How UAE trading companies work out landed cost and margins they can trust

Include costs incurred to bring the goods to their present location and condition.

• Supplier price, converted to AED at the transaction rate.
• International freight and marine insurance.
• Customs duty, where the goods are dutiable.
• Clearing agent fees, port and terminal handling charges.
• Local transport to your warehouse.

Recoverable import VAT is not a cost. A VAT-registered importer generally accounts for import VAT through the VAT return under the reverse charge and recovers it in the same return, so it should sit in VAT accounts, not in stock. Storage after arrival, selling costs and general admin are period expenses, not part of inventory.

Customs duty is different. Unlike VAT, duty is generally a real cost to the importer and belongs in landed cost. Confirm the rate and valuation basis for your goods with your customs broker; it varies by product and origin.

A Deira trader imports 400 blenders at USD 22 each, USD 8,800, converted at 3.6725 to AED 32,318. Freight and insurance cost AED 4,100, customs duty assessed by the broker is AED 1,820, clearing and port charges AED 1,350, and trucking AED 450. Total landed cost is AED 40,038, or about AED 100.10 per blender, not the AED 80.80 supplier price.

If the trader sells at AED 135 each net of VAT, the true gross margin is about AED 34.90 per unit, or 25.9%. Using the supplier price alone would show AED 54.20, or 40.1%. Pricing decisions made on the wrong figure lose money on every order.

When one shipment carries several products, allocate freight and similar costs by a sensible basis: value, weight or volume. Value is simplest and suits goods of similar density; weight or volume suits mixed shipments where cheap bulky items take most of the space. Customs duty is often assessed per line, so allocate it to the line it was charged on.

Choose a basis, document it, and apply it consistently. Auditors care more about consistency than about which basis you picked.

Many accounting systems, including HelloBooks, do not automatically allocate landed costs across items. A manual method works well for most traders. Post the supplier bill to inventory, post the freight, duty and clearing bills to a “landed cost clearing” account, then calculate the allocation in a worksheet and post one journal moving the total from clearing into inventory by item.

At month end, the clearing account should be zero for every completed shipment. Anything left there is a shipment whose costs have not been allocated yet.

With landed cost in stock, cost of sales and gross margin reports become reliable. Review margin by product line monthly and by major customer quarterly. A customer who takes large volumes at thin margins, with 90-day terms, may be less profitable than one buying less at full price with 30-day terms.

HelloBooks handles foreign-currency supplier bills with FX gains and losses tracked, stock by item and warehouse (with lot and batch on the Business plan), and margin reports by product and customer. Landed cost allocation is manual: the AI agent can post freight and clearing bills to a clearing account, and once you have the allocation sheet, post the journal for you to approve. Ask “which shipments still have costs sitting in landed cost clearing?” to catch gaps.

If you want a standard allocation worksheet built around your shipments, the team can set one up; book at /book-a-demo.