Why Landed Cost Is the New FOB for Electronics

Electronic circuit board with a completed BOM checklist on a table, while a customs document is partially hidden beneath the surface, symbolizing overlooked import costs.

Why BOM Savings Disappear Without a Landed Cost Strategy

Many product teams spend months optimizing their Bill of Materials. They negotiate with suppliers, trim excess cost from components, and fine-tune assembly methods.

But once the product ships, a hidden cost emerges. It doesn’t appear in the BOM or the factory quote. It shows up on customs paperwork and quietly eats into your margin. By the time it’s discovered, it’s too late to adjust.

This mistake—ignoring landed cost and Country of Origin strategy—is one of the most expensive errors a product company can make.

Why Landed Cost Tells the Real Story

For years, companies focused on FOB pricing as the key benchmark for product cost. But today, FOB is just the starting point. With tariffs, duties, and classification rules shifting regularly, the price you pay at the factory is often very different from what it costs to deliver the product to your customer.

Landed cost reflects the full financial reality—including import fees and Country of Origin impact. Ignoring it doesn’t just inflate cost—it undermines your pricing strategy.

Factory Cost Is Just the Beginning

Landing a low factory price is only part of the story. What truly matters is the total cost to deliver the product into your customer’s hands. This includes freight, duties, tariffs, inspection, and how the product is classified at import.

We break this down in detail in our article Landed Cost in Electronics: What It Really Costs. If you’re not calculating landed cost from the beginning, you’re making decisions with incomplete data—and likely wasting margin.

Case Example: Smart Design, Costly Oversight

A company assembled their full product—including firmware flashing and packaging—in China. The product shipped on time and passed testing. But no one validated the Country of Origin (COO) status under U.S. trade rules.

Customs applied a default tariff, increasing unit cost. The margin they had worked so hard to preserve through sourcing disappeared.

The bigger problem? They couldn’t move final steps to another country without retooling and revalidating the product. The cost impact was now locked in.

This is not a manufacturing error. It’s a strategic blind spot.

For more on the financial risk, see Why Country of Origin Affects Tariffs, Costs, and Risk.

Country of Origin Is a Financial Decision

Country of Origin is determined by where your product undergoes substantial transformation—not where components come from. For electronics, this could be where firmware is flashed, sensors calibrated, or batteries inserted.

If final assembly and transformation occur in the right country, your product may qualify for favorable tariffs. If not, you may be overpaying on every unit.

Learn more from the official definition at U.S. Trade.gov. And understand the risks of mislabeling COO by reviewing this cautionary piece on origin washing.

Design for COO, Not Just BOM

These decisions should be made during the design for manufacturing phase—not after shipping begins. Products designed with flexibility in mind can shift firmware installation, testing, or packaging to countries like Taiwan, Colombia, or Mexico to lower landed cost and reduce risk.

Planning this in advance gives companies control, even when trade rules shift. See our guide on How to Control Your Product’s Country of Origin.

This Is a Leadership-Level Concern

COO and landed cost are not just operations or compliance topics. They affect pricing strategy, investor expectations, and long-term competitiveness.

If your leadership team is making pricing decisions without understanding how COO will affect import cost, you’re running blind. Trade rules change. Flexible, well-structured supply chains are a hedge against that uncertainty.

Why the Best Companies Plan for This

The most successful product companies are not just the ones with the cheapest BOM—they’re the ones with options. They can shift critical processes across regions. They’ve designed their products to qualify for favorable COO classifications. And they understand that this isn’t just cost-saving—it’s risk mitigation.

Conclusion: Build Smarter from the Start

The most expensive mistake in product development often isn’t technical. It’s the margin lost to a preventable trade classification issue.

At Titoma, we help our clients align design, manufacturing, and cost strategy from the start. With teams in Taiwan, Colombia, and China, we help companies build electronics that are not only manufacturable, but financially optimized across borders.