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Compare suppliers at the same endpoint, not at the factory-price line. Set a destination such as your customs-cleared warehouse, convert every quote to the same currency and quantity, add every buyer-paid cost, separate recoverable GST or VAT from permanent cost, and divide the result by the saleable units received. A supplier with the lowest unit price can be the most expensive after freight, duty, border charges, delays and defects are included.
For New Zealand imports, the calculation must include 15% import GST on the customs value plus duty, freight and insurance, the applicable duty rate for the product and origin, and current Customs and MPI levies. The same method works when comparing a New Zealand supplier with an overseas source or comparing two foreign countries.
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Start with one comparable landed-cost endpoint
Landed cost is the cost of getting usable inventory to a named place under a defined commercial condition. Choose that endpoint before looking at prices. Common choices are delivered to your warehouse in New Zealand, customs-cleared and ready for receiving, or delivered to a third-party fulfilment centre. Do not compare one quote delivered to your door with another quote that ends at a foreign port.
State the endpoint in writing, including the destination address or port, whether customs clearance is complete, whether taxes are included, and the date by which the goods must arrive. Use the same endpoint for every supplier and scenario.
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The complete landed-cost formula
For each SKU and shipment scenario, calculate:
Total landed cost = product cost + origin inland freight + export documentation and handling + main international freight + cargo insurance + destination port, terminal and handling charges + customs broker and entry fees + import duty + import GST or VAT + Customs, MPI or other border levies + permits, testing and compliance + destination inland delivery + storage or demurrage + financing cost + expected loss allocation.
Then calculate landed cost per saleable unit = total landed cost divided by saleable units received. Saleable units are not always the quantity ordered: deduct documented defects, damage, shrinkage, samples, regulatory holds and other units that cannot be sold.
Show two totals when GST or VAT is recoverable
Keep tax in the cash calculation because it must be paid at import, but show a separate accounting view when your business can claim it as input tax. The cash landed cost is the amount that leaves your bank account. The after-recovery landed cost excludes the recoverable portion, while non-recoverable tax remains part of cost. State the recovery assumption and the tax period in your worksheet; a business that cannot claim the tax should not use the after-recovery figure for purchasing decisions.
Make every quote comparable before doing arithmetic
Incoterms® 2020 allocate obligations, costs and risks, but an Incoterm alone does not make two quotes equivalent. A quote can use the same three-letter rule while naming a different port, omitting local charges or applying a different packaging and quantity basis.
Normalize each offer to the same:
- Named destination or place, including the exact port, terminal or warehouse.
- Currency, foreign-exchange date and exchange-rate source.
- Quantity, carton configuration, pallet count, dimensions and gross weight.
- Product specification, packaging, labeling and minimum order quantity.
- Delivery date, production lead time, transit assumption and quote-validity period.
- Incoterms 2020 rule and named place.
- Customs classification, country of manufacture and country of export.
- Tax treatment, including whether GST or VAT is included, collected at checkout or payable at import.
Ask the seller for an itemized cost breakdown. For every line the seller does not cover, obtain a destination-side quote from a freight forwarder, customs broker, carrier or testing provider. Treat an unpriced line as an uncertainty to model, not as zero.
Use a worksheet that exposes every cost
Use one row for each SKU and shipment scenario. A scenario might be one full container, a partial shipment, air freight for an urgent replenishment or a low-volume trial order. Do not blend different shipment sizes into one average unless the pricing and service assumptions are genuinely identical.
