Quick answer
When you pay an overseas supplier in their currency, the cost of each payment is set by the exchange rate on the day you pay. Deposits and balances are paid weeks apart, so movements in between change your landed cost. Customs value for duty and GST is converted separately, using the rate prevailing on the day the goods were exported. Importers manage the risk with conservative pricing, forward rates and timing.
Key points
- Each supplier payment is converted at the rate on the day you pay — deposit and balance can differ.
- The ABF converts customs value using the exchange rate on the day of export, not the day of arrival.
- Price stock on a conservative exchange rate, not today's best case.
- Forward rates from your bank or payment provider can fix the cost of a future payment.
Why does timing matter so much?
An import order isn’t paid for in one go. You pay a deposit when you confirm the order, the balance weeks later before the goods ship, and border costs when they arrive. If you pay your supplier in their currency, each payment is converted at the rate on the day you make it. Between the quote and the last payment, exchange rates can move — and every movement flows into what the stock actually costs you.
For a business working on tight margins, a few per cent can be the difference between a good order and a disappointing one.
Where does the exchange rate touch an import order?
| Moment | Which rate applies | What it affects |
|---|---|---|
| Supplier quote | None yet — just an indication | Your initial landed-cost estimate |
| Deposit payment | Your bank or provider’s rate that day | Part of the goods cost |
| Balance payment | Your bank or provider’s rate that day | The rest of the goods cost |
| Freight (if priced in another currency) | Rate on the day you pay the forwarder | Freight cost |
| Customs value for duty and GST | The rate prevailing on the day of export, per the ABF | Duty and import GST |
That last line surprises people. The ABF states that foreign currency must be converted into local currency at the rate prevailing on the day of export of the goods. The rates are consolidated weekly each Tuesday, and for many currencies they’re uploaded into the customs system daily. So the duty and GST you pay aren’t calculated from the rate you paid your supplier — they’re based on the customs rate for the export date.
What does a movement actually do to landed cost?
Illustrative only. Suppose you order goods quoted at the equivalent of $80,000, pay 30% as a deposit at that rate, and the local currency then weakens by 5% before the balance is paid. The $56,000 balance now costs about $2,800 more. Duty and import GST, calculated from customs value at the export-date rate, rise a little too. On 3,000 units, that’s roughly an extra dollar a unit — on a product where your margin might be only a few dollars.
It works the other way too: a strengthening local currency makes the balance cheaper. The problem isn’t that rates move; it’s not knowing which way before you’ve priced the stock.
How do importers manage exchange-rate risk?
Price conservatively. Build your landed cost using an exchange rate somewhat worse than today’s. If the order still makes sense, you’ve got a buffer; if the rate is kinder, it’s a bonus.
Fix the rate for known payments. Many banks and international payment providers offer forward exchange contracts that fix the rate for a set amount on a future date. It removes uncertainty on the balance payment, at the cost of not benefiting from a favourable move.
Pay earlier or later deliberately. Some importers buy foreign currency in stages as rates look reasonable, holding it in a foreign currency account until the balance is due.
Share the risk with the supplier. For long relationships, some suppliers will agree to adjust prices only if rates move beyond an agreed band.
Keep selling prices flexible. Where you can, avoid locking in customer prices for long periods before your stock has landed and been paid for. See our guide to pricing imported products.
Your bank or payment provider can explain the products available; the right choice depends on how much risk your margins can absorb.
How does this affect funding?
A weaker exchange rate increases the cash you need at two points: the balance payment and the border. If you’ve sized a facility to the last order’s numbers, a movement can leave you short. That’s why we suggest a buffer on top of the calculated gap. The landed cost and funding gap calculator lets you test a few different goods-cost figures to see the effect.
If you’d like to talk through a facility that has room for exchange-rate swings, start a quick enquiry — no credit check to ask.
And for exporters?
The same logic runs in reverse. If you invoice an overseas buyer in their currency, what you receive depends on the rate when their payment lands and converts, perhaps 60 or 90 days after you quoted. See overseas buyer payment terms for how exporters manage the wait and the risk.
What should I track?
- the rate you used to quote or price each order
- the actual rate on each deposit and balance payment
- the customs exchange rate on your broker’s entry summary
- the difference, in dollars, against your plan
Over a few orders, that record shows how much exchange-rate movement is really costing or saving you, and whether fixing rates would be worth it.
Illustrative example
Illustrative only. A cycling-apparel importer pays deposits on three seasonal orders in autumn. Worried about a weaker local currency before the balances fall due in winter, the owner fixes the rate on two of the three balances with a forward contract and leaves the third open. When rates weaken, the fixed balances cost exactly what was budgeted; the open one costs more, but within the buffer built into pricing and the facility.
Leave room for the rate in your funding
If exchange-rate swings are making your import cash harder to plan, see what Trade Loan can do. There’s no credit check to ask, and your enquiry stays with one person rather than being distributed to a list of lenders. They’ll call you to understand your orders and timing. Please give accurate order values and payment dates so we can match you properly first time.
Frequently asked questions
Which exchange rate is used for customs duty and GST?
The ABF says foreign currency must be converted at the rate of exchange prevailing on the day of export of the goods. Rates are published through the customs system, and consolidated weekly each Tuesday.
Should I pay my supplier in their currency or in ours?
Paying in our local currency moves exchange-rate risk to the supplier, who may build a buffer into the price. Paying in their currency keeps the risk with you but often gets a sharper price. Many importers pay in the supplier's currency and manage the risk themselves.
What is a forward exchange contract?
An agreement with a bank or payment provider to exchange a set amount at a set rate on a future date. It removes the uncertainty of what a future payment will cost, though you won't benefit if the rate moves in your favour.
How do I know what exchange rate to plan with?
Look at where rates have been recently — the Reserve Bank publishes daily rates — and plan with a rate somewhat worse than today's. If the order still works at that rate, it has a buffer.
Can an exchange-rate movement affect how much I need to borrow?
Yes. An adverse movement increases the cost of the balance payment and the customs value used for duty and GST, so the cash you need rises. Build a buffer into your facility for it.