Managing Exports and Imports | September 1, 2006

Wal-Mart, GE, and GM Detail FTA Best Practices

U.S. exports to nations with which the United States has negotiated a free trade agreement (FTA) are growing at double the rate of U.S. exports in general.

That striking statistic was just one of many provided by the panel "Can More FTAs Lead to Freer Trade?" at the recent New York conference of the American Association of Exporters & Importers (AAEI). The panel also featured plenty of practical advice on utilizing FTAs to increase your competitive advantage.

The panel featured Steve Brenon, manager, customs compliance, General Electric; Bernadette Shortt, manager, customs administration, General Motors; Houda Nounou, associate general counsel, Wal-Mart; and John Stubbs, Office of the U.S. Trade Representative.

FTA Update

John Stubbs, who cited the above statistic, notes that between December 2005 and February 2006, four new FTAs were concluded (Peru, Bahrain, Oman, and Colombia).

"Currently," Stubbs points out, "no less than six more FTAs are being negotiated by the United States, with South Korea, Ecuador, Malaysia, Thailand, United Arab Emirates, and Panama." Stubbs adds, "The U.S.-Korea FTA will be the biggest since NAFTA in terms of economic impact, and Malaysia accounts for as much U.S. imports as France and nearly as many exports as Italy." Stubbs says, "In fact, FTAs now in place account for nearly one-third of U.S. imports and an even higher share of U.S. exports."

FTA Best Practices

For all three trade pro panelists, NAFTA is the most important FTA in order of importance—for both imports and exports, while Chile ranks second (see table). The number-two position of the relatively new Chile FTA for these companies might come as a surprise, until you consider that U.S.-Chile bilateral trade has soared 85% since implementation in January 2004 and U.S. exports to Chile have catapulted by over 90% in the same period.

The GM, GE, and Wal-Mart panelists teamed up to provide the following list of best practices, broken down by imports and exports, that they follow with respect to FTA claims:

Imports:

– Incorporate T&Cs (terms and conditions) in procurement documentation to ensure supplier compliance.
– Obtain supplier certificate prior to making FTA claim.
– Maintain internal control of SPI declaration: instruct customs brokers not to make FTA claim without direction from internal customs team.
– Conduct review of supplier certificates: three-step audit process consisting of preimportation review, postentry transaction audit, and postentry compliance audit.
– Enable data sharing with entry systems.
– Use Automated Commercial Environment data to identify possible compliance gaps.

Exports:

– Use both internal and external FTA-trained specialists.
– Develop and employ internal global FTA tracking software.
– Enable warehouse personnel to selectively pick FTA-eligible stock from diverse inventory.

All three trade pro panelists also agree that their most significant challenge with respect to FTAs on the imports side are: lack of supplier familiarity with FTA requirements, getting supplier certificates on a timely basis, optimizing FTA content to satisfy origin rules for the same product marketed in different countries, and disparate origin and other criteria from one FTA to another.

On the exports side, these three experts cite the following as their greatest FTA challenges: internal salespeople who promise certificates to customers without confirmation of FTA eligibility, lack of customer familiarity with FTA requirements, and the difficulty of determining FTA eligibility for multisourced parts.

FTA Resources

Free Trade Agreements for Americans: The Mechanics of U.S. Free Trade Agreements in Goods by Frank Reynolds. International Projects Inc.: fjr424@aol.com; 419-865-6201.

IOMA audio conference featuring Frank Reynolds, "How to Maneuver Free Trade Agreements and Boost Your Bottom Line" (March 2006). To order, go to www.ioma.com/audioconferences/627.html (cost: $275; 90 minutes; tape or CD).