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Benchmark Report North American Free Trade Agreement (NAFTA) Management Best Practices for Managing Free Trade Agreement (FTA) Qualification Processes September 2010 Global Trade Compliance and Cargo Security Specialists 66 Witherspoon Street, Suite 321 Princeton, NJ 08542 (609)896-2210, Ext. 101 [email protected] www.ctsiadvisors.com One Meadowlands Plaza East Rutherford, NJ 07073 (201) 935-8588 [email protected] www.ManagementDynamics.com
Transcript

Benchmark Report

North American Free Trade Agreement (NAFTA)

Management

Best Practices for

Managing Free Trade Agreement (FTA)

Qualification Processes

September 2010

Global Trade Compliance and Cargo Security Specialists

66 Witherspoon Street, Suite 321 Princeton, NJ 08542 (609)896-2210, Ext. 101 [email protected] www.ctsiadvisors.com

One Meadowlands Plaza East Rutherford, NJ 07073 (201) 935-8588 [email protected] www.ManagementDynamics.com

CONTENTS

Executive Summary ............................................................................................................ 2

Survey Findings / Use of Trade Agreements ...................................................................... 5

Summary of Survey and Best Practices for NAFTA / Free Trade Agreement Programs 21

Acronyms

CAFTA Central America Free Trade Agreement

CBP U.S. Customs and Border Protection

FTA Free Trade Agreement

NAFTA North American Free Trade Agreement

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 2

EXECUTIVE SUMMARY

The North American Free Trade Agreement (NAFTA) was implemented in 1994 and created the world’s largest free trade area, linking 444 million people and producing $17 trillion in goods and services annually. It provided companies with the benefit of reduced costs for imported product through the elimination of tariffs and the creation of international rights for business investors.

COMPLIANCE RISK WITH NAFTA

Given the advantages of NAFTA and other free trade agreements, exporters and importers seek to widen the advantages of reduced duty impact by participating in trade agreements. In the early years following NAFTA implementation, many firms believed, erroneously, that all products manufactured or purchased in Canada, Mexico or the United States were eligible for reduced duty benefits by simply completing a NAFTA certificate – the approved form that verifies a product is eligible for NAFTA. Developing expertise on the complex rules associated with NAFTA and free trade agreement qualification is difficult and individuals within firms responsible for signing certificates may not have the expertise required to complete the form.

Understanding how to qualify a product for trade agreement eligibility requires a strong understanding of the Harmonized Classification System and NAFTA rules of origin. Before a product can be eligible for NAFTA rules, it must first be classified – then using the classification number, the NAFTA rule is located and used to qualify the product for reduced duty benefits.

A unique aspect of NAFTA, unlike any other trade agreement, is that all three governments – Canada, Mexico and the United States – are capable of auditing an importer, exporter or producer of NAFTA products in any of these three countries. For example, U.S. Customs & Border Protection (CBP) may audit a U.S. importer to determine if the imported product qualifies for duty free treatment. They may also seek to extend their audit to a Canadian exporter and/or producer.

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 3

These audits or Origin Verifications may be time-consuming and costly. NAFTA Certificates are renewed annually and the origin verification may include a review of multiple years of qualification. More importantly, if a product is considered ineligible for NAFTA benefits during a review, the exporter or importer may no longer claim the product on a NAFTA certificate and may now be open to penalties for the wrongful claim, if the error was not voluntarily brought to the attention of Customs before a review.

Importers and exporters may lower the risk of non-compliance through a documented and verifiable process built on strong expertise with trade law. Annual training programs are a key element of strong NAFTA and trade agreement programs and should include classification and NAFTA rules. Automating the system may increase the strength of information collected and lower the risk of penalty action, which includes the following:

REQUIREMENTS AND PENALTIES

Requirement Penalty

Maintaining Import Records for five years from the date of entry in the United States.

Please note: recordkeeping requirements in Canada (6 Years) and Mexico (15 Years) have different timeframes and different penalties.

Up to $10,000 fine per import entry or 40% of entered value. Export penalties may range from $1,000 to $10,000 per file.

$100,000 for Willful failure on imports

U.S. Importer – inability to produce a NAFTA certificate for imported product.

$10,000 and denial of NAFTA Benefits. Will be required to pay back duties and interest.

