Understanding FTAs—Your First Step to Global Expansion

New trade facilitation initiatives could move businesses closer to seamless cross-border interaction


At least once a month across the globe, groups of regulators, politicians, importers and exporters convene to discuss seemingly improbable ideas to minimize the complexities of global trade. This fairy tale normally reads something like this:

Once upon a time, thousands of packages arrived at land, air and sea ports. Each day, customs authorities combed through waybills and declaration forms to determine the value and legitimacy of these goods. To cope, businesses developed complex logistical strategies to lower transportation costs and provide certainty and transparency to their supply chains. These methods—often confusing—prompted governments and the trade community to work together to develop agreements that provide the necessary infrastructure and regulatory coherence for easy trade transactions. The result? Greater capacity for customs authorities; reduced clearance times; and improved competition and cross-border investments. And the global trading community lived happily ever after…

Knowing the often complex nature of trade in a global economy, this may sound too good to be true. However, there are a number of important initiatives in the U.S. and around the globe that could make this a reality.

For smaller businesses looking to grow beyond U.S. borders, understanding the rules and regulations around global trade is an important first step in the process of expansion. And those U.S. small and medium enterprises (SMEs) who do not have in-house logistics capabilities may choose to work with a logistics partner who will act as an authority on the types of international trade issues discussed here.

American legislation movement

For the first time in over a decade, the U.S. Congress is close to passing the Customs Trade Facilitation and Enforcement Act of 2012—known as the customs reauthorization bill—which would pave the way for reforms in facilitation, transparency and risk assessment. Currently, many of the information technology (IT) systems used by the 43 agencies that regulate trade in the U.S. are antiquated and disjointed. Many traders have to present the same data to multiple agencies, quickly convoluting a supply chain as traders wait for the “all clear” from across all departments. The traders, along with partners within U.S. Custom and Border Protection (CBP), successfully convinced Congress that there needs to be “single window” customs environment to evaluate all cargo for greater transparency.

Likewise, CBP officials convinced congress to consider “trusted or certified shipper" programs—much like the “trusted traveler” programs that exist in the passenger world—thus reducing the amount of time and resources that need to be allocated to risk assessment. Such programs would directly benefit companies with clean shipping records by reducing the amount of time required to process their goods at the border and also translate to cost savings for both regulators and shippers.

To centralize the evaluation of cargo along certain industry and commercial lines, CBP installed Centers of Excellence and Expertise (CEEs) across the country over the last two years. Thanks to the success of the CEEs, Congress now considers expanding the program to other industries to ensure that foreign producers and exporters know that the U.S. market is open to them.

Global efforts

The reality within the international trading community is that companies and shippers will do business where they meet the least resistance for the introduction of their products and services. The reduction of trade transaction costs boosts the profitably of businesses, allowing markets and employment to grow. Countries that lagged behind in opening their markets or instituting customs reforms no doubt will find themselves lagging in the competitive race to showcase their domestic products. To address this, the U.S. and its trade allies take steps to improve trade facilitation through bilateral and multilateral free trade agreements (FTAs).

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