Why Companies Still Leave Millions in Tariff Savings Untapped Through Free Trade Agreements

By Simran Sethi, Senior Industry Solutions Consultant, Global Trade Intelligence, Descartes

For years, discussions around Free Trade Agreements (FTA) focused primarily on access: which countries had agreements in place, which trade lanes offered preferential treatment, and which products qualified under specific rules of origin.

Today, that is no longer the limiting factor. The global trade environment offers no shortage of preferential trade opportunities. According to the World Trade Organization, more than 380 regional and bilateral trade agreements are currently in force, with additional agreements continuing to emerge as governments rethink sourcing strategies, regional partnerships, and supply chain dependencies.

Most multinational organizations already operate across markets covered by multiple FTAs. Yet utilization remains inconsistent across industries and trade lanes despite the scale of potential duty savings available. The problem is not awareness, nor is it a lack of agreements. The difficulty lies in sustaining preferential eligibility as supply chains, suppliers, and manufacturing models continue to evolve. Qualification may be established now but maintaining that qualification as the business changes is where complexity begins to compound and where many companies quietly lose substantial savings year after year.

• Most companies already have access to multiple Free Trade Agreements. The challenge is sustaining qualification and execution as supply chains evolve.
• Preferential eligibility is not static. Supplier changes, sourcing shifts, and evolving bills of materials can alter qualification status quickly if origin analysis is not continuously maintained.
• Many organizations overestimate their FTA maturity because utilization is often limited to specific products, trade lanes, or regions where documentation processes are already well established.
• The largest gaps in tariff recovery typically stem from disconnects between procurement, supplier management, trade compliance, and customs execution — not from the agreements themselves.
• As customs scrutiny around origin validation and documentation integrity increases globally, companies are under growing pressure to balance tariff savings with audit readiness.
• The next phase of FTA maturity will depend less on isolated compliance reviews and more on building continuous visibility across sourcing, qualification, supplier data, and execution.

Most organizations still approach FTAs as a qualification exercise. Products are reviewed against rules of origin, supplier declarations are collected and, once eligibility is confirmed, the assumption is often that the process is largely complete.

But supply chains no longer remain stable long enough for that model to hold. Procurement teams shift sourcing decisions in response to cost pressures, geopolitical developments, lead-time concerns, and capacity constraints. Suppliers change manufacturing locations. Bills of materials evolve. Production moves between facilities and regions. Even relatively small sourcing adjustments can alter origin calculations in ways that are not immediately visible.

A supplier substitution made during a China+1 sourcing initiative, for example, may reduce production cost or improve resiliency while unintentionally affecting regional value content calculations under agreements such as the United States–Mexico–Canada Agreement (USMCA) or Association of Southeast Asian Nations (ASEAN) linked FTAs. What appears to be a routine sourcing adjustment upstream can quietly invalidate preferential treatment downstream across multiple SKUs.

Many organizations still manage origin as though it is static. In practice, preferential eligibility weakens over time when supplier data is not refreshed, sourcing decisions occur without visibility into origin impact, or qualification analysis becomes disconnected from day-to-day operational workflows. That creates two familiar outcomes: some organizations stop claiming preference once confidence in the underlying data begins to erode, while others continue claiming based on outdated supplier declarations or historical qualification assumptions that no longer reflect current sourcing realities.

Neither approach is sustainable in an environment where tariff pressure and customs scrutiny continue to increase simultaneously.

One of the more interesting disconnects in the industry is that many organizations genuinely believe they are utilizing FTAs effectively. In reality, utilization is often concentrated in specific trade lanes, product categories, or regions where documentation processes are already mature and well established. Outside those areas, execution becomes inconsistent and heavily dependent on manual intervention.

That inconsistency matters more than many companies realize. A successful FTA strategy is not defined by whether preference is claimed occasionally. It depends on whether the organization can continuously determine which products qualify, under which agreements, based on current sourcing conditions, and support those claims with valid documentation at the point of import.

This requires significantly more coordination across procurement, supplier management, trade compliance, and customs execution than many operating models currently support. Trade teams may understand origin rules thoroughly, but preferential treatment becomes unstable when supplier data, sourcing decisions, and customs execution operate independently from one another. In practice, this is where significant savings often disappear: not through one major breakdown, but through small operational gaps repeated across products, suppliers, and transactions over time.

A successful FTA strategy is not defined by whether preference is claimed occasionally. It depends on whether the organization can continuously determine which products qualify.

