Taking Advantage of Free Trade Agreementsfdra.org/wp-content/uploads/2015/07/Taking-Advantage-of-FTAs.pdf · Taking Advantage of Free Trade Agreements Matt Priest, ... Tariff Shift

© 2015 Amber Road, Inc. All rights reserved. Proprietary and Confidential.

Taking Advantage of Free Trade Agreements

Matt Priest, President, FDRA

Suzanne M. Richer, Director, Trade Advisory Practice Amber Road

Gary M. Barraco, Senior Director, Supply Chain Solutions Amber Road

2 © 2015 Amber Road, Inc. All rights reserved. Proprietary and Confidential.

Agenda

!  TPA and TPP – Now What?

!  The Next Level of Sourcing: Benefits of FTAs

!  The Challenges of Free Trade Agreements

!  Six Best Practices and Advantages

!  Automating Supplier Selection and BOM Cost Analysis


3 © 2015 Amber Road, Inc. All rights reserved. Proprietary and Confidential. 3 © 2015 Amber Road, Inc. All rights reserved. Proprietary and Confidential.


Footwear Production by Country

79%

12% 4%

0.80%

0.75%

2014

China

Vietnam

Indonesia

India

Mexico


In 2014, the footwear industry paid $2,671,841,761

in import taxes on footwear.

A"ribu'on: h"ps://www.flickr.com/photos/donkeyhotey/; h"ps://crea'vecommons.org/licenses/by/2.0/

© 2015 Amber Road, Inc. All rights reserved. Proprietary and Confidential.


!  Tariff barriers/import duties

–  All products versus partial

–  Phased out tariffs

!  Taxes and fees E.g. Merchandise Processing Fee

!  Quotas

!  Overall reduction in COGS

Benefits of FTAs and Preferential Programs

Proprietary and Confidential © Copyright Amber Road, Inc., 2012. All rights reserved.


Challenges – Understanding Rules of Origin

!  Tariff Shift And / Or Regional Value Content

–  Requires Knowledge of How to Classify Your Product, and then How to Qualify Your Product

–  Requires a Change in tariff classification

–  And/or, regional value content requirement

–  Both a change in tariff classification and a regional value content


Challenges – Understanding Rules of Origin

Rule of Origin based on a Tariff Change:

!  Each of the non-originating materials used in the production of the goods must undergo the applicable change as a result of production occurring entirely in the qualifying region

–  This means: non-originating materials are classified under one tariff provision prior to processing and classified under another upon completion


Challenges – Qualifying for Rules of Origin

!  Tariff shift

!  A non-originating product is substantially changed as a result of manufacturing in the FTA country, allowing your product to qualify under an FTA.

!  Example (ASEAN – China): Leather briefcases of heading 4202

!  A Change to heading 4202 from any other heading



!  Regional Value Content (RVC)

The percentage of originating material is above a certain threshold, allowing your product to qualify under an FTA.

!  Example (NAFTA): Metal filing cabinets of subheading 940310

A change to subheading 9403.10 through 9403.89 from subheading 9403.90, provided there is a regional value-content of not less than: a) 60 percent where the transaction value is used; or b) 50 percent where the net-cost method is used.

Transaction Value Method:

Net Cost Method:



RVC example

A change to subheading 9403.10 through 9403.89 from subheading 9403.90, provided there is a regional value-content of not less than: a) 60 percent where the transaction value is used; or b) 50 percent where the net-cost method is used.

!  Transaction Value Method

Good does not qualify under Transaction Value Regional requirement because it does not have at least 60 percent regional value content.

!  Net Cost Method

Good qualifies under Net Cost Regional Value requirement because it has at least 50 percent regional value content.

Producer's Net Cost $182.00 each

Transac8on Value $200.00 each

Value of Non-‐Origina8ng Parts $90.00



!  Percentage Rule

The percentage of non-originating materials falls below a certain threshold, allowing your product to qualify under an FTA.

!  Example (EU - GSP): Motorcycles of heading 8711

Manufacture from materials of any heading, except that of the product or manufacture in which the value of all the non-originating materials used does not exceed 70% of the ex-works price of the product



!  Other

–  Build up method (RVC)

–  Build down method (RVC)

–  Trace value (NAFTA only)

–  De minimis rule

–  Combinations of various rules


Challenges – Documentation & Supplier Solicitation

!  Certificates of Origin

!  Invoice Declarations

!  Bill of Materials (BOM)

!  Supplier solicitation - What can you do to check that your goods have met the origin rules?

