Summary
Landed cost for clothing equals the factory’s unit price plus import duty (based on HTS classification), freight, insurance, the Merchandise Processing Fee, and any customs broker fees, not the FOB quote alone. Duty rates differ meaningfully between HTS Chapter 61 (knit) and Chapter 62 (woven) garments, and the Incoterm you agree to (FOB, EXW, CIF, or DDP) determines exactly which of these costs the factory already covers versus which lands on you separately. This guide walks through the full formula on a real 500-unit order.
The Number on the Factory Quote Was Never the Whole Story
Here’s a pattern that shows up in founder forums with almost mechanical regularity: a brand prices a whole collection off the factory’s FOB quote, launches, and discovers weeks later that their actual landed cost ran 25–40% higher than what they budgeted for. Not because the factory lied about the unit price, because the unit price was never the full cost to begin with.
Duty, freight, a customs broker fee nobody mentioned, and a Merchandise Processing Fee that shows up as a surprise line item on the final invoice, all of it lands after the factory quote, and none of it shows up in a simple per-unit number unless you go looking for it.
If you’ve read our garment costing sheet or worked through what it costs to start a clothing line, this is the piece that was missing from both: the layer of cost that sits between the factory’s quote and what actually leaves your bank account.
The Landed Cost Formula, In Plain English
Landed cost is everything it actually costs to get a garment from the factory floor into your warehouse, ready to sell:
Landed Cost = FOB Price + Freight + Insurance + Import Duty + Merchandise Processing Fee + Customs Broker Fee
Each piece of that formula is doing real work, and skipping any one of them is exactly how a $12 quote turns into a $19 reality. Let’s build it out against an actual order.
HTS Codes: The Number That Decides Your Duty Rate
Before you can calculate duty, you need to know your product’s HTS (Harmonized Tariff Schedule) code, the classification number that determines exactly what duty rate applies. This isn’t paperwork trivia; it’s the single biggest lever in your entire landed-cost calculation, and it’s also the source of one of the most common, and costly, mistakes small brands make.
Chapter 61 vs. Chapter 62: Knit vs. Woven, and Why It Matters
The Harmonized Tariff Schedule splits apparel into two major chapters based on fabric construction, not garment type:
- HTS Chapter 61 covers knitted or crocheted apparel, t-shirts, hoodies, most knit dresses, and jersey-fabric garments.
- HTS Chapter 62 covers woven apparel, most button-down shirts, woven trousers, tailored jackets, and denim.
Duty rates differ between these chapters, and even within a chapter, rates shift again based on fiber content (cotton vs. polyester vs. blends) and specific construction details. A basic cotton knit t-shirt and a cotton woven button-down are not taxed at the same rate, even though both are “cotton shirts” in plain conversation.
Why this is both a cost risk and a compliance risk: misclassifying a garment, even unintentionally, even because a freight forwarder guessed rather than verified, can mean paying the wrong duty rate for months before anyone catches it, and correcting it retroactively can trigger penalties, not just a bill for the difference. Getting the HTS code right isn’t optional diligence; it’s the input that makes every other number in your landed-cost formula accurate.
We’re deliberately not quoting specific duty percentages here, because rates change and a stale number in an old blog post is worse than no number at all. Look up your exact classification and current rate directly on the USITC Harmonized Tariff Schedule before finalizing any costing sheet; it’s free and searchable, and it’s the only source that won’t go out of date on you.
Duty Is Ad Valorem | Here’s What That Means for Your Math
Apparel duty is typically charged ad valorem, as a percentage of the customs value of the goods, not a flat fee per unit. This matters because it means your duty cost scales directly with your FOB price: a cheaper garment carries proportionally less duty in absolute dollars, but the percentage impact on your landed cost stays the same regardless of price point. A $6 t-shirt and a $60 designer jacket, taxed at the same ad valorem rate, both see their landed cost rise by the same proportion relative to FOB price; the dollar amounts just look very different.
Incoterms 2026: Who Pays for What, and When
Incoterms 2026 are standardized international shipping terms that define exactly which costs and responsibilities sit with the buyer versus the seller at each stage of the journey. Confusing one for another is exactly how brands get billed for freight they assumed was already included.
Incoterm |
What the Factory Covers |
What You Cover |
Best For |
| EXW (Ex Works) | Nothing beyond making the goods available at their door | Everything: pickup, export clearance, freight, duty, delivery | Buyers with an experienced freight forwarder already in place |
| FOB (Free On Board) | Goods loaded onto the vessel at the origin port | Freight, insurance, duty, customs clearance, final delivery | Most first-time and growing brands, the most common default |
| CIF (Cost, Insurance, Freight) | Freight and insurance to the destination port | Duty, customs clearance, final delivery | Buyers who want shipping cost certainty without managing freight themselves |
| DDP (Delivered Duty Paid) | Everything, including duty and delivery to your door | Nothing beyond the quoted price | Buyers who want maximum simplicity, at a cost premium built into the quote |
Which one to actually ask for, by stage of maturity:
- First order, no freight relationship yet: ask for DDP. It costs more per unit, but it eliminates the exact “I got billed for freight I thought was included” complaint that shows up constantly in founder forums; everything is baked into one number.
- Second or third order, building freight knowledge: move to FOB, and start working with a freight forwarder directly. This is where real savings start to appear, once you have enough of a track record to manage the moving pieces confidently.
- Established, recurring orders at volume: EXW can unlock the lowest total cost, but only once you have a reliable freight forwarder and customs broker relationship already in place. Attempting EXW on a first order is how goods end up stuck at a foreign port with nobody managing the handoff.
