Tariffs are here! Here’s what to know.

The Facts

 

On February 1, 2025 President Trump ordered the imposition of tariffs on goods imported into the United States from Canada, Mexico and China . The tariffs amount to 25% on almost all goods from Canada and Mexico and 10% on Chinese goods and Canadian energy products.  The tariffs will go into effect on Tuesday, February 4th.

 

Both Canada and Mexico have both retaliated with their own tariffs and non tariffs measures.  The imposition of tariffs by the United States is in contradiction to the USMCA agreed to between the North American neighbors in 2020. Since the 1992 North American Free Trade Agreement goods have crossed borders freely. Businesses large and small have integrated their supply chains to take advantage of each country’s advantage resulting in increased productivity and ultimately, profitability.

 

How are tariffs collected?

 

If you are an importer or exporter, this may be the first time that you will have to deal with the complex world of tariffs.  Even if you are neither, there is a very good chance your supplier imports one of your key products or components that are subject to tariffs.

 

Tariffs are collected by the customs agency at port of entry, remitted to the government of entry and paid for by the importer. The tariff rate depends on the type of goods and country of origin.  The World Customs Organization establishes and maintains HS code classification.  Determining country of origin is not straightforward when a product’s components come from multiple countries. 

 

One of the hidden costs of tariffs are the administrative costs including maintaining HS codes and producing additional documentation such as commercial invoices.  Another is extra lead time required for goods to clear customs which can cause production delays and bottlenecks. 

What does this mean for my business?

 

Importers

 

The most immediate impact will be felt by businesses that import goods for resale or for use in production. Your landed costs will increase by up to 25%. If the trade war is not resolved before your stock runs out, you will need to raise prices in order to maintain profit margins. If you cannot raise prices to offset the price extra you will have to make some difficult cuts elsewhere.

 

Exporters

 

Some of your customers may look for alternative suppliers. You will need to assign HS codes to the products that you export and produce commercial invoices for custom purposes.

 

How can Order Time help?

 

Items

 

• Std Cost: the standard cost encapsulates the landed cost of your product, including the purchase cost duties, tariffs and shipping. The standard cost is also used to compute the markup and margin on quotes and sales orders. And it rolls up to your bills of materials even if they are indented.
• Purchase cost: the purchase cost lives on the vendor tab for each item. It can be different than the standard cost, and this will be especially the case if you import the product if you haven’t already done so you can import your vendor cost and set the cost option to cost is entered for your standard cost
• HS code custom field: create a custom field for the HS code. This custom field can be copied to each sales order line item and ultimately the ship dock line item because you’re going to need them for commercial invoices.

 

Margin analysis 

 

Once you’ve updated the standard cost of your items, create a report that compares the price to the standard cost. You can create a calculated field on the item level which calculates both the markup, margin percentage and the markup percentage. The markup is simply price minus standard cost. The margin percentage is the markup divided by the price whereas the margin percentage is the markup divided by the standard cost.

Add Costs

 

In order to capture the actual landed cost, there is a feature in order time called the ad cost. Basically you take the customs invoice and you add that to the cost of your purchase item to derive the landed cost.

 

Ship Doc COGS 

 

The ship doc is the final sale document in order time. Each line item on the ship dock will have a value amount which is the cost of sale for that item. It’s a negative number.