- Written confirmation from suppliers

- Confirmation first hand from suppliers

- Binding Origin Information


What We’ve Learned from Other FTA Implementation

!  NAFTA Best Practices

–  Documented and Required Form approved by all 3 Participating Governments

–  Only the EXPORTER is allowed to Qualify the Product for this Trade Agreement

–  Specific Recordkeeping Outlined

–  Clear Methodology (i.e.: Preference Criteria A – F)


What We’ve Learned from Other FTA Implementation

!  Challenges from Other FTA Implementation

–  No Required Form

–  Anyone Can Qualify the Product

•  Importer, Exporter, or Freight Forwarder

–  Recordkeeping Required but Not Specified

–  Methodology, but Each Country Outlines their Approach

–  Different Recordkeeping Program Time-Lines


Six Best Practices

1.  Contract Language To Protect Your Firm

2.  Authorized Personnel for FTA Qualification

3.  Verify Classification Code used as Basis of Qualification

4.  Wholly Obtained or Produced

–  Prepare All Parties for Audit Techniques

5. Partner with Customs through C-TPAT and Importer Self-Assessment (ISA) participation


6th Best Practice - Using Technology to Secure Your FTA Process !  Integrated Content

–  Ensures accurate union between both Business Data + Regulations

–  Provides a single point of management

–  Ensures accurate up to date regulations

–  Expert advice available

!  Software Automation

–  Consistent results and processes.

–  Ensure data is available to all internal parties

–  Centrally manage the entire process

–  Enforce internal parties adhere to a governed process

–  Ensure proper use of documentation


Automation Best Practice – Example #1

!  Bill of Material (BOM) Qualification

–  BOM XML Integration

–  Rules of Origin Analysis

–  Sub BOM qualification and cumulation

–  Spreadsheet Reports

–  Audit Trails

!  Supplier Management and Solicitation



!  Rule of Origin content

–  Accurate up to date content

–  Consistent display and interpretation

–  Access to trade specialists and SME

–  Combination



!  Multiple Trade Agreements

–  Expand your portfolio of Agreements

–  Software + content scales with your FTA needs

–  BOM multi-FTA qualification for potential to ship anywhere.

–  Manage multiple FTA’s for each supplier depending on Trade Lanes.

–  Add content when required via packs or country content.

–  Leverage similar rule calculations and criteria within the software across agreements.




The Next Level of Sourcing

• Establish a Supplier On-Boarding and Qualification program

• Map Suppliers and Identify Capabilities

• Determine Countries of Origin

• Document and Trace Component Sources

• Conduct initial pre-costing scenarios

•  Provide suppliers with online tools that detail every cost

• Side-by-side comparison pricing


Implement a Supplier Management Program

!  Segment Suppliers by Location

!  Map Supply Feeder Streams

–  Raw Material and Component Suppliers

!  Identify Key Capabilities

!  Maintain documentation of Certificates of Origin and Trade Program qualification


Identify Suppliers by Grade or Type


Search by Country or Region


BOM and COO Documentation


BOM Level Origination and FTA

Tongue CoO: Vietnam GSP(EU): Yes TPP (US): Yes

Toe Tip CoO: Thailand GSP(EU): Yes TPP (US): Yes

Eyelet CoO: Malaysia GSP(EU): Yes TPP (US): Yes

Rubber Outsole CoO: China GSP(EU): No TPP (US): No

Lace Aglet CoO: Brunei GSP(EU): Yes TPP (US): Yes

Shoe Lace CoO: Singapore GSP(EU): Yes TPP (US): Yes

Collar CoO: India GSP(EU): No TPP (US): No

Midsole CoO: Australia GSP(EU): Yes TPP (US): Yes


BOM Level Origination and FTA

Tongue CoO: Vietnam GSP(EU): Yes TPP (US): Yes

Toe Tip CoO: Thailand GSP(EU): Yes TPP (US): Yes

Eyelet CoO: Malaysia GSP(EU): Yes TPP (US): Yes

Rubber Outsole CoO: Malaysia GSP(EU): Yes TPP (US): Yes

Lace Aglet CoO: Brunei GSP(EU): Yes TPP (US): Yes

Shoe Lace CoO: Singapore GSP(EU): Yes TPP (US): Yes

Collar CoO: Thailand GSP(EU): Yes TPP (US): Yes

Midsole CoO: Australia GSP(EU): Yes TPP (US): Yes


Pre-Costing Scenarios What-If Options, such as COO

differences, to see if the style is viable and preferential trade regions


Side-by-Side RFQ Comparison Once Cost Sheets are Returned from Vendors, Users can Review

Cost Sheets in multiple views with Summaries and side-by-

side Comparisons


Pre-Costing Scenarios What-If Options, such as COO

differences, to see if the style is viable and preferential trade regions


Side-by-Side RFQ Comparison Once Cost Sheets are Returned from Vendors, Users can Review

Cost Sheets in multiple views with Summaries and side-by-

side Comparisons


Capabilities and Agreements



More Questions?

Contact Amber Road:

www.AmberRoad.com

[email protected] [email protected]

+1-201-935-8588

GTM Best Practices Group

/gtmbestpractice

Documents

Taking Advantage of Free Trade Agreementsfdra.org/wp-content/uploads/2015/07/Taking-Advantage-of-FTAs.pdf · Taking Advantage of Free Trade Agreements Matt Priest, ... Tariff Shift