Navigating Tariffs in ERPAG: An Instructional Guide

Efficiently manage fluctuating customs duties and their impact on your product costs.

Introduction

In today’s global marketplace, changing tariffs pose a constant challenge. Customs duties can shift rapidly—sometimes daily—making it hard to maintain margins and stable operations. ERPAG offers built-in tools to help you define, calculate, and adapt to these variations seamlessly.

1. Automatic Propagation of Cost Changes

Ensure real-time accuracy across your BOM

• Parameter-driven updates
  • Any change to a subcomponent’s cost or duty rate immediately updates every BOM level where that subcomponent appears.
• Deep-level support
  • Even in multi-layered assemblies, ERPAG processes and applies updates throughout—minor delays only in very complex hierarchies.
• Instant recalculation
  • When a main component’s cost rises (e.g., due to a new tariff), your final product’s estimated cost adjusts automatically.

2. Making Duty Rates Visible and Definable

Keep customs duties front and center

1. Duty Rating Field
   • No longer hidden in auxiliary data—each inventory item now prominently shows its assigned duty rate.
2. Per-Supplier Duty Setup
   • Assign unique duty percentages for each international supplier, reflecting different trade agreements or HS codes.
3. Regulatory Alignment
   • Match duty rates to local regulations and harmonized tariff schedules to avoid surprises at import.

3. How Duty Rates Impact Estimated Costs

From landed cost to fully loaded unit price

• Land Cost Basis
  • Purchase Price + Landing Costs (e.g., freight, insurance).
• Duty Calculation
  • Duty Amount = Duty Rate × Land Cost.
• Automated Inclusion
  • ERPAG adds this duty amount to the component’s estimated cost, cascading into your finished-goods cost.

Example:
A component with a $5 landing cost and a 25% duty rate jumps from $56 to $68.75 estimated cost. That increase automatically rolls up into the final product’s cost.

4. Identifying Significant Cost Deviations

Spot when duties squeeze your margins

• Visual Alerts
  • ERPAG flags products whose estimated cost approaches or exceeds the selling price (e.g., cost spikes from $60 to $174.75).
• Filtering Options
  • Quickly list items with large cost vs. price gaps—ideal for prioritizing price adjustments.
• Actionable Insights
  • Decide whether to adjust your selling price or seek cost-saving measures.

5. Smart Procurement When Duties Apply

Optimize sourcing under changing tariffs

1. Fulfilment List Navigation
   • Review preferred suppliers, seeing both landed and duty-inclusive costs.
2. Supplier Comparison
   • Identify alternative suppliers offering lower total landed costs (different duty rates or trade terms).
3. Priority Adjustment
   • Reorder supplier preferences to automatically update suggested sourcing—balancing cost, delivery, quality, and contracts.

6. Handling Customs Duty in Purchase Orders

Balance automation with real-world invoice accuracy

• Auto-Calculated Duties
  • Upon creating an international PO, ERPAG applies defined duty rates against allocated landing costs per line item.
• Manual Override
  • Enter actual duty amounts from customs invoices when they differ.
  • Optionally assign custom node numbers for reference.
  • ERPAG redistributes the manual total across items based on landing-cost proportions.
• Configurable Mode
  • Choose between fully automated duty calculation or enforced manual entry for each PO.

Conclusion

ERPAG’s comprehensive tariff management features—from prominent duty fields and real-time BOM cost propagation to supplier comparison tools and manual PO overrides—empower your business to stay agile in a landscape of shifting duties. Leverage these capabilities to maintain profitability, optimize sourcing, and ensure smooth operations despite changing global trade costs.

STEP BY STEP Instruction

Managing Tariff Changes in ERPAG

This document provides a comprehensive overview of managing changes in ERPAG due to tariff adjustments. It outlines the process to ensure that these changes do not adversely affect your business operations. The focus is on understanding how modifications in subcomponent parameters impact the entire Bill of Materials (BOM) and subsequent finished products. The guide highlights the improvements introduced in the latest version, emphasizing practical steps for implementation.

Step 1

Begin by understanding that tariff changes can lead to adjustments in ERPAG. It’s essential to manage these changes effectively to minimize their impact on your business

Step 2

Utilize the application to manage these adjustments in such a way that they do not negatively affect your operations. In ERPAG, a change in a subcomponent’s parameter is automatically reflected in the complete BOM item.ERPAG

Step 3

These changes affect all finished products, considering their respective positions. The speed at which changes occur depends on the number of assembled products and the BOM levels.

