Landed cost at your gate, not the price on the proforma

A quote arrives as one number: the FOB price on the supplier's proforma. The importer's actual unit economics are somewhere else entirely, on the far side of freight, insurance and a duty stack that is not a list of percentages but an ordered algebra. Assessable value first, then basic customs duty on it, then the agriculture infrastructure and development cess and the social welfare surcharge computed off that, then IGST on the whole. Change the order and the total changes, which is why a duty estimate assembled by adding rates together is not an estimate at all.

Why does the order of the duty components change the total?

Because each layer is computed on the running base beneath it rather than on the invoice value, the sequence is load-bearing. A component moved one step up or down the fold moves the final figure, and the error is silent: the number still looks like a duty number, it is still the right order of magnitude, and nothing about it announces that the base was wrong. The only defensible way to price an import is component by component, in order, with each component named to the instrument it comes from, so that anyone who challenges the total can reconstruct it line by line.

This is also why a rate table is not a calculator. A table gives the rates; it does not give the base each rate applies to, and the base is where the money is. Two importers quoting the same line from the same table can arrive at different totals, both defensible on the rates and only one defensible on the arithmetic. The fold is the answer, and it has to be shown, not summarised.

What is actually in the fold, component by component?

Four components carry most of the weight on a typical line. Basic customs duty is computed on the assessable value. The agriculture infrastructure and development cess and the social welfare surcharge are computed off that running base rather than off the invoice. IGST is computed on the whole. Anti-dumping or countervailing duty, where a notification covers the line, the origin and the producer, sits inside the same sequence and can exceed every other component put together. We name the components rather than their enabling sections here, because a section number quoted from memory is exactly the failure this guide argues against.

Two inputs decide the base before any rate is applied. The assessable value is not simply the invoice figure, and the exchange rate used is the one notified for the relevant period rather than the spot rate on the day the quote arrived. Both are set by rule rather than by the supplier, and both move the entire fold when they move. A duty estimate that starts from the invoice value converted at today's rate is already wrong at the first line, before a single percentage has been applied to it.

What leaves the bank, and what comes back?

The second thing that breaks a naive comparison is that the duty stack is not all cost. IGST paid at import is creditable as input tax credit, so it is working capital out and working capital back, on a timing lag. Basic customs duty and cess are not creditable: they are pure cash out and they sit permanently in the cost of the goods. India collected Rs 5.95 lakh crore of IGST on imports in FY26, and for a registered importer the bulk of that is a float, not a burn. A quote that does not split the two is comparing a cash number with a credit number and calling the sum a price.

The lag is the part that gets underweighted. A float is still money that has left the account, and for an importer running on a working capital line it carries an interest cost for as long as it is out. So the honest presentation is three numbers rather than one: permanent cost, recoverable amount, and the expected interval before recovery. Collapse those into a single landed figure and you have hidden the only variable a treasury can actually act on.

Why is the cheapest FOB often not the cheapest landed?

Put those two corrections together and the ranking frequently inverts. A lower ex-works price on a line carrying a higher basic customs duty rate arrives dearer. A heavier item with worse freight per unit arrives dearer. A supplier in a country covered by a trade remedy notification on that line arrives dearer by a margin no negotiation will recover. None of that is visible on the proforma, and all of it is decided by the choice the proforma is asking you to make.

The comparison that should decide the order is landed cost per saleable unit at your own gate: everything in, non-creditable components at full weight, creditable components carried separately with their timing shown, and the result divided by units that can actually be sold rather than units shipped. That is a longer sentence than "cheapest quote wins", and it is the whole difference between a procurement decision and a guess wearing a spreadsheet.

What does the ranking miss if you stop at duty?

Duty is the component people compute; freight is the one that decides. Freight per unit varies with density rather than with price, so a heavier item at a lower ex-works price can land dearer per unit than a lighter one at a higher price, with no duty rate changing anywhere. Detention and demurrage belong in the same column whenever the supplier's documentation is unreliable, because a supplier who sends a late or wrong packing list is selling you days on the ground. The terminal burn calculator prices those days in rupees a day.

The denominator matters as much as the numerator. Divide by units shipped and a supplier with a five percent reject rate looks identical to one with none. Divide by units that can actually be sold and the same two quotes separate immediately. That is the argument for landed cost per saleable unit rather than landed cost per unit: it is the only version of the figure that survives contact with what actually arrives at the gate.

When is the last moment this figure can still change the decision?

Before the advance is wired. After that the order is placed, the price is agreed and the arithmetic is a forecast rather than a decision. Purser's sourcing pre-flight computes the landed figure at that moment: it prices the fold in order, splits cash out from creditable, and shows the per unit landed figure for each quote side by side. Purser never submits to a government portal, and it never sends an outbound message without a recorded human approval event. The negotiation stays yours and the filing stays with your customs broker. What stops being a guess is the arithmetic.

The same pre-flight is where the eligibility question belongs, because a line that cannot legally land has no landed cost at all. What stops a container at the port was decided before you ordered covers the quality control order, trade remedy and origin checks that run on the same purchase order and on much longer lead times.

Where to go from here

Landed cost is one of three questions that are all answered at the purchase order and all paid for at the port.

• Whether the goods can land at all. What stops a container at the port covers quality control orders, trade remedy and the origin burden under CAROTAR.
• What the declaration costs if it is wrong. Half of India's bills of entry get amended, and the assessment to payment latency in that guide is the direct consequence of not knowing this figure in advance.
• Why the number was wrong upstream. One invoice value, thirteen assertions traces the same field through the export leg of the trade.
• Run the fold yourself. The duty fold calculator computes the components in sequence and splits cash out from creditable.

Frequently asked questions

Why does the order of duty components change the total?

The import duty stack is computed in sequence, not added up as a flat set of rates. Basic customs duty is computed on the assessable value, the agriculture infrastructure and development cess and the social welfare surcharge are computed off that running base, and IGST is computed on the whole. Moving a component up or down the sequence changes the final figure, and the error is silent because the wrong total still looks like a duty number.

What is in the import duty fold, component by component?

The import duty fold on a typical Indian line runs assessable value, then basic customs duty on it, then the agriculture infrastructure and development cess and the social welfare surcharge off that running base, then IGST on the whole. Anti-dumping or countervailing duty sits inside the same sequence where a notification covers the line, the origin and the producer, and it can exceed every other component put together.

Is IGST paid on imports a cost?

For a registered importer, IGST paid at import is largely a float rather than a cost, because it is creditable as input tax credit. Basic customs duty and cess are not creditable and stay permanently in the cost of the goods. A landed cost quote should therefore show three numbers: the permanent cost, the recoverable amount, and the expected interval before recovery.

Should I pick the supplier with the lowest FOB price?

Not on the FOB number alone. The cheapest FOB is frequently not the cheapest landed once duty, freight and the non-creditable components are added, and a line covered by a trade remedy notification can arrive dearer by a margin no negotiation recovers. Rank quotes by landed cost per saleable unit delivered to your own gate.

When is the last moment a landed cost figure can change the decision?

Before the advance is wired. Once the order is placed and the price is agreed, a landed cost figure is a forecast rather than a decision, and the only remaining variables are freight terms and clearance speed. Computing the fold at the purchase order is also what turns the duty payment into a scheduled transfer rather than a scramble at the port.