Managing Tariffs and Duty Drawbacks in Business Central
The subject of tariffs has taken on increasing importance in the past few weeks with new proposed tariffs on imports from Canada, Mexico, and China, along with retaliatory actions being imposed by these countries. These actions will likely affect virtually every US industry in some way and can impact global trade in general. As a result, many businesses, from manufacturing to distribution to eCommerce, will face tariffs for the first time.
Here, we provide a brief overview of tariffs, how they can be handled with Microsoft Dynamics 365 Business Central, and resources for more information.
What are tariffs?
Tariffs are taxes or duties the government imposes on certain imported and exported goods. Governments often use tariffs to protect domestic industries by making imports more expensive or to generate additional revenue for the government.
Tariffs are charged at the port of entry or exit and paid for by the recipient. The cost of the tariff is usually based on the type of product being shipped and a percentage of the product’s value.
What are HS codes?
Product types are determined by Harmonized System (HS) codes, which are administered by the World Customs Organization (WCO). The first six digits of the HS code determine the product’s classification. Countries are allowed to add more digits to the HS code. For example, the US uses 10-digit numbers to identify items being imported or exported.
How will tariffs impact my business?
The obvious impact of higher tariffs is an increase in the cost of acquiring raw materials, parts, or finished goods for manufacture or resale. These higher costs must then be passed on to the buyer through higher prices.
As a consequence, your business will want to:
- Understand the HS code of each product and the tariff rate associated with that code.
- Consider diversifying your suppliers, paying particular attention to suppliers with lower tariff costs.
- Be aware that your current suppliers might be affected by higher tariffs and face disruption from a drop in orders or delays due to increased attention by Customs.
- Stay up-to-date on changes in tariffs to or from the countries where you conduct business.
What are drawbacks?
When applied to tariffs, the term “drawback” refers to a refund of duties, taxes, or fees previously paid on imported goods when those goods are later exported or used to produce exported goods. This system encourages exports by preventing double taxation on products that do not remain in the domestic market.
However, companies must maintain detailed records and comply with strict customs regulations to qualify for drawbacks. Moreover, the refund process can take months, impacting cash flow.
How does Microsoft Dynamics 365 Business Central help me handle tariffs?
Business Central has several features to help businesses track, apply, and manage tariffs efficiently within their supply chain and financial operations.
Tariffs in Business Central are typically handled as additional costs on purchases and imports. You can configure these additional costs as item charges (or other) mechanisms to increase landed costs or taxes. Remember to set up the Tariff No. and Country of Origin fields in your Item card, which will help you with later reporting. You should select the option that works best for your needs.
Business Central includes tools to help businesses manage compliance and documentation. For example, Business Central integrates with customs brokers and trade compliance systems to help your company comply with international trade laws. You can also maintain HS codes for your products in the item master data to ensure accurate tariff classification.
Users can also export Business Central data to Power BI to analyze how tariffs affect profitability, margins, and cost structures.
Find out more
Managing tariffs is complex. If you’re new to tariffs, you don’t have to go it alone. Contact the experts at ArcherPoint to help you configure Business Central optimized to how you do business.
If you would like to learn more about tariffs and how they might affect your business, here are some additional resources to help you get started:
Register for the webinar, The Changing Tariff Landscape in 2025 and Beyond, presented by Cherry Bekaert on Wednesday, March 19, 2025, at 1:30 pm ET. This webinar will cover the implications of the current changes to US tariffs, tax considerations for 2025, and four strategies to handle tariffs.
Visit the US Customs and Border Protection website for guidance on Basic Importing and Exporting. Also, see US CBP guidance and resources on Drawbacks.
Visit the International Trade Administration to learn more about HS Codes.