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| Worksheet field | What to record |
|---|---|
| Supplier and product | Supplier name, SKU, specification, packaging and purchase quantity. |
| Manufacture and export | Country where the goods were made and country from which they ship; these can differ. |
| Classification | HS or tariff code, classification rationale and any concession or preferential-origin evidence. |
| Trade term | Incoterm 2020 rule, named place and exactly what the seller says is included. |
| Price and currency | Unit price, extensions, currency, quotation date, FX date and exchange-rate assumption. |
| Origin costs | Pickup, consolidation, export documents, inspection, loading, terminal and handling charges. |
| International movement | Mode, route, carrier or forwarder, freight quote, fuel or peak surcharges, quote validity and transit estimate. |
| Insurance | Cargo-insurance premium or the declared assumption when cover is included in a quote. |
| Destination costs | Port or airport handling, terminal fees, security charges, deconsolidation and delivery order fees. |
| Border costs | Customs value, duty rate and amount, GST or VAT base and amount, Customs and MPI levies, broker and entry fees. |
| Compliance | Permits, product testing, labeling, quarantine, inspection, certification and other regulatory charges. |
| Final delivery | Inland transport to the named warehouse, appointment fees, tail-lift or rural surcharge and unloading. |
| Time-related costs | Storage, demurrage, detention, expedited transport and financing cost during the cash cycle. |
| Loss allowance | Expected defects, damage, shrinkage, rejected units and the basis for the estimate. |
| Output | Saleable units, cash landed total, recoverable tax, after-recovery total and per-unit results. |
Record the evidence for each number: a supplier quotation, freight tariff, broker estimate, customs ruling, insurance schedule or internal assumption. Add a note when a value is provisional and set a date to replace it with an invoice or entry document.
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New Zealand import rules that change the result
Import GST
New Zealand Customs states that GST is 15% of the value of the goods plus any duty, freight, postage or courier charges and insurance. In formula form, GST base = customs value + duty + freight or postage or courier + insurance, and import GST = 15% × GST base. Carry the qualifying freight and insurance amounts into the GST calculation even when they were paid to separate suppliers.
GST is a cash cost at the border. If your registered business can recover it as input tax, show that recovery separately and allow for the timing difference between payment and the return in which it is claimed.
Duty depends on classification and origin
Customs identifies four controlling factors for duty: the product’s tariff classification, whether a concession applies, where the item was made and where it was exported from. The export country alone is not enough. A product manufactured in one country, shipped through another and entered in New Zealand may need evidence for both manufacture and export.
Use the current tariff classification and verify the applied rate for the actual origin. A preferential rate can change the ranking between suppliers, but it may require a certificate, declaration or other origin evidence. If classification or origin is uncertain, model more than one duty case and obtain a broker or Customs determination before committing to a large order.
Shipment value and formal processing
For a shipment over NZ$1,000, plan for formal import processing and a Customs Number. For ordinary consignments at or below NZ$1,000, an overseas supplier may collect GST and Customs generally does not collect duty or GST, subject to exceptions such as alcohol and tobacco. Commercial consignments can have additional requirements, so confirm the treatment with New Zealand Customs or a licensed broker rather than assuming a low-value rule applies.
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Customs and MPI levies
Include the combined Customs and MPI goods levy in the scenario. From 1 April 2026, the combined levy is NZ$51.81 for a high-value air import and NZ$118.44 for a high-value sea import, before any GST applied to those charges. These are shipment-level amounts, so their per-unit effect is large on a small order and much smaller on a full container. Confirm the levy category and current amount for the entry date.
Currency conversion
Use the New Zealand Customs exchange rate applicable to the import entry when converting foreign-currency values for duty and valuation. Customs sets rates in advance. A supplier’s spot rate or the rate on your credit-card statement may be useful for cash forecasting, but it is not necessarily the rate used to assess duty and GST. Keep both rates labelled if they differ.
