Here are some common questions about FTAs and their functions:
What countries does the U.S. have Free Trade Agreements with?
The United States currently holds 14 Free Trade Agreements with 20 countries. They are:
Countries: Australia, Bahrain, Chile, Colombia, Israel, Jordan, Korea, Morocco, Oman, Panama, Peru, Singapore.
DR-CAFTA: Dominican Republic-Central America Free Trade Agreement
Countries: Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua
NAFTA: North American Free Trade Agreement
Countries: Canada & Mexico
How do FTAs benefit U.S. investors and exporters?
An FTA with a certain country eliminates or reduces tariffs charged on qualified products coming from the partnering country (in this case, the U.S.A). FTA partner countries allow for lower tariffs, which means that the business of the U.S. exporter or investor will be more profitable, as they will save money on tariffs.
How do U.S. exporters identify tariffs on FTA partner countries?
There are two databases specifically made available for U.S. exporters to go through.
The Customs Info Database: This tool enables the user to compare current tariff rates with corresponding preferential FTA rates for partner countries.
The FTA Tariff Tool: This tool is used to understand the tax at the border or tariff that U.S. FTA partners will collect when an eligible U.S. export enters their country. This is also used to incorporate all products classified within the 97 chapters of the Harmonized System (HS), including information on product-specific Rules of Origin to determine the eligibility of the reduced tariff rates under any US FTA Partner.
What are Rules of Origin?
Rules of Origin are a set of criteria that a company needs in order to determine the national source of their products, which plays an important role when deciding if your product qualifies to pass through an FTA agreement.
For example, if a U.S.-based company wants to import products that were made in China, into Guatemala, the exporter may have to pay full tariffs in Guatemala if China and Guatemala do not have a Free Trade Agreement. As a result, an American company ends up paying tariffs in Guatemala, regardless of the fact that the U.S. has an FTA with Guatemala under the DR-CAFTA agreement.
What are some defining characteristics of Rules of Origin?
To receive preferential treatment under the FTA Rules of Origin, your exported goods must:
- Be produced in an FTA-partner country or territory;
- Have certifications and documentation to indicate the origins of the product and the compliance with Origin Rules;
- Not have any category within the non-preferential Rules of Origin (not part of an FTA partner).