Managing Free-Trade Agreements Is Crucial
FTAs are a hot topic in Washington, D.C, and in the corporate world, says Nathan Pieri, CEO of
Management Dynamics. He discusses their benefits and challenges, and outlines what you need
to know to make them work to your greatest advantage.
Without a doubt, free-trade agreements are important to countries
because they stimulate trade and contribute to GDP growth. But
companies are no less interested because FTAs reduce or remove
barriers that keep trade costs artificially high, Pieri says. A reduction in duties has a direct relation to reducing the cost of goods
sold, for example. If you can lower the cost of imports, you can
chip away at some of the price points in your markets.
However, it’s one thing to recognize the benefits of FTAs,
such as duty reduction, it’s quite another to manage them. The
process of soliciting suppliers for needed information and the
accompanying process of qualifying a transaction for duty relief
is quite complex.
For instance, the former may entail canvassing each supplier
for the data needed to certify the country of origin of parts. Qualifying involves scrutiny of every component of a transaction, such
as the bill of materials, all of which must be certified before there
can be any savings.
Attempting certification manually is rife with errors, Pieri
says, yet a Management Dynamics study indicates fully 65 percent of companies do that very thing. The solicitation/qualifying
process takes anywhere from 20 minutes to two hours for each
transaction, he says. There are more than 200 free-trade agreements in force around the world, and companies with truly
global operations may be trying to take advantage of a number
of them. “Imagine sending form letters to everyone and trying to
qualify certificates ...” Pieri says.
As many as 35 percent of those companies that attempt trade-regulation management manually do not pursue available FTA
opportunities. “They just don’t do it because it’s too difficult.”
Implementing management software alleviates those hassles, in Pieri’s view. And now with plug-ins, subscribers don’t
need to purchase upgrades. They can simply download content
that reflects the most recent changes in trade treaties and their
rules and regulations.
To view this video interview in its entirety,