Post on 02-Jul-2018
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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
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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
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Footwear Production by Country
79%
12% 4%
0.80%
0.75%
2014
China
Vietnam
Indonesia
India
Mexico
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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/
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! 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
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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
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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
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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
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Challenges – Qualifying for Rules of Origin
! 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:
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Challenges – Qualifying for Rules of Origin
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
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Challenges – Qualifying for Rules of Origin
! 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
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Challenges – Qualifying for Rules of Origin
! Other
– Build up method (RVC)
– Build down method (RVC)
– Trace value (NAFTA only)
– De minimis rule
– Combinations of various rules
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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
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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)
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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
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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
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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
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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
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Automation Best Practice – Example #2
! Rule of Origin content
– Accurate up to date content
– Consistent display and interpretation
– Access to trade specialists and SME
– Combination
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Automation Best Practice – Example #3
! 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.
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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
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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
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Identify Suppliers by Grade or Type
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Search by Country or Region
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BOM and COO Documentation
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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
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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
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Pre-Costing Scenarios What-If Options, such as COO
differences, to see if the style is viable and preferential trade regions
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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
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Pre-Costing Scenarios What-If Options, such as COO
differences, to see if the style is viable and preferential trade regions
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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
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Capabilities and Agreements
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More Questions?
Contact Amber Road:
www.AmberRoad.com
Solutions@AmberRoad.com Consulting@AmberRoad.com
+1-201-935-8588
GTM Best Practices Group
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