A key benefit of free trade agreement or (FTA) is lowered or eliminated tariffs on a qualifying good sold in a foreign market. Each agreement is unique and there are similar ways of determining if a good qualifies to receive a preferential tariff. To qualify the good must meet certain trade agreement requirements known as Rules of Origin. Then you can legally use the FTA tariff rule for your shipment. It is not enough for your goods to be shipped from? Made or assembles within the USA or participating in FAT country. Let’s look at the process closely (FTA qualification process).
- Look up the tariff rate for shipping your good to another country. Use the foreign country’s HS code for your product. You will choose between the regular tariff rate known as the most favoured rate (MFN) or the Free Trade Agreement (FTA) rate.
- If you choose MFN rate, you don’t need to qualify for your good whereas, in the case of the FTA, you need to review the trade agreement and its qualification process. As you review the agreement, you will notice that there are three ways to qualify for a good. They are:
- The goods are wholly obtained or produced in one of the FTA countries
- The good is entirely made up of components and materials that are originated in one of the FTA countries.
- The goods meet other requirements or product, that is, specific rules of origin. You can find products specific rules of origin in the FTA text by looking them up with your finished goods foreign country HS code. The most common methods are (Qualification methods):
- Tariff Shift Method
- Regional Value Content Method
Tariff Shift Method means that the product components are transformed enough to result in a new HS classification code for a finished product. The amount of non-FTA components in a product doesn’t matter.
Regional Value Content method calculates the percentage of goods value coming from any country with the FTA area. The rate includes materials, labour and other costs that go into creating the final goods. It must be at a certain threshold to qualify. You need to gather information about your good’s components such as HS code, cost and country of origin for each import.
In that case, if you need any assistance with things, just check on Clearit customs consulting and they will be of your help.
