Using FTAs to their benefit, companies can establish considerable competitive advantages. Especially when anticipating long-term preferential duty rate changes or creating the ability to react quickly on new FTA developments, companies are likely to be ahead of the competition and further optimize supply chain operations. Origin Management is the all-encompassing approach to origin-related challenges and provides companies with a well-defined infrastructure and auditable process so the company can benefit from all preferential agreements available to them and not incur unreasonable compliance costs.
- Preferential Treatment
- Origin Program
- Preferential Program
- Exchange Rate Fluctuation
- Preferential Trade Agreement
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Exception-based management is a methodology where only things “out of the ordinary” or items for which it is predetermined that intervention is needed are flagged. In this case, the exception can be exchange rate fluctuations over 5% or an exchange rate fluctuation that brings the RVC within 3% of the threshold, a change in supplier of a subcomponent that results in price change and/or origin change of the subcomponent, etc.
Text from this paragraph is based on van de Heetkamp (2009).
Clearly, when it comes to sourcing and manufacturing decisions it is not only preferential treatment that decides on where to manufacture. The broader concept of “total landed costs” will need to be considered (see Sect. 8.2).
See Chap. 8.
Other elements may be needed, but in most cases the RVC and/or Tariff Shift apply (see Chap. 5).
See Sect. 9.2 for a broader look at total landed costs.
At WCO seminar (2008), the following components were mentioned:
Make the case, get management buy-in
Identify internal team
Implement written internal controls over making claims (also to stay conform Sarbanes Oxley, etc.)
Conduct periodic reviews to test compliance
In fact, the whole organization and setup of the customs function should have visibility throughout the company.
Douglas Garfield (2006) points out the importance and capabilities of lobbyists in the presentation “The Proliferating FTAs: They Can Help or Hurt You,” April 6, 2006 for American Bar Association.
On average, logistics costs are around 9% of the value of the goods. With an average duty rate of 9%, sourcing from the right location impacts the go-to-market price for these costs elements.
Aberdeen Group (2007) 5 Ways to Increase the Business Value of Trade Compliance, Research brief. June 2007
Douglas Garfield H (2006) The proliferating FTAs: They can help or hurt you, presentation ABA, April 6, 2006
Napier GRF, Thompson A, van de Heetkamp A (2008) Leveraging origin management to benefit from Free Trade Agreements, APEC Conference 2008–Model Innovation, New Impetus to the APEC E-Commerce Development, APEC Electronic Commerce Steering Committee, APEC Electronic Commerce Trade Alliance, Beijing, pp. 127–138
van de Heetkamp A (2009) Getting to total landed cost, supply and demand chain executive. December 2009
WTO (2008) WTO: developing, transition economies cushion trade slowdown, World Trade 2007, Prospects for 2008, Press/520/Rev. 1 (17 April 2008)
© 2011 Springer-Verlag Berlin Heidelberg
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van de Heetkamp, A., Tusveld, R. (2011). Origin Management. In: Origin Management. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-19808-3_11
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-19807-6
Online ISBN: 978-3-642-19808-3