Marisol International Transportation & Logistics Blog

Exporter Resource: Free Trade Agreement (FTA) Tariff Tool

Posted by Chelsea Mitchell on Mar 17, 2016 2:27:26 PM

The International Trade Administration (ITA) released an updated version of the Free Trade Agreement (FTA) Tariff Tool this week in an effort to help support U.S. exporters. The tool was originally launched in 2011, however, the updated version will encompass the Trans-Pacific Partnership (TPP) tariff elimination schedules. 

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First, it's important to understand what a Free Trade Agreement is and how it works.

FTA's are agreements between two or more countries where the countries agree on certain items which affect trade in goods and services, protections for investors and intellectual property rights, among other topics. Simply put, a FTA reduces barriers to global trade by gradually eliminating tariffs.

For example, a country might have previously charged a tariff rate of 5% of the value for a particular imported product. However, with the implementation of the FTA, that tariff rate could decrease to 3% during year one, further decrease to 2% during year two, and eventually be eliminated.

Reduced, or eliminated, tariffs make U.S. exports more competitive in foreign markets.

When importers (or exporters depending on the Incoterms) do not have to pay duties (taxes based upon the tariff rate) overall costs of doing business are lowered. This makes U.S. products competitive against products made domestically in other countries.

If duty must be paid on an imported product, it is crucial for the importer (or exporter) to know exactly how much cost will be added to the transaction. Planning and researching the estimated duty cost can be difficult and time consuming for exporters. 

Therefore, the ITA released the Tariff Tool in 2011 to help exporters explore tariff rates and schedules.

The tool allows businesses to determine what the tariff rate will be next year, in five years, or in ten years. Companies that utilize the Tariff Tool should find information that will help provide a clearer picture when planning for the future.

The updated Tariff Tool also now includes instant TPP tariff information —searchable by keyword or tariff code— via a user-friendly, accessible interface.

Additionally, it incorporates all products classified within the 97 chapters of the Harmonized System, and includes information on product-specific rules of origin to determine the eligibility of the reduced tariff rates under TPP.

The Tariff Tool not only provides information on current tariff lines, but also provides transparency on future tariffs and the year in which those products will become duty free.

For example, with this tool, an exporter can see that a 17% tariff from Vietnam will be reduced to 10.2% in year one, to 6.8% by year two, and be completely eliminated by year five of TPP going into force.*

*The TPP has been signed by the leaders of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the United States. Congress must now vote to pass the TPP before the benefits will begin. Timeframe for approval by Congress is currently unknown.

The FTA Tariff Tool reduces uncertainty and increases clarity, saving businesses time and money while providing critical information to develop international expansion strategies. Go ahead, check it out here.

Marisol International assists exporters with global transportation and trade expertise. Contact us today to begin exporting with ease.

How Can Free Trade Agreements   Benefit U.S. Exporters?

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Topics: Exporting, Free Trade Agreements

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