Beyond Duty Rates: Why Landed Cost Has to Be a Live Decision

A landed-cost model built in January 2026 has already been wrong at least twice.

On February 20, the Supreme Court ruled in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not authorize the President to impose tariffs. The administration replaced those duties with a temporary 10 percent global tariff under Section 122 of the Trade Act of 1974, effective February 24. When that authority expired at 12:01 a.m. on July 24, new Section 301 tariffs took effect the same minute on imports from 60 economies, at 10 or 12.5 percent depending on each country's forced-labor import rules. Goods covered by Section 232 duties and USMCA-eligible goods are excluded.

At the same time, importers are recovering duties paid under the invalidated tariffs. U.S. Customs and Border Protection opened its CAPE refund process on April 20 and expanded it on June 29, and a third phase covering certain finally liquidated entries opens on October 6. As of September 11, CBP had accepted about $134.7 billion in potential and certified refunds and completed roughly $122 billion. Duty-free de minimis treatment for low-value shipments remains suspended for every country.

For procurement, logistics, and finance teams, the lesson from 2026 is straightforward. Landed cost has to be treated as a living operating metric that is updated whenever its inputs change.

Why tariff changes send companies back to their sourcing plans

A tariff change moves the cost of a product without changing anything physical about it. The natural response is to look for a cheaper origin, a different routing, or a different supplier. Those moves can be right. They also take months to execute and years to unwind, while the tariff that prompted them may not last. The country-specific IEEPA tariffs that drove many 2025 sourcing moves were struck down within about a year, and the Section 122 tariff that replaced them lasted roughly five months.

The common error: comparing duty rates in isolation

A sourcing comparison that looks only at duty rates will usually favor a move. The full operating cost tells a more complicated story. Consider an illustrative example.

An importer buys 200,000 units a year of a product at $40 each, or $8 million of goods. Moving production to a country in the 10 percent tier instead of the 12.5 percent tier saves 2.5 points of duty, about $200,000 a year. The new origin, though, adds nine days of transit and less predictable lead times.

Nine more days of inventory in transit ties up about $197,000. At a 20 percent carrying cost, that is roughly $39,000 a year.
Two more weeks of safety stock to cover the added variability ties up about $307,000, or roughly $61,000 a year in carrying cost.
More frequent expedites during the first year of a new supplier relationship could plausibly add $60,000.

Together those costs come to about $160,000, which erases around 80 percent of the apparent saving before quality, inspection, or supplier-development costs are counted. The move might still be the right one for resilience reasons. It should be made knowing the real numbers.

What a decision-ready landed-cost model includes

Product and supplier cost, including tooling, minimum order quantities, and payment terms.
Duties, tariffs, taxes, and compliance expenses, including brokerage, forced-labor and origin documentation, and the cost of holds or examinations.
Transportation for every leg, covering ocean, air, parcel, rail, truck, and drayage as they apply.
Surcharges, including fuel, peak-season, demand, and accessorial charges. FedEx, for example, raised its demand surcharge on U.S. imports from China and Hong Kong to $0.91 per pound on priority services from September 21.
Transit-time variability and inventory carrying cost, for both the pipeline and the safety stock the variability requires.
Port, warehouse, and handling costs, including demurrage and detention exposure.
The cost of failure, meaning delayed service, stockouts, and missed delivery commitments.

Which inputs need to be live

Not every input changes weekly. Tariff rates by product and origin, freight rates and surcharges, and actual transit performance should update as they change. Carrying-cost rates, handling costs, and contracted product costs can be held as stable assumptions and reviewed quarterly. Separating the two keeps the model current without turning it into a full-time job.

One shared view for procurement, logistics, and finance

In most companies, responsibility for landed cost is divided. Procurement owns the unit price. Logistics owns freight. Finance owns duty accruals. Customer service owns delivery promises. Each group optimizes its own number, and no one owns the total.

A shared framework does not require a reorganization. It requires agreement on a few things:

A single landed-cost model, with named owners for each input.
Triggers that require the model to be re-run, such as a tariff change, a freight rate change beyond an agreed percentage, or a shift in measured transit variability.
A rule that no sourcing change is committed until the model has been reviewed by procurement, logistics, finance, and customer service together.
A short decision log recording the assumptions behind each change, so the team can tell later whether the decision or the assumptions went wrong.

Refunds belong in the same conversation. If your company paid duties under the invalidated tariffs, the refunds change the historical cost of goods, and possibly the margins and customer prices set during that period. Your customs broker or trade counsel can confirm which entries qualify and which CAPE phase applies.

Where Freightgate fits

Landed cost is easiest to manage when it is calculated at the start of the order rather than reconstructed from invoices at the end. Freightgate's Purchase-Order Management applies contract rates, duties, and compliance checks when the purchase order is created, so the expected landed cost is known before goods ship. Rate Management holds freight rates, surcharges, and accessorials across modes, and Audit & Payment checks each invoice against the contract before it is paid. The Supply-Chain Dashboard lets procurement, logistics, and finance review the same figures.

CEO perspective: the best decision is rarely visible in one department's data

Martin Hubert, Founder and CEO, Freightgate

Tariff policy is now changing faster than sourcing cycles. The companies I worry about are the ones that move their supply base on every headline. They pay the switching cost, and then the policy changes again. A factory relationship takes years to build. The country-specific tariffs that pushed many companies to leave one in 2025 were struck down within about a year.

The better approach is to make decisions that hold up across several tariff scenarios, and to know exactly what each decision costs when the scenario changes. That is impossible when procurement sees unit price, logistics sees freight, and finance sees duty, each in a different system and on a different schedule.

The implication many leaders overlook is that the cost of a sourcing decision is locked in for years, while the tariff that motivated it may disappear in months. That asymmetry should raise the bar for moving. The questions I would ask my team this week:

Who owns the total landed cost of our top products, and do they see freight and duty in the same place?
Which assumptions in our current model are older than the last tariff change?
Would our most recent sourcing move still make sense if the tariff difference disappeared next year?
Have we worked out what IEEPA refunds mean for the margins and prices we set while those duties applied?

What to watch next

CAPE Phase 3, opening October 6, and any further CBP guidance on refund timing.
USTR adjustments to country tiers under the Section 301 forced-labor tariffs.
A separate Section 301 investigation into manufacturing overcapacity, which trade lawyers expect could add duties on top of the current tariffs.
New or expanded Section 232 actions on specific product categories.
The government's appeal of a May Court of International Trade ruling that found the Section 122 tariffs exceeded presidential authority. The relief so far applies only to the three plaintiffs, but the outcome could raise new refund questions.
CBP's proposed rules to make the de minimis suspension permanent.

A practical next step

Create a shared landed-cost decision framework that procurement, logistics, finance, and customer service can use before a sourcing change is committed. Start with your ten highest-volume products and check how many of the inputs are current.

If you would like help comparing cost scenarios for a specific lane or product, our team is glad to work through it with you.

This article is general information about trade developments and is not legal advice. Consult your customs broker or trade counsel about your specific entries.