Step 4

In the updated version, changes are more apparent within the item itself. This is a key feature introduced to enhance visibility.

Step 5

Consider an example of a simple BOM item with electronic components. It consists of several components where changes might be significant or minor depending on the main component.

Step 6

When price changes are minimal, such as $1 or $2, they are manageable. However, larger changes in main components significantly impact the BOM product.

Step 7

For instance, a product selling at $60 has an estimated cost of $56. Tariff changes will affect these figures. Each item now has a defined duty rate visible in the updated version.

Step 8

The duty rate, previously located in additional data, is now prominent, reflecting its crucial business impact. This is particularly relevant for products supplied by different suppliers.

Step 9

For each supplier, specific product tariffs may vary. This example demonstrates a manufacturer from Japan, estimating tariffs at approximately 25%.

Step 10

Land & Cost acts as the basis for calculating tariffs. The purchase price combined with Land & Cost applies a 25% duty rate.

Step 11

Implement this tariff rate for products from Switzerland, ensuring compliance with the current 25% rate. Upon adjusting, observe the estimated cost change.

Step 12

The estimated cost increases to $68.75, reflecting $5 Land & Cost plus 25% tariffs. This significantly affects both the component and the finished product prices.

Step 13

The new product price is automatically set to $174.75, compared to a default selling price of $60. This change is highlighted in yellow as a special option.

Step 14

Decide if it’s necessary to adjust prices. In practice, the additional cost is often passed onto the buyer, necessitating a price correction.

Step 15

ERPAG provides a filter function, allowing you to identify columns deviating from the price. Similarly, define the same item for each supplier.

Step 16

For each item, specify the duty rate according to the harmonized rate of order, ranging from 10% to 25%, based on local regulations.

Step 17

Additionally, for items such as the Automatic Baseband Modem, define the emulator with a random duty rate of 25%. This results in a new price of $1.5, impacting the component cost.

Step 18

Evaluate the new component price, and consider the implications for your overall product pricing strategy.

Efficient Procurement and Fulfillment Process

The nex part of this document outlines the steps necessary to efficiently manage procurement and fulfillment within our system. It covers how to handle purchase orders, choose suppliers based on cost efficiency, and manage customs duties effectively. These steps ensure the procurement process is streamlined and cost-effective, meeting all necessary conditions and supplier agreements.

Step 1

In our system, an important aspect is the fulfillment process, apart from the fulfillment list which handles automatic procurement cases. We had a sales order that demonstrated the sale of an item. Here, we can see our preferred supplier and the purchase amount related to this item. The system provides purchase price, landing cost, and duty rate information.

Step 2

Similarly, the preferred supplier is suggested. By clicking this button, a comparison with another supplier is provided. We observe that these two suppliers offer a lower price because they do not include customs duties. We can either choose to purchase from these suppliers or simply adjust our procurement priorities accordingly.

Step 3

Now, when considering shipping days and other conditions, it becomes a different matter. By merely changing the procurement priority, we can rank the supplier Muratu, a Japanese supplier, second. Automatically, the price changes to fifty-two dollars for Muratu, but the system adjusts the price to fifty-eight point thirty. This adjustment signifies that the price is now adequate.

Step 4

We will return to the product replenishment section and adjust the priority again to demonstrate how it works. It’s not just about the price; factors such as delivery capability, signed contracts, delivery speed, quality, and other supplier-related considerations are also crucial. We will now proceed to form a fulfillment order, defining procurements from these suppliers, and generate a bulk action purchase order.

Step 5

Having created the purchase orders, we will review the impacts in the purchase order. In this instance, Morata is defined, and in terms of duty rate, we have purchase costs, landing costs, and additional landing costs of fifty-five, allocated per item. Automatic calculation of customs duty is enabled, applying a twenty-five percent tax rate on each item within the order.

Step 6

We set the total landing cost to five, which is then distributed across the items. In cases where customs distributes costs differently, we have the ability to override and manually input the necessary details, including custom nodes.

Step 7

We define the number, noting that the duty rate is twenty-five percent, though the fifteen percent is distributed accordingly. The distribution follows landing costs and item allocation. With a manual purchase order from a domestic supplier, the customs entry option is unavailable, but it is automatically calculated for international suppliers.

Step 8

Custom calculations are automatically set based on preferences. If automated custom calculations are not desired, parameters can be set for manual input each time. This setup prevents automatic calculations, allowing manual entry of customs details.

Step 9

As a reminder, for each supplier and item procured, the duty rate can be defined if it is identified as international trade. This concludes the basic customs and procurement handling through our system.