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Should you export to the United States?

If you haven’t exported your products to the United States (U.S.), consider this: The U.S. maintains free trade agreements with 12 nations in the Americas and is Latin America’s largest trading partner. Here’s how to determine if it’s the right export market for your SME’s products.

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Published by DHL EXPRESS

It’s important for any SME exporting its products to capitalize on favorable trade rules. For example, do you know if your export product is exempt from import duties? Can it qualify for duty-free access or lower duties under special or preferential import programs? 

Regardless of what products you export, buyers will naturally gravitate to imports that are favorably priced when compared to alternatives of similar quality. So it’s important not only to know the final cost of your product for buyers, but also to familiarize yourself with trade rules and regulations that can lower the price of your products.

The U.S. is a great example because it offers duty-free access for many products. SMEs can also take advantage of preferential programs and Free Trade Agreements (FTAs), which also offer duty-free access or lower duties for many imported goods. Preferential programs provide unilateral benefits from the U.S. to other countries and are designed to spur the growth of specific industries. FTAs are the result of trade negotiations and are either agreements made between two countries or multilateral agreements that encompass several nations.

There are 12 countries in the Americas with FTAs with the U.S., including:  

  • Mexico & Canada (NAFTA - North American Free Trade Agreement) 
  • Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica & the Dominican Republic (Central American-Dominican Republic Free Trade Agreement - CAFTA- DR) 
  • Colombia, Chile, Panama and Peru (individual FTAs)  

While each of these agreements is unique and in various phases of implementation, most products from these 12 countries enter the U.S. duty free. Exceptions include textiles, apparel and agricultural products. There is also one preferential agreement in place with the U.S.: The Caribbean Basin Initiative provides duty-free access for most products from 17 nations within the area.  

It’s also important to remember that trade agreements change. For example, the Andean Trade Preferences Act is no longer available, whereas the Generalized System of Preferences (GSP), which has global reach, may be renewed by the U.S. Congress this year and could deliver significant benefits for Latin America. It’s important to keep tabs on trade negotiations.  

You also need to become familiar with the rules that determine whether a product can qualify for duty-free or lower duty access. The rules of origin are different in a preferential program than in an FTA. And each program typically has its own unique regulations.  

You must look at each program’s rules of origin, and in the case of an FTA, the rules that apply to each country. The importer will also require that you complete a certification of origin, which is based on the tariff classification of the product in question. All products traded internationally have a classification number for use by customs.

 

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Tips to keep in mind

So how do you confirm whether your product is eligible for duty-free or lower duty importation into the U.S. and what rules of origin must be met? Following are some things to keep in mind:

  • Your logistics partner should be able to assist you and determine which tariff classification applies to your product, as well as whether the items you are exporting qualify for any special programs, such as duty-free access. 
  • The Commercial Office at the U.S. embassy in your country may also be able to help; however, it’s worth noting that you will probably be asked for the tariff classification numbers for the products you want to export. 
  • Once you have determined the classification number, you can also access a list of all U.S. classification numbers and the duties associated with them online or in book form.  This is known as the U.S. Harmonized Tariff Schedule (HTS) and it’s available at: http://www.usitc.gov/tata/hts/index.htm. A tutorial is also available at: http://www.usitc.gov/elearning/hts/menu/.  
  • The HTS organizes products into two columns, “general” and “special.” If the rate listed in the general column is “free,” or “zero” there is no duty for the product. If not, you need to check the rate in the “Special/Preferential” column.

The HTS uses one or two letter codes for the various FTAs and preferential programs: 

  • “A, A* or A+ (Generalized System of Preferences when reenacted) 
  • “E, E* or R” (Caribbean Basin Initiative) 
  • “CA” (Canada North American Free Trade Agreement)  
  • “P or P+" (Central American-Dominican Republic Free Trade Agreement)
  • “MX” (Mexico North American Free Trade Agreement) 
  • “CL” (U.S./Chile Free Trade Agreement) 
  • “CO” (U.S./Colombia Free Trade Agreement) 
  • “PA” (U.S./Panama Free Trade Agreement) 
  • “PE” (U.S./Peru Free Trade Agreement)

Many SMEs have taken advantage of these FTAs and preferential programs with the U.S., Latin America’s largest trading partner with $807.4 billion being imported last year. The U.S. may be fertile ground for your company, too.  

We will include a link in the ConnectAmericas website to a DHL search engine you can use to determine the classification of your product and the applicable duty in the coming days. Look for more information on this service, which we’re calling Trade Automation Service, soon. 

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BIBLIOGRAPHY

  • Maritza Castro, DHL Express
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