Inventory glossary

What is Tariffs and duties?

Tariffs and duties are taxes a government charges on goods crossing its border, usually calculated as a percentage of the product's declared value.

Tariffs and duties change your real cost per unit, not just the price you negotiate with a supplier. If you ignore them when pricing products, your actual margin ends up lower than what your spreadsheet shows, and you may not notice until cash gets tight.

Small store owners should check the duty rate for each product category before placing a large purchase order, especially when sourcing from a new country or supplier. Build the duty into your landed cost per unit so your gross margin and reorder decisions reflect the real number, not just the supplier's invoice price.

Formula

Duty owed = Customs value x Duty rate

Example

A candle store imports 500 units at $4 per unit from overseas, so the goods cost $2,000. If the duty rate is 6 percent, the duty owed is $2,000 x 0.06 = $120, bringing the total landed cost before freight to $2,120, or $4.24 per unit.

Common mistakes

  • Forgetting that duties are charged on top of freight and insurance in many countries, not just the product price.
  • Using one flat duty rate for all products when different HS codes carry different rates.
  • Not budgeting for duties when setting retail prices, which quietly shrinks gross margin.

Tariffs and duties and SteadyShelf

SteadyShelf does not calculate landed cost or duties, but its order-by dates and quantity suggestions still help you plan imports early enough to avoid rushed air freight, which often carries its own extra fees.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Related terms

Landed cost · HS code · Incoterms · Customs clearance · FOB shipping

Full inventory glossary

FAQ

Does a tariff change my reorder point calculation?

No. A higher tariff increases your landed cost per unit, which can push the reorder quantity math toward smaller, more frequent orders if cash is tight, but it does not change the reorder point formula itself. Reorder point is still based on lead time demand and safety stock.

Do I pay duties even on inventory that later sits unsold?

Usually yes, if the goods are in the destination country. Tariffs typically apply at the border even if the product has not sold yet, so holding slow-moving stock can mean cash already spent on duties for items that have not earned revenue.

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