Proponents list a host of benefits from FTAs, including:

- Expanded access to markets for both goods and services

- Greater protection of intellectual property rights

- Growth in jobs that would accompany the opening of new markets

Taking this into consideration, Management Dynamics offers a comprehensive Free Trade Agreement (FTA) management solution that provides solicitation and qualification in order to determine if a company’s product is eligible for preferential treatment. This can have a significant impact on the applicable duties for their products resulting in reduced total landed costs.

To learn more about the Free Trade Agreement Solution, read the full press release here.

At the same time Indian Trade Minister Anand Sharma also proposed to Japanese Prime Minister Naoto Kan a joint revolving $9 billion fund to help finance an industrial corridor between New Delhi and India’s financial capital, Mumbai. Japan and Japanese companies already have invested in the project, which started in 2007 and is expected to attract more than $100 billion in investments.

And two days later, India signed a FTA with Malaysia, reported Voice of America.

To learn more about FTAs, check out this webinar on Moving Beyond Global Sourcing to Trade Agreement Management.

On one side, local and national business leaders are urging Congress to approve the agreement, citing the success of NAFTA and its effect on US exports and job creation. President Obama, at the time of his signing of KORUS-FTA, stated that deal would “boost US exports to 11 billion and support at least 70,000 jobs.”

Failing to act would hurt the US as well, proponents of the measure argue, as South Korea is in talks with Canada about a free trade agreement and has already inked one with the European Union. If approved, these agreements create a more attractive trading option for South Korean businesses than what the US has to offer, and thus inevitably decreasing the amount of US exports to South Korea.

If approved, the US will benefit from the gradual reduction of South Korea’s current tariffs of up to 40%, all the way down to zero in 95% of industries within three years, with most remaining tariffs being eliminated within ten years. This will obviously aid many trade industries by reducing the cost of trade and opening new opportunities, including the auto industry and the National Cattlemen’s Beef Association (NCBA), who, along with 60 other food and agricultural groups and companies, have sent a letter to Speaker of the House John Boehner (R-Ohio); House Democratic Leader Nancy Pelosi (D-Calif.); Senate Majority Leader Harry Reid (D-Nev.) and Senate Republican Leader Mitch McConnell (R-Ky.) in support of the recent agreement.

However, not all businesses and politicians support the agreement because they believe the agreement will actually hurt US businesses and create major job loss due to jobs going overseas. California, one of the US’s largest traders with Korea, lost 800,000 jobs due to NAFTA, according to the California Labor Federation, and would likely see further erosion of jobs with another free trade agreement.

California does not necessarily hold the trend for the rest of the US, as it shares the closest ties with South Korea with more than half of a million South Koreans living in the state, and thus is the most vulnerable economically.

Overall, free trade agreements will at the very least increase opportunities for US businesses to increase exports, and will likely save or create jobs as well. The free trade agreement is even more vital if the EU and Canada agreements get finalized, as US cannot afford to fall behind and lose export revenue to the Asian economic giant.

Receive the Trade Agreement Best Practices Benchmark Study Now!

Implementing and maintaining compliance with a free trade agreement is a complex and technical process. Make sure your company takes full advantage of the trade agreement savings by benchmarking your process against 300 respondents across many different industry verticals and revenue size.

Download the Trade Agreement Best Practices Benchmark Study today to learn key insider information related to program management challenges, monetary savings, legal responsibilities, and strategies to help your firm initiate and sustain an effective program.

International Sourcing Strategies

Taking a proactive approach to the implications of offshore sourcing helps protect your bottom line. Many North American manufacturers are finding it increasingly challenging to deal with a growing influx of imported materials and products originating from off competitors, especially those based in China and India.

These competitive pressures are compelling Canadian and US companies to consider various measures to protect market share, including shifting their sourcing arrangements for components, peripherals and finished products outside of North America, to take advantage of lower cost alternatives originating in the emerging economies of Asia, Eastern Europe and South America.

This post highlights the importance of doing the appropriate research and background checks of all the cost and regulatory elements BEFORE you commit buying components or finished goods from new off shore vendors.

Why is this more important than ever?

Because North American manufacturers have traditionally sourced most of their materials in the US., Canada or Mexico, where duty is generally not an issue of the goods are NAFTA qualifying, and Customs and regulatory issues are well documented and understood. These assumptions can not be taken for granted when sourcing goods outside North America. Canadian and US importers are encouraged to review the full spectrum of variables, including currency exchange ratios, marking and packaging requirements, duty rates and tariff treatment, anti-dumping/countervailing duty applicability, duty drawback eligibility, and NAFTA eligibility, if the offshore components are incorporated into products ultimately sold in Canada or the US.

For example, purchasing motors in China that are incorporated into machines you manufacture in Canada for sale to a customer in the US, may negate the finished product’s NAFTA eligibility and duty free status, thereby increasing the ultimate cost of the product, and possibly eroding your margin or forcing you to raise your retail price and risking your competitive position.

Conversely, if you purchase the motors from China and sell them to an US customer in the same condition and without modification, you may be eligible to recover all Canadian duties paid at time of import under the Duty Drawback program. Of course you will need to assess all the trade offs to arrive at a bottom line comparison that takes all the factors into consideration, and gives you and “apples to apples” view of the offshore versus North American sourcing options.

