The price your supplier quotes is not what the goods cost you. Landed cost adds freight, insurance, customs duty calculated on a customs value, import VAT calculated on a base that already includes duty and freight, clearing agent fees, port and terminal charges, transport inland, and whatever the rand did between order and payment. First-time importers routinely price their retail off the supplier invoice and discover the margin was never there.
The compounding is the part people miss. Duty is charged on a value that includes freight, and VAT is charged on a value that includes the duty.
What actually goes into landed cost?
| Cost | Where it comes from | Notes |
|---|---|---|
| Goods | Supplier invoice | The number everyone plans from |
| Freight | Shipping line or airline | Sea is cheaper and far slower |
| Insurance | Marine cargo cover | Skipping it is a decision, not a saving |
| Customs duty | SARS, per tariff heading | Percentage varies enormously by product |
| Import VAT | SARS | On a base including duty and freight |
| Clearing agent | Your agent | Fee plus disbursements |
| Port and terminal handling | Port operator | Often larger than expected |
| Storage | Port | Only if something goes wrong — and then it escalates fast |
| Inland transport | Transporter | Port to your premises |
| Currency movement | The market | Between ordering and paying |
| Financing cost | Your bank | You pay long before you sell |
Two of these are the ones that ruin forecasts. Storage, because it is zero until it is enormous. And currency, because it moves in the weeks between committing and paying.
How the compounding works
This is the mechanism most first-time importers have never had explained.
Customs duty is calculated on the customs value, which is broadly the transaction value brought to a South African port — so it already reflects the cost of getting the goods here, not just the goods.
Import VAT is then calculated on a base that includes the customs value and the duty, plus a prescribed uplift.
So a duty percentage is not a percentage of your supplier invoice. It is a percentage of a larger number. And the VAT is a percentage of a larger number again.
The practical consequence: an importer who budgets "20% duty plus 15% VAT" on a supplier invoice of R100,000 and expects R135,000 will find the actual figure meaningfully higher — because both percentages apply to bases that include freight, and the VAT base includes the duty.
Do not estimate this. Get your clearing agent to model the landed cost on the actual tariff heading before you place the order. They do this daily and it costs you nothing to ask.
Why the tariff heading is the whole game
Duty rates vary enormously by product, and the rate is determined by tariff classification — not by what you call the goods.
Two products that look similar to you can attract very different duty. Classification depends on composition, function and form in ways that are genuinely technical.
Getting it wrong cuts both ways:
Under-classify and you underpay duty. SARS can reassess, with penalties and interest, going back.
Over-classify and you have simply paid more than you needed to, on every shipment, and nobody tells you.
And the classification also determines whether an ITAC permit is required. See import/export licence vs permit.
Have the classification confirmed properly — by a clearing agent, a customs specialist, or through SARS's own processes where the amounts justify it. This is the single highest-return piece of advice in importing, because it applies to every shipment you will ever make of that product.
The VAT position, and why it changes the maths
If you are a registered VAT vendor, import VAT is generally claimable as input tax where the goods are for taxable supplies and you hold the correct documentation. It is a cash flow cost, not a real cost.
If you are not registered, import VAT is a straight cost that goes into your landed cost and stays there.
This changes the case for voluntary registration significantly. An importer below the compulsory threshold who is paying import VAT on every shipment and cannot claim it is carrying a cost their registered competitors are not. See is voluntary VAT registration worth it.
Even where you can claim it, the timing hurts. You pay the VAT to clear the goods and recover it on a later return — so it is out of your bank for weeks or months. Budget for it as cash even though it is not a cost.
Keep the customs documentation. Claiming import VAT requires the correct customs release documentation, not just the supplier invoice. See what input VAT you can claim.
The cash flow shape of an import
This is what catches people who have only ever bought locally.
| When | What happens to cash |
|---|---|
| Order placed | Deposit paid, often 30% |
| Before shipping | Balance paid, frequently before the goods leave |
| Goods in transit | Nothing. Weeks of it |
| Arrival | Duty, VAT, clearing, port charges — all payable to release |
| Delivered | Goods finally in your warehouse |
| Then | Sell them. Then wait for your customers to pay |
The gap between paying your supplier and being paid by your customer can run to several months on a sea shipment. That is working capital, and it is why importers with rising sales run out of cash.
