The Strategic Impact of Country of Origin on Landed Costs in Odoo: A Guide for Canada–US Trade: –
The international trade market, operating between Canada and the United States, sees a lot of activities, but businesses suffer from the issue of their vendor payment method not aligning with their real cost. Market advantages can be achieved by using the Odoo ERP system in which businesses get the right Landed Cost estimation. Country of Origin (COO) becomes the least predictable area for the company during the process.
According to USMCA (United States-Mexico-Canada Agreement), the origin of goods decides if businesses should pay import duty at 0% or above 25%. Your business requires correct Odoo system configuration to these elements, leading to unexpected costs incurred by your business.
Defining Landed Costs Within Odoo ERP
First, let us explain how Odoo treats the term "Landed Cost". In terms of Odoo Inventory module, a landed cost is an extra fee – transportation costs, insurance, duties, and brokerage costs – that is added to the price per unit instead of a separate accounting entry.
Consequences of Ignoring This For Canada-US Trade:
For example, when you receive your shipment from a US-based supplier using Odoo, the Purchase Order reflects just the cost paid to the seller. However, at the Customs Border Control, the agent checks the Country of Origin of the goods.
Thus, if you don't factor in those costs in your Odoo calculations, your Cost of Goods Sold (COGS) figures will be underestimated, and the reported net income will be overstated.
Beware of the COO Mistakes: USMCA v. MFN Tariffs
Odoo users often fall into a trap of believing that "Shipped from the USA" automatically means that the product was manufactured there.
USMCA Eligibility: First, for your product to benefit from zero tariff rates within the USMCA agreement, you need to ensure that it qualifies under one of the Rules of Origin – wholly obtained or significantly transformed in Canada, Mexico, or the United States.
MFN (Most Favored Nation) Rates: If you import goods distributed in Canada by US distributors from their foreign partners located in China or India, MFN tariffs will apply to those goods coming to Canada.
Trade Remedies: Some countries could be subjected to antidumping tariffs referred to as "Surtaxes".
In Odoo: You are likely to make errors while calculating your landed costs if you do not specify the Country of Origin in your product templates.
How To Configure Odoo ERP Properly To Trace Tariffs
To ensure proper management of your landed costs, a proper configuration of Odoo system is needed. This is how your configuration should look like:
Configuration of Product Templates
Open the Product form window. Then switch to the Inventory Tab and fill in the field "Country of Origin".
Tip: When importing different products originating from different countries, use Product Variants. Create product variants such as "Product X - US Origin" and "Product X - CN Origin".
Definition of Landed Cost Types
Go to Inventory > Configuration > Landed Cost Types. Instead of defining only one type called "Customs", define the following:
Duty – USMCA (0%): Good to keep your costs incurred for brokerage services and processing procedures in mind.
Duty – Standard MFN: Percentages are calculated according to the nature of the commodity.
Section 301 / Surtaxes: Very suitable when working with goods carrying heavy taxation.
The "Current Value" Cost Split Method Approach
Odoo has different types of Cost Split Methods: Equal, By Quantity, By Weight, By Volume, and By Current Value. If one works with Canada-US tariff duties, then it is very likely that the correct method is By Current Value since the duties are ad valorem in nature.
The Human Element of the Work Flow – Practical Scenario
You are a retailer in Canada, and you use Odoo. You place a purchase order worth $10,000 for industrial valves from a vendor in Texas.
Purchase Order – Prepare a purchase order worth $10,000 in Odoo.
Receipt – The goods reach your warehouse, and you validate your Picking process.
Customs Bill – After two days, you get an invoice bill for 6% MFN Duty ($600) and brokerage charges ($150) on your purchase. Why? You discover that the COO (Country of Origin) of your industrial valves is Germany (DE).
Odoo Action – Go to Operations>Landed Costs. Apply the total charge of $750 to the original Picking.
Results – The value of your valves now changes to $10,750 in Odoo. Whenever you sell these valves in the future, you earn reduced margins compared to earlier transactions.
Avoid Future Audits with Odoo Document Management System
The CBSA cannot take your word for granted. There must be a Certificate of Origin. Probably the least used feature in Odoo is Document Integration.
When you attach your USMCA Certificate of Origin either to the Vendor Profile or the Purchase Order in Odoo, you create what is known as an "audit trail". In case a customs officer wants to know the reason behind reporting a shipment from three years ago in order to avoid paying 0% duty, he/she gets their answers in your ERP system.
Strategic Thoughts – Odoo Reporting for Sourcing Optimization
After incorporating landed costs in Odoo for about six to twelve months, one can conduct a Sourcing Audit.
For instance, by using the Inventory Valuation Report and selecting "Product" and "Landed Costs" for grouping, one can learn that:
- Supplier A (USA) – $100/unit+ 0% MFN Duty.
- Supplier B (International) – $85/unit +20% MFN Duty.
Although Supplier B may appear cheaper, Supplier A is cheaper for you. This is the information displayed to you by the Odoo ERP.
Let Us Assist You
It is simple to set up Odoo. It becomes difficult to configure Odoo to suit your international business operations. The main focus at Cloudmonte Technologies is assisting organizations to achieve a stage where they will have Odoo as their Global Trade Powerhouse.
We offer a number of services such as:
Landed Cost Automation – Save time that is consumed manually in recording broker bills per shipment.
Multi-Currency Accounting Services – Hedge the volatility of both the Canadian Dollar and United States Dollar to ensure your landed costs calculations are absolutely precise.
Valuation Layer Automation – Maintain your Balance Sheet updates automatically using the customs invoices received.
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