger share of product cost here than in many other markets.
On top of that, customs payments vary widely. PwC's summary notes that customs duty rates range from 5% to 70% depending on the type of goods, excise rates range from 15% to 70%, and customs clearance fees are set in base calculation units and tiered by the value of the shipment (PwC Tax Summaries). When one container holds goods with different rates, the "add 25% to everything" approach is guaranteed to be wrong.
How do you calculate landed cost? A worked example
For example, take a hypothetical shipment (all figures are assumptions):
- Product A: 1,000 units at $10, total $10,000, 1 kg per unit.
- Product B: 200 units at $50, total $10,000, 10 kg per unit.
- International freight and insurance: $2,500.
- Customs duty: assume 10%, or $2,250.
- Customs fees and broker services: $600.
- Inland transport: $400.
- Bank and conversion charges: $200.
Total extra cost is $5,950, almost 30% of the invoice value. The key question is how to split it between A and B.
If freight and inland transport ($2,900) are allocated by value, A and B each get $1,450: $1.45 per unit of A and $7.25 per unit of B. If the same costs are allocated by weight (A totals 1,000 kg, B totals 2,000 kg), A gets about $0.97 per unit and B gets $9.67 per unit. In other words, allocating by value understates the cost of heavy product B by $2.42 per unit. If B's price was set from that "cheap" cost, you lose money on every sale without knowing it.
That is why the method is chosen by cost type: freight is usually allocated by weight or volume, duty by each line's customs value and rate, and bank charges by value.
How do exchange differences affect landed cost?
Imports are paid in stages: prepayment, payment after shipment, customs payments. The exchange rate can differ at each stage. If the accountant books the whole shipment at one rate, the cost drifts away from reality.
For example, if 30% of a $20,000 shipment is paid at one rate and the rest after the rate rises 2%, that difference alone adds $280 of cost. In an ERP, each payment is booked at the rate on its own date, and exchange differences are tracked separately.
What is risky about calculating landed cost in Excel?
- Formulas are copied by hand for every shipment, so errors creep in easily.
- The calculation is not linked to inventory valuation: one cost in Excel, another in the books.
- A late cost (for example, a broker invoice that arrives a month later) never reaches the cost of goods already sold.
- The person setting prices works from an outdated cost.
A small cost error flows straight into price. McKinsey calculated that for an average company a 1% change in price changes operating profit by about 8% (McKinsey, 2003). Understating cost by 2–3% can lead to pricing 2–3% too low.
How does landed cost work in Odoo?
In Odoo, extra costs are attached to a received shipment through a "Landed Costs" document. For each cost type you choose a split method: equal, by quantity, by current cost, by weight or by volume. The system allocates the cost to each product, updates the inventory valuation and creates the accounting entries automatically. This requires products to be valued automatically using FIFO or average cost. We covered the warehouse side in Odoo Inventory and the finance side in the Odoo accounting module.
Late costs are not a problem either: even if added later, the cost is attached to the right receipt and the stock value is updated. It is worth agreeing this rule with the finance team in advance.
What changes after automation: in numbers
- Price and profit: an accurate cost leads to an accurate price; in McKinsey's calculation 1% of price equals roughly 8% of operating profit (McKinsey, 2003).
- In the hypothetical example above, correct allocation shows extra cost per unit of B as $9.67 instead of $7.25, so a hidden loss becomes visible.
- ERP payoff: Nucleus Research found that ERP returns an average of $7.23 for every dollar spent (Nucleus Research, 2014).
- Catalogue speed: at Deep Vision client Timsoll (18 branches, 7,000+ SKUs), setting up a new product went from 6–8 months to 2–3 days (Timsoll case).
How does Deep Vision work with importers?
Deep Vision is an official Odoo Gold Partner based in Tashkent. According to its Odoo partner page, the team has 7 certified experts, 24 client references and an 89% customer retention rate, with most clients in wholesale, retail and manufacturing (Odoo).
A common pattern in the experience of Deep Vision founder Amon Olimov's team when working with such businesses: the importer is sure it knows its costs, but after the first shipments are recalculated in the system, margins on some products turn out noticeably lower than expected. That is why we first agree cost types and allocation rules with the finance team, and then configure them in Odoo. Standard sales and inventory usually go live in 6–8 weeks; a full project takes 2–6 months.
If you want to see your true import costs, fill in a short brief or see our Odoo implementation service.
Frequently asked questions
Is import VAT part of landed cost?
For a VAT-registered company, usually not: it is recoverable. For a business that is not a VAT payer, it may become a cost. Check your specific situation with your accountant.
Which method should be used to allocate freight?
Most often weight or volume, because freight cost depends on them. Allocating by value understates the cost of heavy but cheap products.
What if the broker's invoice arrives late?
In Odoo, a cost added later is still attached to the right receipt, and the stock value is recalculated.
Which valuation method does landed cost require?
In Odoo, landed costs work for products valued automatically using FIFO or average cost.
Do you have to calculate every shipment by hand?
No. Cost types and split methods are set up once; after that you only enter the cost amounts for each shipment.
Sources
- PwC Worldwide Tax Summaries — Uzbekistan, Other taxes
- Kun.uz — What changed in tax legislation from 2023 (in Uzbek)
- UN OHRLLS — LLDC3 infographic (2024)
- McKinsey — The power of pricing (2003)
- Nucleus Research — ERP returns $7.23 for every dollar spent (2014)
- Odoo — Deep Vision partner page
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