Tag Archives: NAFTA

Upcoming Webinar: Best Practices for Free Trade Agreement Management Processes

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Both importers and exporters can realize cost savings with the help of Free Trade Agreements, such as NAFTA.  After surveying import and export compliance managers from 200 firms, Customs & Trade Solutions, Inc. and Management Dynamics have uncovered key trends in managing the complex Free Trade Management process.

Join our webinar, Best Practices for Managing Free Trade Agreement Management Processes, to learn how your company can successfully implement and optimize NAFTA.  Broadcasting live on Tuesday, April 19 at 2pm EDT, presenters will address key findings from this industry benchmark study.  Presenters include:

  • Suzanne Richer, President, Customs & Trade Solutions, Inc.
  • Scott Byrnes, Vice President of Marketing, Management Dynamics, Inc.
  • Moderator: Lara Sowinski, Managing Editor of World Trade magazine

Join us on Tuesday, April 19 at 2pm EDT.  Register today!

 

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International Sourcing Strategies and the Influence of Trade Agreements

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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.

This article is a reprinted with permission: Bob Cowie, VP Consulting, GHY International

International Sourcing Strategies

3640490 s 300x300 Trade Compliance – International Sourcing StrategiesTaking 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

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NAFTA and Duty Recovery Saves $6 Million

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a guest blog by Nigel Fortlage of International Trade Compliance Strategy at GHY.

NAFTA and Duty Recovery Saves $6 MillionAn 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.

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NAFTA: Key to NEI Success?

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The following is a guest post by Caroline from the Global Trade Content Blog.

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.)

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NAFTA Management Best Practices

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The North American Free Trade Agreement (NAFTA), implemented in 1994, created the world’s largest free trade area, stimulating exports between the U.S., Canada, and Mexico by eliminating tariffs and creating international rights for business investors. NAFTA ultimately produced sales of $17 trillion, establishing a model that was adopted globally. For new members, however, managing the red tape can be daunting and potentially risky.

To take advantage of the reduced duties afforded by NAFTA and other free trade agreements, exporters and importers have to verify the eligibility of their products. The qualification process involves classifying products via the Harmonized Classification System and NAFTA rules of origin. Each of the three partner governments may audit an importer, exporter, or producer of NAFTA products in any of thee three member countries, and hefty fines are levied on non-compliant manufacturers or distributors.

Best Practices for Firms Qualifying Product for NAFTA Eligibility

Qualifying products under NAFTA and other trade agreements such as CAFTA, Australian, and Singapore programs, can be a challenge but one that reaps significant savings when trading internationally. The following best practices recommended by a 2010 Global Trade Management study provide guidelines for developing a documented and verifiable process to meet NAFTA qualification compliance regulations, as well as lower the risk of fines for non-compliance.

  1. Product qualification requires expertise with classification programs, trade laws, and NAFTA rules of origin such as Tariff Shift Concepts. This process is labor intensive, so companies are well advised to align trained staff and resources to the project on an annual basis. Given the complexity of classification and NAFTA rules of origin, companies that allocate trade agreement qualification to departments with fiduciary responsibility generally reflect high levels of compliance. Also, for companies with multiple sites, centralized trade agreement compliance programs yield better compliance results as well.
  2. Review the list of products exported to NAFTA countries and determine which products carry the highest duty rates in the receiving country. The greatest savings will be realized for product with high duty rates or highest volume of exports. Offset the number of products to be NAFTA verified against the duty savings to quantify the bottom-line impact.
  3. Use cost savings data to offset training program costs for staff. The ability to monitor trade agreement programs through documented savings can enable strong compliance programs and also better support sales — lower costs to the end customer makes the exporter’s product more competitive.Consider the estimated savings that would increase if an automated system was utilized. Automation of NAFTA programs has the ability to improve processes and expedite the confirmation of information needed to qualify products for NAFTA as well as communicating and archiving it. Automated systems, however, don’t remove the need for internal expertise on classification and rules of origin.
  4. When soliciting NAFTA certificates from producers/exporters, it is imperative that the supplier or exporter have completed NAFTA certificates for their customers before shipping product. In most cases, suppliers or exporters focus on securing NAFTA certificates and supporting documentation in the latter part of the year in order to be able to sign NAFTA certificates for the coming year.Importers of NAFTA qualifying product generally seek the NAFTA certificates from their supplier/exporter by December 31st for products to be shipped in the next calendar year, well in advance of the shipment arriving in their country. Importers cannot legally declare the NAFTA reduced duty benefit without the certificate on file.
  5. Conduct annual audits of your trade compliance programs – whether import or export oriented and include alls trade agreement reviews. Working with experts will expedite the process, ensure accuracy with information declared to Customs, and lower the risk of non-compliance for both current and future shipments.

For additional information on NAFTA support, training or best practices, please contact Ms. Suzanne Richer at Customs & Trade Solutions, Inc, at smricher@ctsiadvisors.com

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Best Strategies for Managing NAFTA

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Given the advantages of NAFTA and other free trade agreements, exporters and importers seek to widen the advantages of reduced duty impact by participating in trade agreements.