Two disciplines help:
Model the cash, not just the margin. A 13-week forecast that shows the payment dates is worth more than a landed cost spreadsheet. See how to build a 13-week cash flow forecast.
Understand your stock cycle. Money tied up in a container is money you cannot use, and an importer who orders the next shipment before selling the last one is compounding the problem. See what is working capital.
What about the exchange rate?
You are carrying currency risk from the moment you commit to a price.
A 10% adverse move between order and payment removes 10% of the goods cost from your margin — and on a thin-margin import, that can be the whole margin.
Three ways businesses handle it:
Accept it and price with a buffer. Simplest, and adequate for small or infrequent orders.
Pay early where terms allow, reducing the exposure window.
Use a forward cover arrangement through your bank to fix the rate. Worth discussing with your banker once the amounts are meaningful.
Whatever you choose, record it properly. Foreign exchange gains and losses have their own accounting and tax treatment, and an importer whose books simply record the rand amount that left the account is losing the information that would tell them whether the currency or the pricing was the problem.
Building a landed cost sheet you can trust
One per product, updated per shipment.
| Line | Amount | Note |
|---|---|---|
| Supplier price (foreign currency) | ||
| Exchange rate used | Actual, not the rate on the day you ordered | |
| Freight | ||
| Insurance | ||
| Customs value | Basis for duty | |
| Duty at your tariff rate | ||
| VAT base | Customs value + duty + prescribed uplift | |
| Import VAT | Recoverable if you are registered | |
| Clearing agent fee | ||
| Port and terminal handling | ||
| Inland transport | ||
| Landed cost, excluding VAT | This is your true cost of goods | |
| ÷ units | ||
| Landed cost per unit | Price from this. Nothing else. |
The last line is the point of the whole exercise. Every pricing decision, every margin calculation and every discount you agree should be measured against landed cost per unit — not against the supplier's price.
And rebuild it each shipment. Freight rates move, the exchange rate moves, and port charges change. A landed cost sheet from eighteen months ago is a guess.
Frequently asked questions
What is landed cost? The total cost of getting goods into your warehouse — the supplier price plus freight, insurance, customs duty, import VAT, clearing fees, port and terminal handling, inland transport, and the effect of currency movement.
How is customs duty calculated in South Africa? As a percentage determined by the tariff classification of the goods, applied to the customs value — broadly the transaction value brought to a South African port, so it already includes the cost of getting the goods here.
Why is import VAT higher than 15% of my invoice? Because it is not calculated on your supplier invoice. The VAT base includes the customs value and the duty, plus a prescribed uplift — so the percentage applies to a larger number.
Can I claim import VAT back? If you are a registered VAT vendor and the goods are for taxable supplies, generally yes, provided you hold the correct customs documentation. If you are not registered it is a straight cost.
Why does the tariff heading matter so much? Because it determines the duty rate, and rates vary enormously by product. It also determines whether an ITAC permit is required. Under-classifying risks reassessment with penalties; over-classifying means quietly overpaying on every shipment.
How long is my cash tied up when importing? Frequently several months on a sea shipment — from deposit, through balance paid before departure, through weeks in transit, through duty and VAT on arrival, and then through your own customers' payment terms.
How should I handle exchange rate risk? Either price with a buffer, pay early where terms allow to shorten the exposure window, or use forward cover through your bank. Whichever you choose, record foreign exchange gains and losses properly so you can see which decisions cost you money.
What should I price from? Landed cost per unit, rebuilt for each shipment. Pricing from the supplier invoice is the most common reason a growing import business is not profitable.
Price from landed cost, not the invoice
Importers rarely fail because they chose bad products. They fail because the margin they thought they had was measured against the wrong number, and by the time the landed cost was clear the stock was already priced and on the shelf.
Smartbook builds landed cost models for South African importers, keeps foreign exchange gains and losses recorded properly, tracks the working capital tied up in stock and in transit, and handles the SARS customs registration if you are not set up yet.
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Last reviewed: 28 August 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. Duty rates, the VAT calculation base and customs valuation rules are technical and change from time to time — have landed cost modelled on your actual tariff heading by a clearing agent or customs specialist before ordering. General guidance, not advice on your circumstances.
Primary sources: SARS — Customs and Excise · SARS — Value-Added Tax · Customs and Excise Act 91 of 1964 · International Trade Administration Commission