The Free Trade Agreement, Software and the Need for Advanced Solutions

Free trade agreements (FTAs) are playing an increasingly important role in global commerce.  FTAs can be either bilateral (between two nations) or multilateral (between three or more nations). In addition, FTAs can cover issues far beyond just tariff rates, including labor and environmental standards, Intellectual Property (IP) concerns and more. The agreements create extremely complex standards of compliance for businesses participating in global commerce, whether they are large international corporations or small- to medium-sized firms that are new to global supply chains. To better handle compliance with FTAs, companies are looking increasingly to technology solutions.

Free Trade Agreements Are on the Rise

The World Trade Organization (WTO) is the umbrella organization under which global trade rules are developed and enforced. Today, an increasing number of bilateral and multilateral FTAs are being formed among subgroups of WTO member nations. Trade within these FTA areas can be economically advantageous for firms who are positioned to leverage their operational strengths. However, each agreement has its own regulatory framework and compliance challenges.

For example, the North American Free Trade Agreement (NAFTA) went into effect in 1994. NAFTA helped open up the markets of Canada, Mexico and the United States by reducing the tariffs and customs duties owed by importers and exporters. However, taking advantage of the economic benefits of the agreement requires that shippers remain in compliance with the rules of the treaty. In particular, importers must ensure that products from potential vendors are accompanied by Certificates of Origin (COOs) that are compliant with the relevant FTA, and that exporters provide those certificates by confirming they are providing qualified goods under the agreement. The qualifying process involves an analysis verifying that the components of the goods, or Bill of Materials (BoM), match the rules of origin as defined by the pertinent FTA.

Facilitating FTA Compliance, NAFTA, Software & Integrated Technology

Many firms participating in the global supply chain already use Global Trade Management (GTM) software. Market leaders in this space include Oracle with its Global Trade Management (GTM) product and SAP with its Global Trade Services (GTS) solution. When combined with a reliable trade content and customs classification product such as Descartes Customs Info™, firms involved in global trade can leverage a more complete platform to take full advantage of the terms of FTAs without diluting the value added with unnecessary administration for trade compliance professionals. For companies trading within NAFTA, content from Descartes Customs Info™ can be used by both GTM and Enterprise Resource Planning (ERP) solutions from companies like Oracle and SAP.  By integrating these technologies, importers/exporters have a market leading solution that streamlines trade processes for improved cost control, reduced risk of penalties and fines, and faster clearance of inbound and outbound customs, while ensuring products are fully compliant with certification rules.

Descartes Customs Info – Free Trade Agreement Software

With Descartes Customs Info™ Reference and Descartes Customs Info™ Manager, companies can be assured that they are taking advantage of the applicable FTAs and minimizing costs. Descartes Customs Info™ Reference provides a single point of access that leverages comprehensive databases of current FTAs to obtain the benefits afforded under the agreements. Descartes Customs Info™ Manager provides a powerful “workbench” that allows the user to demonstrate reasonable care in ensuring compliance by ensuring trade data integrity and creating a dependable audit trail.