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.

NAFTAAfter 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 dataNAFTA Best Practices Benchmark
  • 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!

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AberdeenGroup Releases New Trade Compliance Report

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The AberdeenGroup has come out with a brand new report, which will be available for free for a limited time –

Global Trade Management: Strategies for Mastering Trade Compliance and Supply Chain Complexity.

For this research report, Aberdeen surveyed 136 global exporters and importers in August and September of this year.

Their findings revealed that trade compliance teams are actively revamping and augmenting their Global Trade Management (GTM), specifically their Global Trade Compliance programs, to stay current with supply and demand fluctuations, growing global operations, increasing operational complexity and risk, and trade lane changes.

Here are a few key findings in the report:

  • Best-in-Class companies had 8.2% in average trade compliance cost to value ratio
  • Best-in-Class companies achieved 95.0% perfect order rate received on imports received from international suppliers
  • Best-in-Class companies experienced 96.0% for perfect order rate delivered on exports to international suppliers/customers
  • Best-in-Class companies improved their average trade compliance cost to value ratio by 1.4% improvement, year over year
  • Best-in-Class companies increased their total land cost per unit handled versus prior year by 0.6%, a 5.5 percentage point

Global-Trade-Mgmt-Report-Trade-Compliance-AberdeenGroup

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Take the NAFTA Benchmarking Survey

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Are you interested in learning about the best practices of firms qualifying product for NAFTA and other Free Trade Agreements?

Many firms walk away from these duty savings due to the difficulty of learning origin rules or due to the time-frame involved in accurately qualifying a product for reduced duties – even when the benefits are significant.

Please participate in a survey on how companies manage NAFTA qualification! With the results, we hope to advance industry knowledge of best practices and better understand overall use of NAFTA processes across a wide spectrum of organizations.

Take NAFTA SurveyTake the 2010 NAFTA Benchmarking Survey

This is a brief survey and should take less than 10 minutes to complete. Your answers are kept strictly confidential and will be reported anonymously.

Customs & Trade Solutions, Inc. and Management Dynamics are working to identify best practices when dealing with the complexities of NAFTA. Our goal is to identify best practices, and pass those along to you so that your company may benefit from improved processes and procedures.

The results will be used to prepare a report which Management Dynamics and CTSI Advisors will distribute during the AAEI Annual Conference, June 6-8. If you plan to attend the AAEI Conference, please stop by our booth for a copy of the results. Otherwise, we will email you a copy when it’s ready.

Take the 2010 NAFTA Benchmarking Survey

The survey will close on June 2nd, so please be sure to participate early.

Please refer to your own company’s policy on whether this would be considered a work-related activity, and be sensitive to what data about the company can be provided.

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‘Made in America’ rules are complex, confusing (NO KIDDING) Part 2

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In Part 2 of my “Made in America” feature, let’s take a look into the requirements for a product to be considered “Made in America.”

According to an MSNBC article, the ‘rules are complex, confusing.’ No kidding!!

It takes roughly 40 pages to spell out the FTC’s rules of the road for companies that want to make the Made in America claim. And those are just one of a half-dozen separate sets of rules that apply to “country of origin” labeling.

This doesn’t include the additional complex, confusing rules that make up free trade agreements. And this is why we have extensive networks of trade compliance professionals, customs brokers, customs law attorneys, and regulatory agencies such as the CBP & FTC, constantly working with companies to either ensure their products are in compliance with these complex rules, or to work towards improving the rules.

As is the nature of government, products pop up or change faster than the rules are made, so the entire system is in constant flux. So if you think you’ve got those 40 pages of regulations memorized today, unless you are keeping up-to-date on new developments, you will soon be left in the dust when the rules change.

What does that entail? Well, you could be subject to duties when you thought your items were duty-free, and you could be subject to fines & penalties. Or you could be uneccesarily paying taxes on free-trade eligible items – and don’t bet on the government knocking on your door to return your money!

What happens if you make a false “Made in America” claim? This article focuses on the consequences of selling in the US:

If you get caught, and the FTC decides you’ve crossed the line, you’ll get an order to stop making the claim. Most companies who get nabbed agree to stop making false Made in America claims without admitting or denying they did anything wrong. If you break the rules again, you’ll probably get hit with a heavy fine for each infraction.

But the FTC doesn’t have a Made in America Police browsing store shelves for violations. The agency relies on consumers to tip them to infractions. If you think a company is falsely making a “Made in America” claim, you can notify the FTC’s Complaint Assistant Web site.

For more answers to frequently-asked questions about Made in America regulations, visit: ‘Made in America rules’ are complex, confusing.

Trade Agreement Best Practices Benchmark Study

Free Trade Agreement Benchmark Study

Free Trade Agreement Benchmark Study

If your company is considering utilizing a free trade agreement such as NAFTA, or wants to maximize the savings from a free trade agreement, read our Trade Agreement Best Practices Benchmark.

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.

Receive the Trade Agreement Best Practices Benchmark Study Now!

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