Weeks pass between ordering and receiving imports, and exchange rates move. Landed cost models need a policy for which rate counts, and when to reprice.
An imported product's price is set in one currency and sold in another, with weeks or months between the purchase order, the supplier invoice, the customs entry, and the final payment. Each of those moments has a different exchange rate. A five percent slide between order and payment is unremarkable in a volatile quarter, and on thin DTC margins five percent is the whole profit.
The mistake is treating the purchase order rate as truth. It was an estimate made before the goods existed as an entry. Finance, operations, and pricing each quietly using a different rate, PO, invoice, or spot, produces three different landed costs for the same SKU and arguments nobody can settle from the data.
Most importers anchor on one of two defensible rates: the rate on the customs entry date, which matches how duty values are converted, or the actual rate paid when settling the supplier invoice, which matches cash reality. Blended models weight both. There is no universally correct choice; there is only a correct choice applied consistently and visible to everyone who prices from it.
Whatever you choose, separate the estimate from the outcome. Keep the PO rate as your planning figure, book the policy rate as actual landed cost, and report the difference as a currency variance line. That separation is what lets you see whether a margin problem is sourcing, freight, or exchange rates wearing a disguise.
Chasing every rate movement with shelf price changes destroys price credibility and exhausts the team. Instead set a band: inside plus or minus two or three percent, absorb the variance and let it average out across orders. Outside the band, or when a move persists across two order cycles, run a price review on the exposed categories.
Hedging belongs in this conversation for larger importers. Forward contracts on your main buying currency convert an unknowable swing into a known cost for a fee. The decision is volume math, not sophistication signaling: when a single quarter's plausible swing exceeds the cost of hedging plus your repricing pain, hedging is the cheaper policy.
Shorten the exposure window where you can. Payment terms that settle closer to shipment, supplier pricing in your home currency with a transparent conversion clause, and smaller, more frequent orders all reduce the distance a rate can travel against you. Each shifts some risk rather than deleting it, so price the shift: a supplier absorbing currency risk is charging for it somewhere.
In your cost system, store the rate used, its date, and its source on every receipt. Six months later, when a margin review asks why a hero SKU drifted, that audit trail turns a forensic argument into a five minute lookup, and your next pricing decision starts from facts.
Most importers use either the customs entry date rate or the actual rate paid to the supplier. Either is defensible; what matters is choosing one policy, documenting it, and applying it consistently.
As its own line, separate from product, freight, and duty costs. Blending it into unit cost hides whether margin problems come from sourcing or from exchange rate movement.
Set a tolerance band, often two to three percent. Absorb moves inside it, and review prices when moves exceed the band or persist across consecutive order cycles.
Compare the plausible quarterly swing on your import volume with the cost of forwards. When one bad quarter's swing dwarfs the hedging cost, it is usually the cheaper policy.