{"id":10800,"date":"2020-09-16T16:15:44","date_gmt":"2020-09-16T23:15:44","guid":{"rendered":"https:\/\/www.qad.com\/blog\/?p=10800"},"modified":"2023-01-17T16:16:47","modified_gmt":"2023-01-18T00:16:47","slug":"3-minute-explainer-free-trade-agreement-compliance","status":"publish","type":"post","link":"https:\/\/www.qad.com\/blog\/2020\/09\/3-minute-explainer-free-trade-agreement-compliance","title":{"rendered":"3 Minute Explainer: Free Trade Agreement Compliance"},"content":{"rendered":"<p>[vc_row][vc_column][vc_single_image image=&#8221;10801&#8243; img_size=&#8221;full&#8221;][vc_column_text]<i><span style=\"font-weight: 400;\">Free trade agreement compliance is complex. In this 3-Minute Explainer we look at the challenges of FTA compliance and how automation can help.<\/span><\/i><\/p>\n<p><span style=\"font-weight: 400;\">A free trade agreement (FTA) is an arrangement between two or more countries to remove trade barriers. Under the terms of the FTA, the signatories agree to reduce tariffs. Once the agreement is ratified, they can access each other\u2019s markets with preferential duties \u2014 and sometimes with no duties at all.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As a result, an enterprise that engages in foreign trade can use FTA compliance to reduce duty obligations by sourcing goods and raw materials that are eligible for lower or zero duties. A company that can source goods at a lower price gains a competitive advantage.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Despite this, <\/span><a target=\"_blank\" href=\"https:\/\/blogs.thomsonreuters.com\/answerson\/leveraging-big-data-free-trade-agreements\/\" rel=\"noopener\"><span style=\"font-weight: 400;\">many companies do not do so<\/span><\/a><span style=\"font-weight: 400;\">. There is a good reason why \u2014 FTA compliance is a complex challenge.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Challenge 1: Rules of Origin<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">A laptop manufacturer may make their finished products using goods \u2014 such as microprocessors or graphics cards \u2014 sourced from a number of different countries. If the manufacturer assembles the laptop in Germany, it is \u201cMade in Germany\u201d under non-preferential rules of origin. In other words, Germany is where the last substantial transformation of the laptop took place.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, free trade agreements use preferential rules of origin. Preferential rules of origin use criteria such as regional value content, tariff shift, de minimis to determine FTA origin. Governments set out the metrics on how to use rules of origin to qualify a good.(For more details on these criteria, please see our explanation of FTA rules of origin vs country of origin <\/span><a target=\"_blank\" href=\"https:\/\/www.qad.com\/blog\/2018\/10\/rules-of-origin-fta-origin-vs-country-of-origin\" rel=\"noopener\"><span style=\"font-weight: 400;\">here<\/span><\/a><span style=\"font-weight: 400;\">).<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Challenge 2: Calculating FTA Origin<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">To determine the FTA origin or its goods, a manufacturer must pull production bills of material (BOMs). Then the manufacturer must determine how much content the good contains relative to the criteria outlined in the FTA.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To complicate matters further, FTA origin status frequently. If there are any changes to your suppliers, costs or BOM, you will need to go through the qualification process again. As a result, a manufacturer may need to qualify the same product several times over the course of a year. Multiple that by hundreds or thousands of goods, and the process becomes almost unsustainable if done manually.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Simplify Free Trade Agreement Compliance with Automation\u00a0<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Many enterprises do not leverage all the free trade agreements that they could because of these challenges. Many lack the internal expertise or the staff resources needed to ensure ongoing free trade agreement compliance.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, software solutions can simplify some of the most complex and time consuming aspects of FTA compliance, including <\/span><a target=\"_blank\" href=\"https:\/\/www.qad.com\/solutions\/free-trade-agreement\" rel=\"noopener\"><span style=\"font-weight: 400;\">automating origin determination<\/span><\/a><span style=\"font-weight: 400;\"> and preferential origin management.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Automated solutions allow companies to determine the FTA origin status of any product easily. Free trade agreement software can also automate the solicitation and creation of Certificates of Origin, and ensure ongoing compliance.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A truly best-in-class solution will cover all free trade agreements recognized by the World Trade Organization. In addition, it should offer detailed origin records and comply with the necessary record retention requirements.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Furthermore, your free trade agreement software should allow you to run \u201cwhat if\u201d scenarios against upcoming free trade deals. By doing so, your organization will be able to see any potential benefits before an agreement comes into force. This includes changes to existing trade agreements, such as the United States &#8211; Mexico &#8211; Canada Agreement, that replaced Nafta earlier this year, as well as free trade agreements that are several years from ratification.<\/span>[\/vc_column_text][\/vc_column][\/vc_row]<\/p>\n","protected":false},"excerpt":{"rendered":"<p>[vc_row][vc_column][vc_single_image image=&#8221;10801&#8243; img_size=&#8221;full&#8221;][vc_column_text]Free trade agreement compliance is complex. In this 3-Minute Explainer we look at the challenges of FTA compliance and how automation can help. A free trade agreement (FTA) is an arrangement between two or more countries to remove trade barriers. Under the terms of the FTA, the signatories agree to reduce tariffs. Once [&hellip;]<\/p>\n","protected":false},"author":64,"featured_media":10801,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2045],"tags":[2568,2569,516,1830],"class_list":["post-10800","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-supply-chain-trends","tag-free-trade-agreements","tag-fta","tag-global-trade-management","tag-trade-optimization"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>3 Minute Explainer: Free Trade Agreement Compliance | QAD Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.qad.com\/blog\/2020\/09\/3-minute-explainer-free-trade-agreement-compliance\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"3 Minute Explainer: Free Trade Agreement Compliance | QAD Blog\" \/>\n<meta property=\"og:description\" content=\"[vc_row][vc_column][vc_single_image image=&#8221;10801&#8243; img_size=&#8221;full&#8221;][vc_column_text]Free trade agreement compliance is complex. In this 3-Minute Explainer we look at the challenges of FTA compliance and how automation can help. A free trade agreement (FTA) is an arrangement between two or more countries to remove trade barriers. Under the terms of the FTA, the signatories agree to reduce tariffs. 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She writes extensively about global trade, transportation and logistics. When she surfaces from her laptop, Anne enjoys hiking, travelling and cooking. She also owns far too many books.\",\"url\":\"https:\\\/\\\/www.qad.com\\\/blog\\\/author\\\/anne-sexton\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"3 Minute Explainer: Free Trade Agreement Compliance | QAD Blog","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.qad.com\/blog\/2020\/09\/3-minute-explainer-free-trade-agreement-compliance","og_locale":"en_US","og_type":"article","og_title":"3 Minute Explainer: Free Trade Agreement Compliance | QAD Blog","og_description":"[vc_row][vc_column][vc_single_image image=&#8221;10801&#8243; img_size=&#8221;full&#8221;][vc_column_text]Free trade agreement compliance is complex. 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