How to handle tariffs and landed costs in Dynamics 365 Business Central

For companies that import goods, tariffs and landed costs in Dynamics 365 Business Central such as freight, duty, and customs fees can significantly impact your bottom line. When these expenses are tracked manually or ignored, it often results in inaccurate inventory valuation and unreliable profit margins.

Microsoft Dynamics 365 Business Central provides built-in tools to help businesses manage these hidden costs. Whether you’re handling a simple purchase or managing complex overseas shipments, understanding how to apply tariffs and landed costs properly can make or break your supply chain profitability.

In this blog, we’ll walk through how item charges work in Business Central, explore reporting tools for landed cost visibility, and introduce features and apps that simplify this essential process.

A tariff is a government-imposed tax on goods imported from another country. These charges are typically used to:

• Protect local industries
• Generate revenue
• Influence trade policies

For importers, tariffs increase product costs and often lead to:

• Supply chain disruptions
• The need to source from new suppliers
• Reduced competitiveness against local alternatives

Exporters may also feel the effects when other countries respond with retaliatory tariffs or when supply chains are impacted by new cost structures.

Landed costs include more than just the purchase price of goods. They also factor in:

• Duties and tariffs
• Freight and shipping fees
• Customs broker charges
• Local taxes

Failing to account for these expenses can lead to inaccurate pricing and margin reporting. Businesses using Business Central must ensure that tariffs and landed costs are reflected in their inventory valuation to maintain accurate financials.

Failing to account for these expenses can lead to inaccurate pricing and margin reporting. Businesses using Business Central must ensure that tariffs and landed costs are reflected in their inventory valuation to maintain accurate financials

In Dynamics 365 Business Central, the item charges feature is used to assign landed costs. These charges are not part of the original purchase order lines but are applied after goods are received.

1. You receive the goods into inventory using a purchase order.
2. Later, you receive invoices for freight, duty, or taxes.
3. These charges are applied to the original receipt using item charges.

Business Central automatically updates the inventory cost or adjusts the cost of goods sold (COGS), depending on whether the inventory is still in stock.

Once item charges like freight, duty, and customs fees are assigned in Dynamics 365 Business Central, it’s crucial to understand their actual impact on your inventory costs. That’s where Power BI reporting becomes a powerful tool.

Using a specialized Power BI report built for Business Central, you can visualize and analyze how landed costs affect inventory valuation. These reports are designed to separate item charges from regular purchase costs, providing finance and operations teams with the transparency needed to make informed decisions.

This reporting allows you to:

• See gross margin impact by item
• Track historical cost fluctuations
• Monitor duty and freight spending

While Dynamics 365 Business Central offers strong native functionality through item charges, some scenarios—especially those involving international shipments—require more specialized handling. Additional tools extend the platform’s capabilities and automate manual processes.

For importers managing multiple purchase orders, freight charges, and complex delivery timelines, the Inbound Container Handling app simplifies the process.

It enables companies to:

• Build a physical container (such as one arriving by boat) that includes one or more purchase orders
• Apply item charges like freight or duty at the container level, based on weight, cube, or cost ratio
• Enable FOB (Free on Board) receipts, allowing vendor payments while goods are still in transit

Native Business Central does not allow inventory receipt or vendor payment while goods are en route. Workarounds often require multiple locations or manual adjustments. This app streamlines workflows, improves accuracy, and removes these limitations.

Timing is a challenge with item charges, especially when duties are known but invoices arrive later. The Landed Cost Validator app enables businesses to accrue estimated costs at the purchase order stage instead of waiting for the invoice.

• At the purchase order level, users apply an item charge for known landed costs, such as duties
• Upon receipt, these estimated charges are accrued in the system
• When the invoice arrives, the item charge is applied and the accrual is cleared automatically

This is especially useful for companies importing goods with tariff or duty rates tied to harmonized system codes. Instead of calculating accruals manually at month-end for goods in transit, the process is fully automated. The tool follows the same accounting and posting rules as standard Business Central item charges, making it easy to adopt and integrate.

Let’s say you receive 50 units of an item for $10 each, totalling $500. Two weeks later, you get a $50 duty invoice.

Using item charges:

• You create a new invoice and assign the duty as an item charge.
• The system adjusts the unit cost to $11 each.
• If the items are still in inventory, the inventory value is updated.

If the items have been sold, the cost of goods sold is updated instead.

As global supply chains become more complex and volatile, tracking true landed costs is critical. Business Central’s item charges, combined with advanced reporting tools, give businesses the control and visibility needed to:

• Maintain accurate inventory values
• Protect gross margins
• Make informed sourcing decisions

Whether you’re importing from overseas or dealing with cross-border tariffs, understanding your landed cost structure can be a game-changer for profitability.

At Rand Group, we help businesses optimize supply chain and inventory processes with Microsoft Dynamics 365 Business Central. Contact us today to learn how to unlock better insights and improve profitability with stronger landed cost management.