U.S. Exporters Leave Millions in Duty Savings Unclaimed

Majority of companies not positioned to reap savings from new free trade agreements, Vastera study finds

Majority of companies not positioned to reap savings from new free trade agreements, Vastera study finds

Dulles, VA — March 22, 2005 — A large majority of U.S. exporters are not taking full advantage of duty savings associated with new preferential free trade programs such as the U.S.-Australia Free Trade Agreement, according to the results of a study conducted by global trade management (GTM) specialist Vastera.

The preferential trade agreement between the United States and Australia became effective the first of this year, yet in researching approximately 60 U.S. companies that export goods to Australia, Vastera found that, in some cases, millions of dollars worth of duty savings remain unclaimed.

One such company, a global manufacturer that has outsourced its duty minimization program, will obtain a benefit of over $3 million dollars annually by leveraging Vastera to certify its goods against the rules of origin and properly qualify for the U.S.-Australia Free Trade Agreement, the solution provider said.

"The complexity associated with understanding and leveraging free trade agreements is beyond the scope of many companies because they either lack the expertise, resources, technology or all of the above to do it efficiently and cost-effectively," said Adrian Gonzalez, director of the Logistics Executive Council at ARC Advisory Group. "Many companies eventually come to a decision point: either invest internally or outsource to a provider such as Vastera."

The reasons cited by companies for not taking better advantage of new free trade agreements include:

  • The proliferation of free trade agreements. Today, more than 300 trade programs exist around the world, and more are being developed. The U.S.-Australia Free Trade Agreement went into effect in January of this year, while the new Mexico-Japan trade program is expected to take effect in April. Some companies are still struggling to maximize fully older programs like NAFTA and are unable to keep up with the growing number of programs being enacted.

  • Bandwidth. In many cases, the logistics or global trade departments at companies are too stretched to handle the complexity and detail associated with participation in numerous free trade programs. The infrastructure and support to leverage these programs simply does not exist.

  • Lack of in-house expertise. Global trade management is a niche market that requires experts with deep knowledge. Many companies do not have the in-house experience required to manage such programs effectively.
"Participation in preferential trade programs such as the U.S.-Australia Free Trade Agreement can generate significant duty savings if done properly," said Tim Davenport, president and CEO at Vastera. "Companies choosing to hire an expert global trade management provider, such as Vastera, are able to leverage a knowledge base and technological infrastructure that already exists. The trade experts and technology from Vastera are being leveraged to minimize duty payments, get goods across border more efficiently, and provide a comprehensive audit trail for customs. Outsourcing this function enables companies to focus more on their core businesses."

According to the Port Import Export Reporting Service (PIERS), the top U.S. exports to Australia include paper products, tires, hardware, automotive parts, and lawn mowers and garden equipment.

Additional Articles of Interest

Imminent terrorist attacks or no, your competitive advantage demands that you secure your company's supply chain. Read more in "Supply Chain Security: Is Your Company Complacent or Engaged?," in the August/September 2004 issue of Supply & Demand Chain Executive.

For a look at how Tyco Fire & Security is tackling trade compliance issues in its global supply chain, see "Turning Global Trade Compliance Into a Competitive Advantage," in the August/September 2004 issue of Supply & Demand Chain Executive.

For more information on the challenges and opportunities presented by increasingly global supply chains, see the special in-depth report in the August/September 2004 issue of Supply & Demand Chain Executive, which includes the following articles:

For more information on the global supply chain, with a focus on security issues, see "Building the Secure Supply Chain," the Net Best Thing article in the June/July 2003 issue of iSource Business (now Supply & Demand Chain Executive) magazine.