Taking a proactive approach to studying the implications of off shore sourcing can confirm that you will achieve the desired competitive cost advantage, help you avoid unexpected costs or surprises, and minimize the probability of unexpected regulatory issues with Canada Border Services Agency or United States Customs and Border Protection

An industry leading organization specializing in window covering was able to save over $6M in duty as a result of having an effective integrated trade compliance strategy. By coordinating NAFTA with organizational processes by use of a compliance champion, the company was able to assign tariff to every item.

This then allowed the organization to have clear visibility of duty payments thus allowing the option of duty recovery for particular items. By integrating a well structured NAFTA program throughout the industry, the organization was able benefit from multiple drawbacks and save both time and cost.

Case Analyzed

The message is clear, by using the model of an Integrated Trade Compliance Strategy, this firm created efficiencies in terms of process but also cash management with an integrated strategy that factored NAFTA status and duty drawback for Non-NAFTA related products.

The resulting $6 million savings were a result of their in-house trade compliance champion who oversaw the entire process on imports as well as exports and worked in conjunction with their professional trade services provider to handle the claims paperwork on both sides of the border.

U.S. Commerce Secretary Gary Locke, hosted a meeting for North America’s Industry Ministers.  Tony Clement, Canada’s Minister of Industry, and Bruno Ferrari, Mexico’s Secretary of Economy, were in attendance.  They discussed the importance of trilateral cooperation on issues such as the National Export Initiative.  The leaders agreed to identify ways to encourage small and medium-sized firms to export their goods and services.  Secretary Locked added:

Canada, the United States, and Mexico have a sophisticated and robust trade relationship because of NAFTA… Because our businesses already cooperate in the production of goods and delivery of services, we must work together to develop strategies that will benefit these businesses and the workers of this region.

According to American Shipper, trilateral trade among the NAFTA partners totaled more than $735 billion in 2009.  (An increase of 148% since the year before NAFTA’s implementation.)

Following the AberdeenGroup’s research with 136 enterprises from September and “regarding growth and complexity in global trade operations, we can see that changes in trade lanes, shifts in trade volume and increases in overall supply chain complexity have combined to place a renewed focus on the concept of global trade management and compliance,” said Bob Heaney, senior research analyst of supply chain management at Aberdeen.

Please join AberdeenGroup and distinguished industry executives (topic areas are considered sensitive and company names are not disclosed) as they discuss global trade management initiatives and practices within their enterprises around FTZ, Restricted Party Screening, 10+2 and other initiatives. Key topic areas covered in the recent report will also be highlighted.

After viewing this webinar, you will:

• Understand the pros and cons of FTZs and other duty reduction provisions.
• Lower your overall Landed Costs
• Improve Import/Export document generation

Register Now!

Presenters:

Bob Heaney, Sr. Research Analyst, Supply Chain Management
Aberdeen Group

Craig M., Head of Customs Compliance
Large Global Copier OEM

Brian C., Director International Trade Compliance
Large Electronics Firm

Philip T., CFO of the North American Manufacturing Operations
Global Automaker/ Manufacturer

However, developing expertise on the complex rules associated with NAFTA and free trade agreement qualification is difficult and individuals within firms responsible for signing certificates may not have the expertise required to complete the form.

After surveying import and export compliance managers from 200 firms, Customs & Trade Solutions Inc and Management Dynamics have compiled key statistics into our latest benchmark study, “Best Practices for Managing NAFTA and Free Trade Agreement Programs.”

Despite the hurdles for developing NAFTA and Free Trade Agreement (FTA) expertise, the programs bring strong benefits to companies.

For exporters, signing a NAFTA certificate allows their customers to legally declare a lower, preferential duty rate in the receiving country – making the exporter’s product more competitive on pricing than exporters not qualifying their product for NAFTA.

For an importer, cost savings associated with NAFTA qualifying products can be high and a major impact on the company’s bottom line. Most survey respondents  recognized savings of $50,000 to $500,000 annually due to NAFTA and/or other Free Trade Agreement qualifications – a strong indicator for the company to continue to pursue free trade agreement programs.

The benchmark study also revealed key findings in NAFTA qualification management:

• 86% of all firms used a manual process to manage their NAFTA data
• Only 34.3% of all companies were confident of the information they shared with Customs and their Customers through the NAFTA certificate
• 32% of respondents have had their customs group audited in the last 3 years

Additionally, firms qualifying products for trade agreements realized significant savings, with 28.2% of the participants posting savings of $500,000 or more per year. Clearly working with trade agreements can result in substantial savings to a firm, justifying both the staff and training programs for maintaining accuracy with the filing of NAFTA certificates.

On the other hand, 36% of all companies could not qualify their duty savings through their NAFTA / FTA programs. Management resources are generally allocated to programs where impact on the bottom line is quantifiable – so the key insight here is to start measuring your savings (or unnecessary spend if you have not implemented NAFTA) in order to secure future support of your programs.

Best Practices for Managing NAFTA and Free Trade Agreement Programs

Curious about what else the survey uncovered? If you’d like to benchmark your best practices, download the NAFTA Benchmark Report for yourself!