Total Landed Cost Calculation - Part 5

Posted by Mollie Leon on Thu, Jun, 23 2016 @ 9:07 AM

3158_2888_3420.jpgIn a previous webinar, Amber Road discussed why for today’s companies, a landed cost management capability is not only important, but essential.

We have transcribed the webinar to explain landed costs in more detail.  If you would like to watch the archived presentation, please click here.

If you would like to read Part 4, please click here.

Continued from Part 4

The most important factor in all 3 scenarios, Brazil, China and Russia, has been the harmonized classifications of the goods. It is imperative that you make sure that they're correct. You should have noticed that the import HS codes I used and the import HS numbers are different. They've only been harmonized to the first 6 digits. That is not always 100% reliable, but is normally a good indicator.

Country Specific Import Classifications

We’ve now demonstrated all the HS classification differences between the countries. We've made reference to the Russian tire situation in terms of the 15 to 16 inch and beyond. We've looked at radial versus non-radial tires in China. Also, we've looked at the different taxation based on your product.

Mode of Transportation

Mode of transportation can affect the region of import. With Brazil there is a list of different regional tax authorities. That situation is not only unique to Brazil, but is also seen in Mexico and India, as they have different requirements as well. The region of import is an extremely important dynamic in your local calculation.

Preferential Duty Status

You also saw preferential duty rates in the example about the MFN relationship between Thailand and China. It only took us 30 seconds to do that calculation. The bilateral agreement, the Asian Framework, and the same scenario, we have 3 possible outcomes in 30 seconds, which is an extremely powerful aspect of your business to be able to look at and to monitor and calculate in terms of composition of product. It allows you to do something that was termed custom engineering years ago, which was looking at how to optimize the markets that you sell to by taking into account where you are and where you produce. Indirect taxation, as many of you with financial backgrounds know, is something that can be extremely complex.

The Right Tools

A simple entry level tool allows a business to take control of calculating an effective landed cost. It gives you a much greater chance of managing your margins to get the true visibility of costs, down to all the different levels you've seen in the examples. It also allows you to work on both the sourcing and procurement and the selling and margin management sides of business. Finally, it prevents or enables an audit capability that many companies haven't had access to before. To be able to quickly put in the value of goods and see what you should have paid, versus what you actually paid, can be such an eye-opener to today’s businesses.

This is something that Amber Road has spent years striving to move forward with. Global Trade Management has become an increasingly important part of supply chain, procurement, sourcing, and legal aspects of international trade.

Q&A

Here are a few questions that were asked during this webinar:

1. How does Amber Road deal with inland charges for a DDT calculation?

At the very beginning of the presentation, we drew a line at landing the costs or landing the goods into a country for the purposes of sale. Some of our customers wish to add additional charges once they've established, in our terminology, a landed cost. They then wish to add on additional costs or additional aspects such as financial aspects to create a local selling price, above and beyond that landed cost. That is completely supported within our mainstream applications. The purpose of the tool that was shown today is purely for the landing of goods into circulation, but we do have solutions and other tools that can take it to that next step to enable a full automation all the way through.

2. Should a marketing cost, such as translation of documents for import, be included to the landed cost?

Technically, that's somebody asking if documents are translated by the broker for the purposes of entry clearance. Frankly, I don't know. Broker fees are normally associated with the cost of importing into a country. Whether those broker fees that relate to translation are directly attributable to the value of the shipment, and therefore dutiable, I don't know. The good news from an Amber Road perspective is, if you used an Amber Road solution, those documents can be automatically produced in those local languages, and therefore there would be no translation costs. Already, that would contribute to an improvement in automation.

This concludes the Total Landed Cost Calculation webinar transcription. For more information on total landed cost calculation, check out our Sourcing Optimization:Capabilities for Scenario-based Sourcing Analysis brochure! 

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Topics: Landed Cost Calculation, Import Management, Global Sourcing

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