The biggest barriers to FTA optimization are rarely the regulations themselves. Most large organizations already have experienced trade professionals who understand rules of origin, regional value content calculations, and agreement-specific documentation requirements.

The harder challenge is operational coordination.

Procurement teams optimize for cost and continuity of supply. Suppliers respond to data requests with varying levels of consistency and completeness. Trade teams focus on qualification analysis and compliance exposure. Customs teams manage execution under strict filing timelines. Each function operates with different priorities, systems, and visibility. But preferential trade depends on all of them working together.

A supplier declaration that has not been refreshed in several years may still exist in the system even though the supplier’s manufacturing footprint has changed entirely. Similarly, a bill of materials that was originally analyzed during product onboarding may no longer reflect current sourcing realities after multiple engineering or procurement changes over time.

These are no longer unusual edge cases. They are increasingly common operating realities in global supply chains. As sourcing models become more fluid, maintaining alignment between qualification analysis and execution becomes significantly harder to manage manually, particularly for organizations operating across multiple agreements and supplier ecosystems.

For years, many organizations responded to this complexity conservatively. If qualification could not be confirmed with certainty, preference simply was not claimed. That approach reduced perceived compliance exposure, but it also allowed avoidable duty costs to accumulate quietly over time.

Today, that calculation looks very different. Tariff exposure remains elevated across many sectors, while customs authorities are placing greater emphasis on origin verification, documentation integrity, and audit readiness, increasing the pressure on organizations to maintain defensible qualification records over time.

In many regions, customs authorities have increased scrutiny around origin substantiation and supplier evidence, particularly under agreements such as USMCA where verification activity has become more active in recent years. Organizations are increasingly expected to demonstrate not only that a product qualified at one point in time, but also that supporting documentation and sourcing assumptions remain current and defensible.

As a result, many companies now find themselves caught between two undesirable outcomes: accepting unrealized savings or taking on compliance risk they are not fully comfortable defending. The organizations managing this well are not necessarily simplifying the regulatory environment. They are improving visibility, strengthening data integrity, and creating tighter coordination around preferential trade execution.

In many regions, customs authorities have increased scrutiny around origin substantiation and supplier evidence

The industry conversation needs to evolve from treating FTA management as a periodic compliance exercise.  Annual supplier outreach campaigns, disconnected qualification reviews, spreadsheet-based analysis, and reactive documentation collection when customs requests arise is a model that no longer scales effectively.

To fully capture the value of preferential trade programs, organizations increasingly need to treat FTA management as a business capability embedded across sourcing, supplier management, and customs execution processes. That means continuously evaluating qualification as sourcing changes occur, maintaining current supplier data, connecting origin analysis to operational workflows, and supporting claims with audit-ready documentation at any point in time.

The shift is becoming less about automation alone and more about maintaining control in increasingly dynamic trade environments. At scale, FTA optimization is fundamentally a data and decision-management challenge as much as it is a compliance exercise. The organizations recognizing the shift are already creating measurable competitive advantage.

The pressure surrounding preferential trade is unlikely to ease anytime soon.

Supply chains are becoming more fragmented, sourcing strategies are shifting more frequently, and customs scrutiny continues to increase. At the same time, organizations remain under pressure to reduce landed costs without introducing additional compliance exposure.

In that environment, underutilized FTAs are no longer simply a missed efficiency opportunity. They directly influence sourcing flexibility, pricing strategy, margin performance, and competitiveness.

The companies that manage preferential trade effectively over the next several years will not necessarily be the ones with the largest trade teams or the most aggressive claiming strategies. They will be the ones capable of maintaining alignment between sourcing decisions, supplier data, qualification analysis, and customs execution as the business evolves.

Free Trade Agreements were designed to reduce friction in global trade. But for many organizations, they have quietly become a source of hidden inefficiency, not because the agreements lack value, but because the operational discipline required to sustain them has not kept pace with the realities of modern supply chains.

The organizations that gain the greatest value from FTAs will be the ones capable of executing them consistently, accurately, and at scale while maintaining confidence in the data and processes supporting every claim.

Navigating the complexity of modern FTAs requires more than spreadsheets and guesswork. Descartes CustomsInfo™ offers valuable FTA data as part of a powerful, integrated solution that simplifies qualification, automates documentation, and enhances compliance across your supply chain. From verifying Rules of Origin to managing vendor solicitations, the solution helps ensure your business captures every available cost-saving opportunity while staying audit ready.

Equip your team with the tools to master FTAs—and turn trade compliance into a competitive advantage.