U.S. Exporter/Producer – inability to produce documentation to support a Certificate of Origin claim.

$10,000 for each claim and denial of NAFTA benefits by Canadian and Mexican Customs Authorities

U.S. Exporter – filing false certificates of origin

Action under 19 USC 1592 covering levels of culpability (negligence, gross negligence, fraud) and denial of NAFTA benefits by Canadian and Mexican Customs Authorities.

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 4

BENEFITS OF NAFTA AND NEED FOR BEST PRACTICES

Despite the hurdles for developing NAFTA and Free Trade Agreement (FTA) expertise, the programs bring strong benefits to companies. For exporters, signing a NAFTA certificate allows their customers to legally declare a lower, preferential duty rate in the receiving country – making the exporter’s product more competitive on pricing than exporters not qualifying their product for NAFTA.

For an importer, cost savings associated with NAFTA qualifying products can be high and a major impact on the company’s bottom line. Working closely with their suppliers, importers are generally seeking NAFTA certificates for qualifying product at the start of each New Year, seeking to take advantage of reduced duty benefits all year long. Over 20% of all of the survey participants recognized savings of $50,000 to $500,000 annually due to NAFTA and/or other Free Trade Agreement qualifications – a strong indicator for the company to continue to pursue free trade agreement programs.

BEST PRACTICES AND SURVEY DEMOGRAPHICS

Given the benefits and risks associated with NAFTA, this white paper profiles the best practices of firms qualifying product for NAFTA eligibility. Respondents included large to small size firms, and their responses shed light on some of the key challenges facing corporations today for qualifying product under trade agreements. It also highlighted software functions that are used in the process.

The findings are the result of a survey conducted in June of 2010 in which 200 firms responded to questions distributed through Customs & Trade Solutions, Inc and Management Dynamics. 84% of all companies responding were importer and/or exporters, with customs brokers or consultants represented by 16%. The survey is represented by companies in a broad range of industries and product lines, from pharmaceutical products to automotive, agriculture and textiles.

The insight provided will open the door to understanding how firms operate NAFTA qualifying programs, where the expertise exists within their firms and the savings and struggles associated with maintaining the program from year to year.

For additional information on NAFTA support, training or best practices, please contact Ms. Suzanne Richer at Customs & Trade Solutions, Inc, at [email protected] or Mr. Nathan Pieri at [email protected].

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 5

SURVEY FINDINGS / USE OF TRADE AGREEMENTS

Nearly 91% of all respondents indicated that in addition to qualifying product for NAFTA, they also participated in other trade agreements. The largest used trade agreements include NAFTA (80%) followed by CAFTA (31%) and Israel (23%), and then Singapore (18%) with all other trade agreements utilized at a minimal level.

NAFTA rules which include tariff shift and regional value content calculations are similar to the rules for CAFTA and the Singapore and Australian trade agreements. Therefore, familiarity with one trade agreement may support a trade compliance group’s ability to transfer that knowledge to other trade agreement programs.

Best Practice – Build expertise on Trade Agreements that use similar rules of origin programs such as Tariff Shift Concepts. Knowledge used to qualify product for NAFTA may be transferable to other trade agreements using the similar methods including CAFTA, Singapore and Australian programs.

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 6

NUMBER OF PRODUCTS QUALIFIED ANNUALLY

Of the trade agreements utilized, 42% qualified over 500 parts for NAFTA on an annual basis followed by 9.8% qualifying between 250-500 parts annually. 11.9 % of all participants qualified less than 100 parts per year and 26.8 % qualified less than 50 parts annually.

NAFTA Certificates must be signed by the Exporter of Record. When the exporter IS also the producer of the product, locating NAFTA qualifying information becomes easier as the information is held internally within the company. When the exporter is NOT the producer, then NAFTA qualifying information must be secured from the producer.

If the production of the NAFTA qualifying good involved multiple producers or providers or raw materials, then the exporter must outline a plan of action for contacting each group to secure the information before the NAFTA certificate can be signed.

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 7

Qualifying a product for NAFTA requires strong classification programs and expertise on NAFTA rules of origin. This process is labor intensive, so companies are well advised to consider the number of hours needed for this project on an annual basis and then align staff resources to the project.

