Minimizing Duties, Maximizing Savings

Vastera launches service to help importers identify savings under preferential trade programs

Dulles, VA  November 7, 2002  Trade management specialist Vastera this week unveiled the latest version of Duty Manager, a solution to help companies maximize duty savings achieved by participating in various preferential trade programs such as NAFTA, EU-Mexico Free Trade Agreement and Generalized System of Preferences (GSP).

By offering a stand-alone duty management solution, Vastera is betting that its clients can use the managed services offering to more quickly realize the benefits associated with the trade programs.

According to a recent study by Penn State University, duties can comprise up to 75 percent of a company's total cost to import goods, excluding freight charges. For companies importing even modest volumes, this cost percentage represents a significant expense.

Regional trade pacts such as the North American Free Trade Agreement (NAFTA), however, offer importers the opportunity to reduce their duty costs significantly. Duty costs can be reduced by 50 percent or more for shipments that qualify for special treatment under these trade pacts.

However, establishing and facilitating duty reduction programs can be extremely complex, prompting many companies to forego the available savings. According to a report by industry analyst AMR Research, U.S. importers alone leave over $3 billion worth of duty savings and refunds unclaimed each year simply because they do not have the internal expertise or systems to manage them.

Vastera said that by packaging its trade expertise, business processes and technology, it can help companies realize the duty savings for which they are eligible today, but which they are currently unable to claim. In addition to helping companies realize incremental duty savings, Vastera said it could improve a company's cash flow by claiming duty preference savings at the moment goods cross the border.

Typically, most businesses claim only 50 to 60 percent of preference savings at the time the goods cross the border, which forces them to file, and then wait, for a refund on the remaining portion. The refund process can take as much as a year or more. Vastera's said its managed services offerings enable clients to claim preference savings at the border more than 95 percent of the time.

Utilizing its TradeSphere technology, Vastera's trade experts determine the eligibility of a company's products to qualify or participate in preferential trade programs. This process, called "qualification," provides clients with an audit trail for Customs, interfaces with customer systems, and enables tracking and reporting of the transactions. Vastera also provides "what-if" sourcing analysis to identify new, cheaper sources of supply.

Once program eligibility has been determined, Vastera's trade professionals solicit supplier content information to prove the eligibility of materials and components. This process, called "solicitation," is an additional legal requirement with which companies must comply when seeking to take advantage of preferential trade programs.

Finally, Vastera distributes the relevant preferential program information gathered during the solicitation process to those end customers that receive the finished goods.

Gail Morin, senior manager for global trade compliance at Black & Decker, said Vastera identified savings her company would not have even thought to pursue. "They have analyzed and improved our existing processes, which will result in qualification of far more products for NAFTA, improved compliance and the capture of preference savings at the border on over 95 percent of the transactions," Morin said. "This is savings that Black & Decker would not have otherwise realized due to the required investment in time, skills and technology."

"Identifying the eligibility for, and facilitating participation in, preferential trade programs can be a daunting task, even for those companies with very experienced, in-house trade groups," said Bernie Hart, vice president for cross industry solutions development at Vastera. "By packaging our trade expertise, technology and business processes, we can get a company up and running with a duty management program very quickly."

Hart said the duty savings Vastera had been able to realize for its existing managed services clients had motivated the provider to break out and package this focused offering for other companies.