diff --git a/azurerm/internal/services/apimanagement/api_management_resource.go b/azurerm/internal/services/apimanagement/api_management_resource.go
index 97643d4c93a9..910167fcd3ec 100644
--- a/azurerm/internal/services/apimanagement/api_management_resource.go
+++ b/azurerm/internal/services/apimanagement/api_management_resource.go
@@ -20,7 +20,6 @@ import (
 	"github.com/terraform-providers/terraform-provider-azurerm/azurerm/internal/clients"
 	"github.com/terraform-providers/terraform-provider-azurerm/azurerm/internal/services/apimanagement/parse"
 	"github.com/terraform-providers/terraform-provider-azurerm/azurerm/internal/tags"
-	"github.com/terraform-providers/terraform-provider-azurerm/azurerm/internal/tf/suppress"
 	"github.com/terraform-providers/terraform-provider-azurerm/azurerm/internal/timeouts"
 	"github.com/terraform-providers/terraform-provider-azurerm/azurerm/utils"
 )
@@ -357,7 +356,7 @@ func resourceArmApiManagementService() *schema.Resource {
 							Optional:         true,
 							Computed:         true,
 							ConflictsWith:    []string{"policy.0.xml_link"},
-							DiffSuppressFunc: suppress.XmlDiff,
+							DiffSuppressFunc: XmlWithDotNetInterpolationsDiffSuppress,
 						},
 
 						"xml_link": {
@@ -1343,7 +1342,7 @@ func expandApiManagementPolicies(input []interface{}) (*apimanagement.PolicyCont
 	if xmlContent != "" {
 		return &apimanagement.PolicyContract{
 			PolicyContractProperties: &apimanagement.PolicyContractProperties{
-				Format: apimanagement.XML,
+				Format: apimanagement.Rawxml,
 				Value:  utils.String(xmlContent),
 			},
 		}, nil
diff --git a/azurerm/internal/services/apimanagement/tests/api_management_resource_test.go b/azurerm/internal/services/apimanagement/tests/api_management_resource_test.go
index 976e06b4097a..115124177f14 100644
--- a/azurerm/internal/services/apimanagement/tests/api_management_resource_test.go
+++ b/azurerm/internal/services/apimanagement/tests/api_management_resource_test.go
@@ -626,6 +626,7 @@ resource "azurerm_api_management" "test" {
     xml_content = <<XML
 <policies>
   <inbound>
+    <set-variable name="abc" value="@(context.Request.Headers.GetValueOrDefault("X-Header-Name", ""))" />
     <find-and-replace from="xyz" to="abc" />
   </inbound>
 </policies>