SAVINGS FROM TRADE AGREEMENTS

Firms qualifying products for trade agreements realized significant savings, with 28.2% of the participants posting savings of $500,000 or more per year. Clearly working with trade agreements can result in substantial savings to a firm, justifying both the staff and training programs for maintaining accuracy with the filing of NAFTA certificates. 12.8% saved from $100,000 to $500,000 per year and 7.7% recognized savings of $50,000 to $100,000 per year. 16% of all companies recognized $50,000 or less per year.

36% of all companies could not qualify their duty savings

through their NAFTA / FTA programs. Management resources are

generally allocated to programs where impact on the

bottom line is quantifiable.

Best Practice –

o Review the list of products exported to NAFTA countries and determines which products carry the highest duty rates in the receiving country. The greatest savings will be realized for product with high duty rates or highest volume of exports.

o Offset the number of products to be NAFTA verified against the duty savings and determine what resources the company is willing to allocate to the program

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 8

Most notable was the number of companies unable to substantiate savings through the use of trade agreements. 36.5% of all participants were unsure as to how much their firm saved through the qualification process. Qualifying the savings achieved through the utilization of free trade agreements provides a company’s senior management team with the ability to support stronger training programs and resources in support of NAFTA and related programs.

Best Practice - Companies able to monitor and measure their trade agreement programs through documented savings have greater support for proper training programs, supplier training and automated systems that support a strong trade compliance program.

o Project estimated duty savings for NAFTA qualifying Product - use key metrics to keep Senior Management up to date on how these programs support Sales (lower cost to the end customer makes the exporter’s product more competitive)

o Using cost savings data, offset training costs for staff responsible for NAFTA / FTA programs

o Consider the estimated savings that would increase if an automated system was utilized

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 9

WHEN TO SOLICIT NAFTA CERTIFICATES FROM PRODUCERS/EXPORTERS

Importers of NAFTA qualifying product seek the NAFTA certificates from their supplier/exporter as early in the New Year as possible and well in advance of the shipment arriving in their country. Without the certificate on file, an importer cannot legally declare the reduced duty benefit associated with a NAFTA qualifying product so it is imperative that the supplier/exporter have completed NAFTA certificates for their customers before shipping product.

Importers generally seek NAFTA Certificates from Exporters by December 31st for products

to be shipped in the next calendar year.

In most cases, the supplier or exporter focused their efforts on securing NAFTA Certificates and supporting documentation in the latter part of the year in order to be able to sign NAFTA certificates for the coming year. 49% of all firms began soliciting certificates in 4th quarter, while 8.3% began the process in the 1st quarter for that same year. Only 2.4% waited until 2nd quarter to solicit certificates while 31% solicited certificates in the current year and at any point in the year.

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 10

Under NAFTA guidelines, importers are entitled to seek a NAFTA Duty Refund for any product entered into a NAFTA country duty paid with the ability to prove NAFTA eligibility after the shipment date. Submitting the appropriate documents post entry will result in a refund of duties for the original entry.* For corporations soliciting NAFTA certificates late in the year, this allows for retroactive refunds up to one year from the date of entry.

*Please note – Mexican importers have historically experienced extreme difficulty in securing a NAFTA duty refund, even with proper documentation. U.S. and Canadian exporters to Mexico should work diligently to ensure their customers have the appropriative certificate at the time of the shipment.

Understandably, importers prefer to take advantage of NAFTA preferential duty rates at the time of the shipment. While refunds may be achieved post entry through the NAFTA Duty Refund program, the paperwork and resources required to secure the savings falls to the importer. This duplication of paperwork and staff resources may reduce the financial benefits of NAFTA.

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 11

TARGETED DATE TO HAVE CERTIFICATES AVAILABLE TO TRADE PARTNERS

As noted above, 49% of all firms began soliciting NAFTA certificates in the 4th quarter, with 47.5% of all companies targeting December 31st as the date at which trade partners will have access to Certificates and another 22% targeting January of the current year for which certificates would be available. 30.5% were unsure as to when certificates would be available to their trade partners.

30.5% of all survey respondents were unsure as to when certificates

would be available to their trade partners.