Understand what each Incoterm leaves to you
| Quote basis | What to verify | Buyer-side lines commonly still required |
|---|---|---|
| EXW or FCA | Whether pickup, export clearance and loading are included, and the exact handover place. | Origin pickup and export handling where omitted, main freight, insurance, all destination charges, clearance, duty, tax and final delivery. |
| FOB | Named port, whether origin terminal and documentation fees are included, and when risk transfers. | Ocean or air freight, insurance if not arranged separately, destination handling, clearance, duty, tax, levies and delivery. |
| CFR or CIF | Named destination port, freight inclusions, insurance scope under CIF and any excluded origin charges. | Destination handling, import clearance, duty, tax, levies and inland delivery; insurance gaps may require extra cover. |
| DAP | Named destination and whether the price reaches your warehouse or only a terminal. Confirm unloading responsibility. | Import clearance, duty and tax, plus destination charges that the contract leaves to the buyer. |
| DDP | Whether the seller can legally perform import clearance, who is importer of record, and whether the bundle includes brokerage, levies, local delivery and tax. | Usually no separate border payment under a correctly executed DDP quote, but verify exclusions, tax recoverability and any delivery or compliance charge. |
Incoterms assign shipment, insurance, documentation and customs-clearance responsibilities; they do not guarantee that a quote includes every local fee. Treat DDP as a bundled price and request the underlying cost split so it can be compared with a DAP, CIF or FOB offer. If a seller cannot identify the importer of record or provide evidence that duty and tax are included, model the quote as uncertain rather than automatically “all inclusive.”
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Step-by-step comparison process
- Define the decision. Choose the SKU, order quantity, required arrival date and destination endpoint. Decide whether the comparison is for one shipment, a replenishment pattern or a yearly volume.
- Collect complete quotes. Request the Incoterm and named place, packaging data, production and transit times, quote validity, payment terms and a list of included and excluded charges.
- Confirm classification and origin. Record the HS or tariff code, manufacturing country, export country and any concession or preferential-origin documentation. Flag unresolved items for a broker.
- Convert to one currency. Use a dated FX assumption for commercial planning and the applicable New Zealand Customs rate for entry valuation. Keep the dates visible.
- Price the physical movement. Add origin pickup, export handling, main freight, insurance, destination handling and final delivery. Use the same route and service level where possible.
- Calculate border charges. Determine customs value, duty, 15% import GST where applicable, Customs and MPI levies, broker fees and compliance costs. Identify which taxes are recoverable.
- Account for time and loss. Add financing for the cash tied up from payment to sale, expected storage or demurrage, delay-related costs and the value of unsaleable units.
- Compute both totals. Divide cash landed cost and after-recovery landed cost by saleable units. Preserve the shipment total so a small order’s fixed charges remain visible.
- Run low, base and high cases. Change freight, FX, duty classification, shipment size and delay assumptions independently. Do not hide uncertainty in a single average.
- Choose and document. Select the supplier whose result fits the required service level and risk tolerance, then save the assumptions, quote versions and evidence used.
Illustrative calculation for a New Zealand import
The following is a hypothetical method example, not a market quotation. Assume 1,000 units at a foreign supplier price of NZ$8,000 equivalent. Origin pickup and export handling are NZ$350, international freight NZ$1,200, insurance NZ$80, destination handling NZ$420, brokerage NZ$180, compliance testing NZ$250 and delivery to the warehouse NZ$300. Assume the classified duty rate is 5% on a customs value of NZ$9,550 (goods plus qualifying freight and insurance under the applicable valuation), and a high-value sea levy of NZ$118.44. Your broker should confirm the actual customs valuation and duty base for the product.
| Component | Illustrative NZ$ |
|---|---|
| Goods | 8,000.00 |
| Origin pickup and export handling | 350.00 |
| International freight | 1,200.00 |
| Insurance | 80.00 |
| Destination handling | 420.00 |
| Brokerage | 180.00 |
| Testing and compliance | 250.00 |
| Warehouse delivery | 300.00 |
| Duty at an assumed 5% of NZ$9,550 | 477.50 |
| High-value sea Customs and MPI levy | 118.44 |
| GST base (illustrative customs value plus duty, freight and insurance) | 11,307.50 |
| Import GST at 15% | 1,696.13 |
| Cash total before financing and loss allowance | 13,072.07 |
| Cash cost per 1,000 received units | NZ$13.07 |
If 20 units are expected to be unsaleable, divide by 980 saleable units rather than 1,000. If the business fully recovers the NZ$1,696.13 GST, the after-recovery total is lower, but the cash requirement at import is unchanged. In a real worksheet, use the exact Customs valuation, the current levy category and the broker’s confirmed GST base rather than the illustrative assumptions above.
