Posted by Brooks Whiting, Intern
The most notable benefit of a FTA is the reduction
or elimination of tariffs on imported goods.
Another benefit directly associated with FTA's is that exported goods
originating from the United States receive a lower duty from the agreement than
imports sourced from countries without free trade agreements. Currently, the United States has joined with
20 countries and negotiated 14 active FTA's.
A listing of these active FTA's is available from the Office of the United
States Trade Representative (USTR) website. The
United States is also in negotiations for regional FTA's, such as the
Asia-Pacific trade agreement called the Trans-Pacific
Partnership (TPP) Agreement and
the European Union trade agreement called the Transatlantic Trade and Investment Partnership (T-TIP).
Taking
Advantage of a Free Trade Agreement
The first step to take advantage of a FTA is to classify
your products by their Harmonized Tariff System (HTS) code, using the GRI-General
Rules of Interpretation and chapter/section notes. The Customs
Ruling Online System Search (CROSS) is a great tool to
verify and double-check your HTS code.
The second step is to find out if a tariff is being
imposed on your product. You are not
required to participate in Free Trade Agreements. If the tariff being imposed on your product
is zero there is no need to involve yourself.
The "tariff tool" found on the US Dept of
Commerce's website is an invaluable resource. This tool will tell you not only how large
the tariff being imposed on your good is, but any other taxes as well. If the tariff is small, you may benefit from
doing a cost analysis. This will help determine
if the benefits realized from taking part in the FTA will outweigh the costs.
Rules
of Origin
The third step in taking advantage of a FTA is to
determine the applicable rules of origin for your product. In other words, you need to find out if your
products qualify as being made of originating or non-originating materials. If you are not the primary manufacturer, it
may be necessary to have documentation from the primary manufacturer supporting
the claim of originating material. The rules
of origin and forms that must be used vary depending on the trade agreement.
The North American Free Trade Agreement (NAFTA) is
between the US, Canada, and Mexico. This
agreement uses Annex
401- Specific Rules of Origin. The KORUS FTA is between South Korea and the
US, and it has deliberate in-text
guidelines to certify origin.
The Colombia Trade Promotion Agreement with the US has an entire
chapter dedicated to determining origin. Panama's Trade Promotion Agreement with the
US uses Annex
4.1
for rules of origin.
Filing
Certificates of Origin
After determining if your products qualify under the
corresponding rules of origin, the next step is to ensure you have the proper
forms and information to complete the FTA's Certificate of Origin. Each FTA requires the completion of a form
detailing aspects necessary to comply with the guidelines of the FTA. Carefully compare the differences between NAFTA, KORUS, Colombia-US
TPA, and Panama-US
TPA. Be sure to stay current on rules of origin, tariff
requirements, and other eligibility constraints that may change
periodically. The law requires your
business to keep all FTA documents for 5 years after filing.
This full day seminar was presented by Mike Allocca,
President, Allocca Enterprises, Inc. His
website
has informational videos that cover a variety of Export and Import Compliance
Training topics. Should you wish to
learn more about documentation, HTS-Schedule B or even NAFTA, his videos are
available to rent or buy. As always, our
team at the World Trade Center Harrisburg is standing by to help you achieve
your international business goals. Feel
free to give us a call at (717) 842-1090, we will be glad to answer any
questions you may have.