BUILDING INTERNAL NAFTA EXPERTISE

Given the complexity of classification and NAFTA rules of origin, it is important to consider where to place the responsibility of trade agreement qualification. Over half the participants placed NAFTA programs under the Trade Compliance Group (59.9 %) while 31.2 % placed the function under Logistics. Only 17.2 % relied on the Supply Chain Group while 6.4 % placed the responsibility within legal and 3.2 % within finance. 1.9 % was handled by the Quality Department, while 10.8 % placed the function outside these departments and handled the responsibility elsewhere within the corporation.

Given the complexity of classification and NAFTA rules of origin,

companies restricting trade agreement qualification to

departments/titles that reflect fiduciary responsibility are more likely to

reflect high levels of compliance.

Best Practice – Exporters seeking excellence in Customer Service should complete NAFTA Certificates prior to the first export, ensuring their Customers (the Importer) have access to reduced duty programs at the time of importation.

The Exporter’s Management Team must allocate resources to the program and recognize the impact of NAFTA qualifying product on total Sales.

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 12

Other Best Practices include:

o Improving Sales and Marketing efforts that promote the Company’s product advantages through NAFTA qualifying measures

o Limiting the key personnel who can qualify products for NAFTA AND who can sign certificates;

o Confirm annual training and internal audit checkpoints to ensure accuracy with data; mis-qualification may lead to problems for customers.

Best practice - Given the complexity of classification and NAFTA rules of origin, companies restricting trade agreement qualification to departments/titles that reflect fiduciary responsibility are more likely to reflect high levels of compliance. The qualification process should be handled by groups who are not limited by budget constraints. For example, if Logistics is operating under a strict budget where compliance competes with cost cutting measures, companies should consider moving the Trade Compliance function to a department where fiduciary responsibilities will be honored.

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 13

o Centralize practice for large companies with many sites.

o Consider using automated systems that support a strong trade compliance program

NUMBER OF PERSONNEL DEDICATED TO WORKING ON FREE TRADE AGREEMENTS INTERNALLY

While a large percentage of companies achieve substantial savings through the use of Free Trade Agreements, the number of dedicated personnel towards this end is limited. 79.5% of all participants dedicate only 1-3 personnel towards this project.

8.6 % of all companies have 4-5 employees working on this task, while only 5.3 % have 6-7 employees focused on FTA analysis. The companies with more than 7 employees focused on FTA work were 6.7%.

LEVEL OF ASSOCIATES PERFORMING NAFTA ANALYSES

While the NAFTA work is generally performed within the Trade Compliance Department, the majority of the work is handled by trade agreement specialists or managers. FTA Specialists accounted for 34.2 % of the groups focused on FTA analysis. 22.6% of the work is handled by Managers followed closely with 21.3% of the work done by Analysts.

11.6% of the time, the Trade Coordinator was responsible, while 10.3% of the work was done by individuals other than the Coordinator. This may include sales or purchasing personnel.

TITLE OF PERSON RESPONSIBLE FOR SIGNING THE CERTIFICATE OF ORIGIN

While the majority of NAFTA analyses are preformed by the Trade Specialists, 36.6% of the time the certificate was signed by a Manager. 30.7% of all certificates are signed by the Analyst or Staff Member, indicating the same person is both qualifying the product and signing the certificate.

Best practice – Determine the total cost savings achieved through NAFTA/FTA qualification and dedicate the resources needed to achieve the project. Management teams require hard data on cost savings in order to support FTA programs.

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 14

Directors were responsible for signing the Certificate 13.8% of the time, while Corporate Officers were involved only 11.1% of the time, and Vice Presidents in 7.2% of all cases. Only 1.3% allowed outside consultants the ability to sign the Certificate of Origin.

29% of all certificates are signed by the Analyst or Staff Member, indicating the same person is both qualifying the product and signing the certificate.

Strong compliance programs include “check & balance” process where the NAFTA qualifier is different from the Signer.

TIMEFRAME FOR COMPLETING A FTA QUALIFICATION PROJECT

The majority of all firms involved in FTA qualification apportion the project over a 1-3 month period. 71.4% of all firms dedicated up to three months to perform this function.

Firms focusing on this project for 4-6 months represented 17.7% of all firms while the number dramatically declines thereafter, with only 2.7% of firms working on FTA analyses for 6-8 months and 8.2% dedicated personnel for 9-12 months of the year.

The majority of all firms appoint 1-3 employees to work for up to 3 months on a NAFTA project.

