In 2017, nearly half of the goods exported from the United States were headed into Free Trade Zones as a result of the Free Trade Agreements the U.S. holds with over 20 countries worldwide.
A Free Trade Agreement or FTA is a pact between two or more countries to reduce monetary barriers to encourage trade among them. Under free trade policies, goods and services can be sold and purchased across these international borders with little to no government tariffs.
Ultimately, importing and exporting while using the benefits of free trade agreements positively affects sellers, consumers, and the involved governments.
The United States currently holds 14 Free Trade Agreements with 20 countries:
Partner Countries: Australia, Bahrain, Chile, Colombia, Israel, Jordan, Korea, Morocco, Oman, Panama, Peru, Singapore.
Regional Free Trade Agreements
DR-CAFTA: Dominican Republic-Central America Free Trade Agreement
Countries: Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua
USMCA: United States Mexico Canada Free Trade Agreement (previously NAFTA)
Partner Countries: Canada & Mexico
While the specific details of each Free Trade Agreement vary, they generally provide U.S. sellers with lower (sometimes zero) import duties, making it easier and cheaper to export American products and services. These agreements also make it easier for U.S. companies to bid on foreign government procurements.
There are two databases specifically made available for U.S. exporters to identify tariff rates when exporting:
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: All 97 chapters of the Harmonized System (HS) are incorporated into this tool to help determine reduced tariff rates under any U.S. Free Trade Agreement. This tool also provides information on product-specific Rules of Origin requirements to indicate their qualification for lower tariff rates.
***The FTA Tariff Tool provides tariff information only for U.S. FTA partners.
Rules of Origin are a set of criteria that a company needs in order to determine the national source of their products. This plays an important role when deciding if your products qualify for lower tariffs under Free Trade Agreements.
For example, if an American company based in China wants to export its products to Guatemala, the exporter may have to pay full tariffs upon arrival if China and Guatemala don’t have a mutual FTA. As a result, the American company will pay full tariffs in Guatemala, despite the DR-CAFTA agreement.
To receive preferential treatment under the FTA Rules of Origin, you must make sure:
All or most parts of your goods are produced in an approved FTA-partner country or territory;
Provide a Certificate of Origin to prove where your products were manufactured.
Rules of Origin are usually listed in Free Trade Agreements by HS product classification numbers. There are other government resources where these rules can be found. Here are some websites that can provide specific rules of Origin:
United States International Trade Commission
United States Trade Representative
Rules of Origin Facilitator (Organization)
CBP Free Trade Agreement Comparison Document