A free trade agreement, or FTA, is a treaty between jurisdictions that reduces specified trade barriers and sets rules for covered goods, services or investment. Preferential tariff treatment is available only when the product and transaction meet the agreement's conditions.
What can an FTA cover?
- Tariff reductions or elimination
- Rules of origin
- Customs procedures and trade facilitation
- Services and investment commitments
- Technical, sanitary and procurement provisions
- Dispute and safeguard mechanisms
How is a tariff preference claimed?
- Classify the product under the tariff.
- Identify the applicable agreement and tariff schedule.
- Test the product against its origin rule.
- Obtain or prepare the required origin evidence.
- Make the claim on the customs entry.
- Retain supporting records for verification.
FTA eligibility vs. shipment route
Shipping from a member country does not automatically confer origin. The goods must satisfy the agreement's product-specific rule and any direct-transport or non-alteration conditions.
How should savings be evaluated?
Compare the ordinary duty with the preferential duty using the correct customs value, then consider documentation, supplier evidence and compliance cost. If ordinary duty is $8,000 and preferential duty is $2,000, the gross potential saving is $6,000 before those costs.
What records should be retained?
Keep classification support, bills of material, supplier declarations, production records, certificates or origin statements, transport evidence and the customs entry. Unsupported preference claims can be reassessed after release.