However, only 10% of their actual workweek is spent on the project. More significant – only 38% of all firms expressed confidence in the

information presented on the NAFTA Certificate.

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 15

BUDGETED TIMEFRAME - WHAT PERCENTAGE OF TIME DOES THIS PERSON ALLOCATE TO FREE TRADE ANALYSIS IN RELATION TO OTHER WORK TASKS?

Earlier, we learned that close to 80% of all companies assign NAFTA and/or Free Trade Agreement qualification to 1-3 employees and 71.4% of all firms allow only a 3-month window to complete the NAFTA/FTA qualification process for the coming year.

The following graph indicates that of that number, 46.6% dedicate only 10% of their entire job function to this task. 16.2% focus 25% of their job function on FTA analyses, while 8.4% of all firms spend over 35% of the work week in FTA qualification. 18.2% of the staff spent 50% of their time on NAFTA programs. 10.4% of the employees use 100% of their time.

Only 10.4% of all firms dedicate their Trade Compliance staff to full time NAFTA / FTA qualifying programs. This is understandable

given that 35.9% of all firms could not qualify their duty savings using Free Trade Agreements.

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 16

TECHNOLOGY AND AUTOMATION

Qualifying product for NAFTA or any other FTA requires strong internal controls to ensure accurate information is captured and presented to CBP. 45.4% of all firms use a manual process to confirm FTA eligibility with another 41.4% using manual processes developed with the use of excel or access database management. Only 16.4% use publicly available trade compliance software with another 13.8% using software developed internally to their firm.

86% of all firms use manual qualifying programs including the use of excel or access databases.

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 17

Automation of NAFTA programs has the ability to improve processes and expedite the confirmation of information needed to qualify products for NAFTA. While an automated system does NOT remove the need for internal expertise on classification and NAFTA rules of origin, it promotes a cost savings benefit for companies who already employ or support strong trade compliance knowledge and training programs.

CONFIDENCE IN LEVEL OF ACCURACY

While 86% of all firms used a manual process to manage their NAFTA data, only 34.3% of all companies were confident of the information they shared with Customs and their Customers through the NAFTA certificate. 41.3% of the participants believed their NAFTA certificates were accurate at least 75% of the time, while 25% of all respondents gave their data a failing mark for accurate filings.

Only 33.8% of all companies were confident of the information they shared with Customs and

their Customers through the NAFTA certificate.

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 18

The challenges of developing and maintaining a strong compliance program for NAFTA verification is evident in the responses provided by participants. With limited resources or access to training programs, the confidence in data provided to Customs is significantly low.

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 19

NAFTA ORIGIN VERIFICATIONS / AUDITS

32.2% of all respondents have been audited in the past three years. This may include a review of any of the three country’s Customs groups. If conducted onsite at the firm, Customs will generally plan for a maximum two week review.

23.4% of all firms anticipate a NAFTA Origin Verification within the next two years, while 76.6% of all firms are confident they will not be contacted. While an onsite review may not be initiated, NAFTA Origin Verifications may also be conducted through written correspondence sent through the mail. In these instances, companies generally have up to 30 days to respond unless otherwise noted and the inquiry may be on a file as old as 5 years. Keeping accurate records is a key component to answering inquiries timely and accurately.

23.4% of all firms anticipate a NAFTA Origin Verification within the next two years

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 20

INTERNAL AUDIT OF PROGRAMS

Interestingly, while the majority of firms indicated a lack of confidence in the accuracy of their NAFTA Certificates, 44.8% of all firms conducted an annual internal audit of their free trade agreement programs while 16.1% conducted a quarterly review. 20.3% had an audit program that was not annual. 18.9% did not audit their programs at all.

Given the concern of accuracy with NAFTA certificates, it may be connected to the level of training provided to internal auditors. While penalties are always a concern to companies importing and exporting, for exporters, the concern that a customer may no longer be eligible for reduced duty benefits related to poorly executed NAFTA certificates should be a top priority. The implications beyond penalty action includes branding issues and lack of trust for customers buying from these firms.

Best Practice – Conduct annual audits of your trade compliance programs – whether import or export oriented and include Free Trade Agreement reviews. Working with experts will expedite the process, ensure accuracy with information declared to Customs and lower the risk of non-compliance for both current AND future shipments.