The single most common founder mistake here isn’t picking the “wrong” Incoterm; it’s assuming FOB means “the price I see is the price I pay,” when FOB explicitly excludes freight, insurance, duty, and customs clearance entirely.
A Worked Example: 500 Units, Real Line Items
Let’s put the formula to work on an actual order, 500 knit hoodies (HTS Chapter 61), quoted FOB at $14.00 per unit:
Line Item |
Amount |
Notes |
| FOB price (500 units × $14.00) | $7,000.00 | The number on the factory quote |
| Ocean freight (shared container) | $650.00 | Varies by route, season, and container fill |
| Marine cargo insurance | $85.00 | Typically ~0.3–0.5% of cargo value |
| Import duty (ad valorem, verify current rate on USITC HTS) | Varies, commonly a meaningful double-digit percentage of FOB value for apparel | Confirm your exact HTS code and rate before finalizing. |
| Merchandise Processing Fee (MPF) | 0.3464% of the entered value, current FY floor/ceiling applies | A federal fee, separate from duty, billed on nearly every formal entry |
| Customs broker fee | $150–$300 | Flat or tiered fee for filing your entry |
| Estimated landed cost per unit | Meaningfully above the $14.00 FOB price, often 30–40% higher | The number that should actually go into your retail pricing model |
The duty figure is intentionally left as “verify current rate” rather than a hard number, because a rate quoted today can be outdated within a single trade policy cycle, and a wrong number here isn’t a rounding error; it’s the biggest single line item in the whole table. Pull your product’s exact classification and current duty rate from the USITC Harmonized Tariff Schedule before you finalize pricing on any real order.
Customs Broker: Do You Actually Need One?
A customs broker is a licensed professional who files your entry paperwork with CBP, ensures your HTS classification and documentation are correct, and manages the formal entry process. For any commercial shipment valued over $2,500, which covers essentially every order size discussed in this article, a formal customs entry is required, and while technically an importer can self-file, a licensed broker is standard practice for a reason: an incorrect entry can mean delayed goods, penalties, or an incorrect duty payment that takes months to untangle.
Broker fees are a real, budgetable line item, typically a flat or tiered fee per entry, and they belong in your landed-cost formula, not treated as an afterthought.
ISF Filing: The Requirement That Holds Goods at Customs
ISF (Importer Security Filing), also called “10+2,” is a mandatory advance filing required for virtually all ocean freight entering the United States. The importer (or their broker) submits 10 data elements to CBP, and the ocean carrier submits 2 more, at least 24 hours before the cargo is loaded onto the vessel at the foreign port, not 24 hours before it arrives in the US.
This is exactly the requirement behind the “goods held at customs” complaints that show up in founder forums. Missing or late ISF filings carry real penalties, and CBP has increased enforcement in recent years. The practical fix is simple: confirm with your freight forwarder or customs broker, before your goods ever leave the factory, exactly who is responsible for filing the ISF and by what date. This should never be left ambiguous between you, your factory, and your freight partner.
Put the Real Number Into Your Pricing Model
Every costing exercise on this site, from a basic garment costing sheet to a full breakdown of what it costs to start a clothing line, is only as accurate as the landed cost sitting underneath it. Pricing off FOB alone isn’t a shortcut; it’s a 25–40% blind spot baked into your margin before you’ve sold a single unit.
Run the formula: FOB, plus freight, plus insurance, plus duty (verified against your exact HTS classification), plus MPF, plus broker fees. Choose the Incoterm that matches your actual freight experience, not the one that looks cheapest on paper. And treat your supply chain partner as someone who should be walking through these numbers with you, not handing you a quote and leaving the rest to guesswork.
Use Weft Apparel’s landed-cost calculator and talk through the real numbers on your next order—no FOB-only pricing, no surprise line items at customs.
Frequently Asked Questions
How do I calculate landed cost for imported clothing?
Add the FOB unit price to freight, insurance, import duty (based on your product’s HTS classification), the Merchandise Processing Fee, and any customs broker fees. The FOB price alone typically represents only 60–75% of the true landed cost.
What is the import duty on t-shirts into the USA?
Duty rates for apparel are ad valorem (a percentage of customs value) and depend on the exact HTS classification, fiber content, and construction. Knit t-shirts fall under HTS Chapter 61, and woven shirts under Chapter 62, with different rates applying. Always verify the current rate for your specific product on the USITC Harmonized Tariff Schedule rather than relying on a rate quoted elsewhere, since rates can change.
What is the difference between FOB and DDP?
Under FOB (Free On Board), the factory’s responsibility ends once goods are loaded onto the vessel; you cover freight, insurance, duty, and customs clearance separately. Under DDP (Delivered Duty Paid), the factory handles everything, including duty and final delivery, for one all-inclusive quoted price. DDP costs more per unit but eliminates the risk of being billed for freight you assumed was included.
Do I need a customs broker?
For any commercial shipment valued over $2,500, which covers virtually all apparel orders discussed in sourcing content, a formal customs entry is required, and a licensed customs broker is standard practice to file it correctly. Errors in self-filed entries can lead to delayed goods, penalties, or incorrect duty payments that take months to resolve.
What HTS code covers hoodies?
Knit hoodies generally fall under HTS Chapter 61 (knitted or crocheted apparel), while a woven hoodie-style jacket could fall under Chapter 62 instead; the exact code depends on fabric construction and fiber content. Look up your specific product on the USITC Harmonized Tariff Schedule to confirm the correct classification and current duty rate before finalizing your costing.