Comparing a New Zealand supplier with an overseas supplier
A New Zealand supplier usually has no import entry, international freight or import duty for a domestic delivery, but the quoted price may include local transport, packaging, compliance and the supplier’s GST. Ask whether the price is GST-inclusive or GST-exclusive and whether delivery is to your warehouse, a depot or the supplier’s premises.
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For an overseas source, add the border and logistics lines even when the factory price looks lower. A domestic quote can win on speed, minimum order flexibility, warranty handling and lower disruption risk; an overseas quote can win on production scale or unit price. Those benefits belong in the decision only after the same endpoint and service requirements are applied.
Compare equivalent service levels: a local supplier promising two-day replenishment is not equivalent to an overseas supplier with a six-week production and transit cycle. Include the financing and safety-stock effect of that lead time in the scenario rather than treating delivery speed as a non-financial detail.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Stress-test the assumptions that move the ranking
Run at least three cases for each supplier:
- Low case: favourable but plausible freight, FX, duty and transit assumptions.
- Base case: the most supportable quote and customs assumptions available today.
- High case: a weaker exchange rate, higher freight or surcharge, a less favourable classification outcome, smaller shipment, border delay and added storage or demurrage.
Vary one driver at a time first so you can see sensitivity, then run a combined high case. Fixed levies and brokerage make small consignments especially sensitive to quantity. Freight volatility matters more for bulky, low-value products; duty and GST matter more for high-value products; defects and compliance costs matter more when specifications are tight.
Use a break-even calculation when the ranking is close. For example, determine the maximum freight or duty rate the overseas offer can absorb before it exceeds the New Zealand delivered cost. If a small change reverses the result, negotiate the contract, increase shipment size, obtain a binding classification decision or choose the option with lower operational risk.
Common mistakes and how to correct them
Comparing EXW with DDP as if both were delivered prices
Correction: expand the EXW quote with every origin and destination line, and obtain a DDP breakdown showing importer-of-record, duty, tax, brokerage, levies and final delivery.
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Using the export country as the duty origin
Correction: record where the product was made and where it was exported. Verify preferential-origin evidence and the current applied tariff for the destination.
Leaving destination charges at zero
Correction: request terminal, deconsolidation, security, documentation, broker and delivery estimates from the destination service providers. Mark estimates clearly until invoices arrive.
Dividing by ordered units
Correction: deduct expected defects, damage, shrinkage, testing failures and other non-saleable units before calculating the per-unit result.
Removing GST from the decision without checking recovery
Correction: show a cash view and an after-recovery view. A recoverable tax can still create a funding requirement and timing cost.
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Correction: date every rate, use the New Zealand Customs rate for entry valuation and update Customs and MPI levy amounts for the expected entry date.
Ignoring quote validity and delay
Correction: record the expiry date, surcharge rules and transit assumptions. Model storage, demurrage, expedited freight and lost-sales exposure when the arrival date is critical.
Decision framework for selecting the lower-risk source
Choose the overseas supplier when its normalized landed cost remains lower in the base and credible high cases, the classification and origin evidence is solid, and the lead time and compliance burden fit your operation. Choose the New Zealand supplier when the imported advantage disappears under realistic freight, duty, delay or loss assumptions, or when speed and service reliability justify a modest premium.
Do not report a single universal landed-cost percentage: no authoritative benchmark applies to every product, route, quantity or contract. Report the assumptions, the per-saleable-unit result, the cash requirement, the recoverable-tax treatment and the range produced by the sensitivity cases. That makes the comparison auditable and lets you update it when freight, currency, tariff treatment or levies change.
Quick Recap
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