Introduction
Retailers in 2025 are no longer simply fighting margin erosion — they’re battling duty spikes, changing sourcing lanes, and unpredictable rate shocks. Traditional merchandising workflows now require a duty-aware mindset: capturing landed cost, structuring SKUs around origin and tariff risk, and protecting contribution across price, volume, and mix. This article shows what to do first, explains why it matters now, and walks through the payoff when you get it right.
What to Do First
- Capture HTS code, country of origin, and duty-inclusive landed cost for all SKUs.
- Reprioritize vendor sourcing toward low-duty origins and qualify at least one secondary supplier for each critical SKU.
- Review special-order policies: set deposits reflecting duty exposure and use duty-light alternatives when lead time or rate risk spikes.
Why This Matters Now
With reciprocal tariff baselines rising (e.g., +10%) and steel/aluminum under §232 at ~50% of steel content, landed cost is rising even before freight and handling are added. Meanwhile, inflation in furniture and bedding categories is running ahead of broader consumer goods (house-hold furnishings +3.4% vs headline +2.7%). If merchandising still uses legacy cost models, you risk hidden margin loss, over-stocking high-duty SKUs, and giving up price competitiveness.
Tactical Checklist
- Ensure SKU-master file includes duty add-on columns and origin flags.
- Map vendor lines to duty risk: classify ‘duty-light’, ‘moderate’, ‘high’.
- Incorporate duty-impact into PO timing: pace receipts when duty uncertain, forward-buy only when rate and materials are locked.
- Adjust breadth: reduce small-quantity SKUs where duty pushes price out of market.
- For special orders: clearly communicate duty-risk, use deposits or surcharges to preserve margin.
The Payoff
Retailers who execute this duty-aware merchandising play gain multiple advantages:
- Faster order-to-receipt turnaround because sourcing flexibility is built in.
- Better pricing discipline driven by landed cost visibility.
- Margin protection even when duty rates reset.
- Competitive differentiation because you avoid the trap of downstream duty shock while others scramble.
FAQ
No. §199A reduces income tax on profits; tariffs raise landed cost. Manage duty at the SKU/PO level and protect contribution via pricing and mix.
Legal product/classification changes (materials, components, assembly) that place items in lower‑duty HTS categories.
Price with duty‑inclusive costs, collect deposits accordingly, and steer to duty‑light alternatives when value/lead time improves.
When a scheduled duty increase or window is certain and carrying costs are acceptable; otherwise, avoid tying up cash in duty‑paid inventory.
By standardizing duty data in the SKU, calculating landed cost, enabling dual sourcing, automating special‑order POs, and enforcing pricing guardrails.
Sources (primary)
Congress.gov (tax); White House/Federal Register (tariffs); USTR (exclusions); BLS (CPI); peer‑reviewed tariff pass‑through research; STORIS product documentation.
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