Qualifying For A Free-trade Agreement
To determine eligibility for a free-trade agreement, importers must obtain product information from all the suppliers within the supply chain. An automated solution should be in place for an importer to solicit his/her suppliers. Once supplier documentation is received the importer must determine the eligibility of the product based on the many rules of origin surrounding the product's Harmonized System number. Each free trade agreement will qualify an importer's products in different ways, however the basis of the qualification surrounds the idea that the finished product must have a minimum percentage of local/regional content. Under the North American Free Trade Agreement (NAFTA), qualifying rules include De Minimis, Regional Value Content, and Tariff Shift.
- De Minimis states that a finished good will not be disqualified from preferential treatment if the non-originating content of that finished good is 7% or less of the transaction value of the good on an FOB basis (or its weight, depending on the type of good).
- Regional Value Content is a calculated percentage of the value of the product that represents its North American content
- Tariff Shift is a substantial transformation that takes place in a NAFTA country A finished good must qualify under one of these rules to be eligible for free trade under NAFTA. This is just one example of a qualification for a free-trade agreement. If a certificate of origin is present from a supplier demonstrating that the good originated in a country under the associated free trade agreement, no further calculations are needed. When qualifying products for an FTA, the use of an automated system allows importers to stay up-to-date on international compliance regulations, as well as solicit suppliers via the web instead of manually. A functional solution should also perform the required calculations for the associated FTA during the Bill of Material (BOM) analysis, ensuring correct eligibility.
Read more about this topic: Free Trade Agreements
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