Landed Cost and Inventory Valuation: A Practical Guide for Bangladeshi Importers

Ask an importer what a product costs and many will quote the supplier’s FOB price converted into taka. The real number — what the item actually cost by the time it sat on your warehouse shelf — is higher, sometimes by a wide margin. That real number is the landed cost, and it is what your stock should be valued at, what your margins should be calculated on, and what your selling prices should be built from.

This article explains which costs belong in landed cost under accounting standards, which do not, how to allocate shared costs across different products in one shipment, and how Bangladesh-specific items such as VAT, AT and AIT at the import stage should be handled. It is practical guidance, not tax advice; your accountant should confirm the treatment for your business.

The Accounting Rule Behind Landed Cost

Bangladesh has adopted International Financial Reporting Standards, and inventory is covered by IAS 2 Inventories. IAS 2 says the cost of purchase of inventory includes the purchase price, import duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities), transport, handling and other costs directly attributable to acquiring the goods. Trade discounts and rebates are deducted.

That one sentence answers most practical questions. If a cost was necessary to get the goods to their present location and condition, and you cannot get it back from the government, it is part of inventory cost. If you can reclaim it, it is not — it sits as a receivable or credit instead.

What Usually Goes Into Landed Cost

• Supplier price for the goods, converted at the rate you actually paid (see the exchange rate section below).
• International freight and insurance if you bought FOB or EXW; if you bought CIF, these are already inside the price.
• Customs duty, regulatory duty and supplementary duty, which are not recoverable for a normal importer.
• Port and terminal charges, off-dock or CFS charges, and shipping line delivery order fees.
• C&F agent fees and documentation charges directly linked to that shipment.
• Inland transport from port to your warehouse.
• LC opening and bank charges directly tied to the purchase, which many businesses capitalise as part of the cost of purchase.

Our breakdown of the total cost of importing from China and our list of hidden charges are useful checklists to make sure nothing is left out.

What Stays Out: VAT, AT, AIT and Abnormal Costs

Several taxes collected at the import stage in Bangladesh are designed to be credited or adjusted later, which is why they generally should not be loaded into inventory cost:

• Import VAT — a VAT-registered business can normally claim it as input tax under the VAT and Supplementary Duty Act, 2012, subject to the Act’s conditions. If you can claim it, it is not inventory cost. If you are not registered, or the purchase is not eligible, it becomes part of cost.
• Advance Tax (AT) — collected at import and generally adjustable through the VAT return for eligible registered persons.
• Advance Income Tax (AIT) — collected at import and adjustable against income tax liability, although for some categories of importers it can operate as a minimum tax. How it is treated depends on your circumstances, which is a question for your tax adviser rather than a general rule. See our guide to AIT on imports.

IAS 2 also excludes abnormal costs. Demurrage caused by a late document, storage because your warehouse was full, or rework after a supplier defect are generally expensed rather than capitalised, because they are not part of the normal cost of getting goods to their location. Storage after arrival, administrative overheads and selling costs are also excluded. Interest on usance LCs or deferred payment terms is a financing cost, not a purchase cost.

Choosing an Allocation Method for Mixed Shipments

Some costs belong to a single product — its own duty, for example, which customs assesses by HS code. Others, like sea freight on a mixed container, the C&F fee and inland trucking, are shared across every product in the shipment and must be allocated. The method you choose changes each product’s cost and therefore its apparent margin.

Method	How it works	Fits best when
By value	Share costs in proportion to each line’s invoice value	Products have similar density; insurance and bank charges
By weight	Share in proportion to gross weight	Heavy goods drive the freight, such as machinery or tiles
By volume (CBM)	Share in proportion to cubic metres occupied	Bulky, light goods drive the freight, such as furniture or plastics
By quantity	Equal share per unit	Items are near-identical in size and value

A sensible approach is to allocate each cost by what actually drives it: freight by volume or weight, insurance and LC charges by value, per-shipment fees such as the C&F fee by value or equally. Whatever you choose, use it consistently so your margins stay comparable between shipments.

A Worked Walkthrough Without the Guesswork

Take a consolidated container carrying two products: bulky plastic storage boxes and compact, expensive electric motors. Suppose the motors are worth several times more than the boxes in total, but the boxes fill most of the container. If you allocate freight by value, most of the freight lands on the motors, making the boxes look cheaper than they really are, and you may underprice them. Allocating freight by volume puts most of it on the boxes, where it belongs, because it was the boxes that consumed the space. The duty, meanwhile, is assessed separately for each HS code, so each product carries its own duty directly.

The outcome is often a surprise: the bulky low-value line turns out to have a thinner margin than the owner believed, and the high-value line a better one. Those are exactly the insights that should inform the next order. Our article on revenue ton pricing in LCL shows why volume so often drives freight cost.

Which Exchange Rate to Use

Two different exchange rates appear in an import. Customs assesses duty using the exchange rate it notifies for customs purposes on the relevant date, which is used to convert the assessable value into taka. Your actual payment to the supplier is converted by your bank at the rate on the day the LC is retired or the TT is sent. For inventory cost, the supplier price should reflect what you actually paid in taka, while the duties are whatever customs actually assessed. Mixing the two produces a cost figure that does not match either your bank statement or your customs documents. Our guide to the USD–BDT rate and import cost explains the wider effect of currency movement.

Why Getting Landed Cost Right Matters Beyond the Books

• Pricing — selling prices built on FOB price alone systematically under-recover costs.
• Supplier comparison — a cheaper supplier in a far inland city can have a higher landed cost once inland China trucking is included.
• Stock write-downs — IAS 2 requires inventory at the lower of cost and net realisable value, so you need an accurate cost to know when slow stock must be written down. See our guide to dead and obsolete stock.
• Tax and audit — auditors and tax officers compare inventory values with customs and bank records, and unexplained gaps invite questions.

Common Mistakes and What They Cause

• Adding reclaimable VAT to stock cost — double counts the tax: once in inventory and again as an input credit.
• Leaving freight and C&F fees in general expenses — overstates gross margin on every sale.
• Capitalising demurrage — hides a controllable operational cost inside stock value.
• Allocating everything by value — distorts the true cost of bulky low-value products.
• Closing the landed cost before all bills arrive — late port or transport invoices then get lost in general expenses.

Tax structures change with each budget, so reading the tariff correctly matters too. Our guide to total tax incidence in the Bangladesh tariff is a good companion to this article.

Every shipment is different, so we do not publish one-size-fits-all numbers here. If you want help with building an accurate landed cost for your China imports before you set selling prices, contact DE International and ask us for a quote built around your actual product, volume and route. You can also browse our sourcing, freight and C&F services, our China sourcing and buying agent service, or products already available in our shop.