Show Landed Cost

When you click Show Landed Cost, the following sub-processes are executed in the background:

• Callout to an external tax engine to get estimated duty and taxes
• Assign and calculate costs and other values required to calculate landed cost
• Show and compare landed cost results

Callout to an External Tax Engine

The following are the steps followed by the application:

1. Prepare a Tax XML Request with product classification code and all the sourcing information.
2. Add the quantity details in the 5 duty and tax UOMs requested by the third party data provider to the XML request.
3. Prepare the value data elements (i.e. base amounts) required by the external tax engine to calculate duty and taxes. For the data provider, they are as follows:

1. • COST OF GOODS: the FOB price of the item (i.e. not considering international freight and insurance).
   • INTERNATIONAL FREIGHT: the international freight value.
   • INSURANCE: the insurance value.
   • DUTIABLE INTERNATIONAL FREIGHT: In some cases this value differs from the International Freight. For example, in Europe when importing from India with a transportation mode AIR, the dutiable freight could be 70% of the International Freight.

GTM will add up the values manually entered or calculated by the system into these buckets.

Let's take an example with two sourcing options:

Option 1:

1. • Country of Export = CHN
   • Country of Origin = CHN
   • Transport Mode = AIR
   • Incoterm = CIF
   • Invoice Value = 50000 CNY
   • Domestic Inland Freight = 500 CNY
   • Insurance = 100 CNY
   • International Freight = 250 CNY
   • Bank Fee = 200 CNY
   • Brokerage Fee = 300 CNY

Option 2:

 

• Country of Export = IND
• Country of Origin = IND
• Transport Mode = AIR
• Incoterm = FOB
• Invoice Value = 40000 INR
• Domestic Inland Freight = 500 INR
• Insurance = 100 USD
• International Freight = 250 USD
• Bank Fee = 200 USD
• Brokerage Fee = 300 USD

In our example, the following are the values to be passed to the data provider:

Option 1:

1. • COST OF GOODS = FOB PRICE = INVOICE VALUE – FREIGHT – INSURANCE = 50000 CNY – 100 CNY – 250 CNY = 49650 CNY
   • INTERNATIONAL FREIGHT= 250 CNY
   • INSURANCE = 100 CNY

Option 2:

1. • COST OF GOODS = FOB PRICE = INVOICE VALUE = 40000 INR
   • INTERNATIONAL FREIGHT= 250 USD
   • INSURANCE = 100 USD

GTM will pass these values to the external tax engine in the currency they were entered. The external tax engine will make any currency conversion they need to calculate duty and taxes.

For detailed information on how to setup the mapping between GTM and the data provider, refer to Properties Setup.

4. Make the call out to the data provider to request the calculation of duty and taxes.
5. Receive the response from the data provider and do the mapping to the value qualifiers setup for that purpose. Based on the pre-seeded setup offered by GTM, the following are the value qualifiers received in the response :

1. • DUTY: the customs duty. If there is more than one customs duty, it will represent the sum of all of them.
   • EXCISE: any excise tax. If there is more than one excise tax, it will represent the sum of all of them.
   • VAT: any VAT tax. If there is more than one VAT tax, it will represent the sum of all of them.
   • OTHER: any other tax not covered by the above groups. If there is more than one tax in this category, it will represent the sum of all of them.

GTM may receive multiple duty values for the same sourcing option as the tariff code may have multiple duty rates due to one or more existing trade agreements.

GTM supports duty and taxes at the trade transaction header and line level. Since the ad hoc simulation scenarios are modeled as a single trade transaction line in the background, any duty or tax received at the header level will be added up to the duty or tax at the line level.

Assign and Calculate Costs and Other Values

GTM will require assigning and calculating any other cost or value required to calculate landed cost. For that purpose, the application will execute the following sub-processes:

• Compliance rule screening using the ELC VALUE SET-RULE SET GROUP as a parameter. This process will assign any additional cost/value required to estimate the landed cost.
• Compliance rule screening using the ELC FORMULA-RULE SET GROUP as a parameter. This process will apply the formulas to any additional cost/value and estimate the landed cost.

For detailed information on how to assign costs/values and calculate them, refer to Value Qualifiers Setup.

Landed Cost Results

The landed cost results are calculated for each sourcing option and displayed in the Estimated Landed Cost page.

Following the example in the previous section, there will be multiple tariff rates for tariff code HTS-GB 8482400000 as follows:

• For Country of Origin CHN there are two duty rates:
• • the general or default rate
  • the ERGA OMNES special rate
• For Country of Origin IND there are three duty rates:
• • the general or default rate
  • the SPGL special rate
  • the ERGA OMNES special rate.

In this case, there will be two lowest landed cost results, both of them coming from the second sourcing option - the first one taking advantage of the SPGL agreement, and the second one taking advantage of the ERGA OMNES agreement.