3 Questions to Ask Before You Commit to a Free Trade Agreement

Committing to a free trade agreement (FTA) is a big step for any global organization. Customer requests to engage with particular FTAs and different guidelines for various product lines can make for a lot of red tape. You must determine what documentation is needed, starting with certificates of origin. You’ll also need to know how to manage documents and fulfill certificate requests from customers that can withstand any audit.

Uncertainties and trade agreements go hand in hand; FTAs can increase risk, and require investigation. Before you commit to a free trade agreement, see if it’s a good match for your business by asking three questions.

How Can We Tell If an FTA is Right For Us?

FTA identification requires in-depth analysis of all aspects of your business. Retaining the services of a global trade compliance consultant (GTCC) provides you with an advantage in getting the analysis right. They need a deep knowledge of your industry and product offerings to be effective. They consult with key business stakeholders so that everyone stays on the same page. Once you have this expertise and guidance secured, you can start considering your options.

It pays to be mindful of the risks involved in getting into the wrong FTA. Common FTA selection mistakes misaligne the true demand and benefit against the cost of participation. The wrong FTA costs revenue; you can also lose sales by not being in any FTAs.

Start with the creation of a requirements list for any FTA you are considering. These requirements must be based both on your trade expectations and product offerings/classifications; Will there be a lot of internal transfers across country lines? Is shipping on a simple internal transfer basis or does it involve manufacturers in different places? Thinking along these lines will also give you ideas about building efficiencies within your trade processes.

Which Processes Need to Be Streamlined?

Key areas for efficiency gains when considering FTAs can be easily identified and put into place. Focusing on critical FTA items, such as key vendor certificates of origin and product classifications, mitigates FTA risks. They must be fully accurate in order to avoid fines and penalties. Determine if the workload will be so large that automation will be necessary. If so, it’s time for software. Remove any manual processes in place around these tasks, replacing them with process automation and precise documentation.

A prime example of a software solution for managing FTAs is SAP GTS. It’s a customizable system that, when properly configured, greatly reduces FTA risk without inundating your team with unnecessary tasks. It shows the cost basis for your financials in real-time against FTAs, and helps more effectively manage shipping manifests, customs declarations, and certificates of origin. By managing vendor certificate of origin solicitation within the same system that houses your product information, confidently issuing certificates can flow stay in pace with your outbound orders. This gives you next-gen FTA management capabilities and precise, one-stop record keeping.

Will We Be Able to Respond to Audit Requests Quickly?

Maintaining accurate documentation is vital to not just operations, but for handling audit requests. This is another area in which you will want to use software, especially for document management. Knowing that any internal or external request to verify product qualification can be resolved with a few clicks is an invaluable tool that will nip those headaches in the bud.

Document management is the foundation of administering audit controls. SAP GTS helps manage your documents and recall them as needed for audits. This innovative solution also includes business process monitoring, so that any process or data discrepancies can be addressed before they become risk or audit-inducing events.

Again, if you want to get the most out of your software—and keep FTA risk to a minimum—make sure you have a GTCC on your team from start to finish.

Cut Through Free Trade Agreement Uncertainty

International trade is a proving ground for process accuracy and efficiency. Reducing risk is a top priority when engaging in FTAs, and you often have only one chance to get it right. Make sure your team has the global trade expertise needed to make it happen.


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