Management of free trade agreements (FTAs) and related origin issues has never been as important for businesses as it is today. Why? Primarily because it provides a competitive advantage through lower duty rates, and allows manufacturers to keep up with the competition.
A strategic approach towards FTAs optimizes global supply chain operations and allows businesses to enter new markets under favorable conditions. A well-founded origin management system will allow companies to apply the same logic and compliance (no matter which trade lane or markets are targeted), and supports the design of their supply chains to deliver products at low target prices.
Prior to developing a program that commits resources to origin management, manufacturers must evaluate whether such a program makes sense for their business by asking certain key questions.
These questions include: What products does the business sell? What trade lanes does your business sell on or plan to sell on?
Once the assessment is complete, businesses should be well on their way to crafting a origin management program. The following five components are key to a successful implementation of such program:
1. Visibility at the executive level – It’s of considerable benefit for C-level executives to be aware of your implementation efforts and to provide ongoing support for a consistent program.
2. Cross-functional teams – Ensure cohesive decisions are made and information is shared between internal teams.
3. Trade intelligence – Stay informed about regular (most-favored nation [MFN]) and preferential duty rates for current and future years, rules of origin, and harmonized system codes, and gain insight into new/forthcoming FTAs and exchange rates (fluctuations).
4. Focus on necessary functions – Identify focused elements of the origin programs, such as manufacturing location and sourcing decisions, and avoid wasting time on origin-related programs that do not affect the bottom line or the level of compliance.
5. Reliable software – Implement software to increase the compliance rate and reduce the compliance costs associated with origin programs.
Benefiting from preferential trade programs is not simply a matter of getting things right once. Implementing an origin management solution provides all parties involved with the transparency and tools necessary to make profitable decisions every time, and to employ processes that ensure ongoing compliance. Following these five steps ensures that all elements required to run an origin management program are accounted for, and that your company is in a strong position to take advantage of the many benefits that origin management has to offer.
Anne van de Heetkamp is a guest blogger with TEC. He is Director of Global Trade Compliance, TradeBeam, Inc.