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 21

SUMMARY OF SURVEY AND BEST PRACTICES FOR NAFTA / FREE TRADE

AGREEMENT PROGRAMS

NAFTA and FTA qualifications offer firms substantial savings and related benefits. The survey exposed many of the challenges companies face in developing and maintaining expertise on NAFTA trade laws. Best practices within firms managing their NAFTA and Trade Agreement programs include:

o Build expertise on Trade Agreements that use similar rules of origin programs such as Tariff Shift Concepts. Knowledge used to qualify product for NAFTA may be transferable to other trade agreements using the similar methods including CAFTA, Singapore and Australian programs.

o Review the list of products exported to NAFTA countries and determines which products carry the highest duty rates in the receiving country. The greatest savings will be realized for product with high duty rates or highest volume of exports.

o Offset the number of products to be NAFTA verified against the duty savings and determine what resources the company is willing to allocate to the program

o Companies able to monitor and measure their trade agreement programs through documented savings have greater support for proper training programs, supplier training and automated systems that support a strong trade compliance program.

o Project estimated duty savings for NAFTA qualifying Product - use key metrics to keep Senior Management up to date on how these programs support Sales (lower cost to the end customer makes the exporter’s product more competitive)

o Using cost savings data, offset training costs for staff responsible for NAFTA / FTA programs

Consider the estimated savings that would increase if an automated system was utilized

– Exporters seeking excellence in Customer Service should complete NAFTA Certificates prior to the first export, ensuring their Customers (the Importer) have access to reduced duty programs at the time of importation

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 22

The Exporter’s Management Team must allocate resources to the program and recognize the impact of NAFTA qualifying product on total Sales. Given the complexity of classification and NAFTA rules of origin, companies restricting trade agreement qualification to departments/titles that reflect fiduciary responsibility are more likely to reflect high levels of compliance. The qualification process should be handled by groups who are not limited by budget constraints. For example, if Logistics is operating under a strict budget where compliance competes with cost cutting measures, companies should consider moving the Trade Compliance function to a department where fiduciary responsibilities will be honored.

Determine the total cost savings achieved through NAFTA/FTA qualification and dedicate the resources needed to achieve the project. Management teams require hard data on cost savings in order to support FTA programs.

o Improving Sales and Marketing efforts that promote the Company’s product advantages through NAFTA qualifying measures

o Limiting the key personnel who can qualify products for NAFTA AND who can sign certificates;

o Confirm annual training and internal audit checkpoints to ensure accuracy with data; mis-qualification may lead to problems for customers.

o Centralize practice for large companies with many sites.

o Consider using automated systems that support a strong trade compliance program

Best Practices for Managing NAFTA and Free Trade Agreement Programs / Benchmark Report 2010.

All Rights Reserved © Customs & Trade Solutions, Inc and Management Dynamics 23

Customs & Trade Solutions Inc is an advisory firm specializing in global customs compliance and cargo security programs. An important outcome of our industry monitoring and active work is that we have an intimate working knowledge of customs compliance and trade security concerns. We have successfully implemented a variety of projects across the country for our clients, including C-TPAT application assistance, guidance through C-TPAT validations, conducted worldwide supplier training on how to ship to the United States, and assistance moving through a Customs audit, NAFTA review, FTZ audits and applications for the Importer Self Assessment (ISA) program. Our market-specific experience, expertise and relationships enable us to add critical insight and value in areas such as research, strategy development, compliance auditing, technical training for senior management, middle management and staff, relationship-building, and security programs.

For More Information, contact our team at: Customs & Trade Solutions, Inc.

www.ctsiadvisors.com [email protected] (609) 896-2210, Ext 101

Management Dynamics is setting the standard for on-demand Global Trade Management (GTM) solutions for Global 2000 importers and exporters and logistics service providers. Combining an expansive trading partner network, enterprise-class software and specialized trade content resources, we enable you to dramatically improve the performance of your global supply chain.

Since 1990, Management Dynamics has been developing and delivering software and related content and services for GTM. We help our customers transform their business and gain market share by leveraging our industry and technology expertise. Our solutions are currently deployed to over 13,000 users in 70 countries and our customer base includes some of the world’s leading retailers, manufacturers and logistics providers.

Management Dynamics One Meadowlands Plaza

East Rutherford, NJ 07073 [email protected]


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