Manufacturers often spend 50% or more of revenue on direct materials. In light of this, it is not surprising that companies recognize the strategic importance of sourcing from low-cost countries to improve competitiveness, even during turbulent trade wars or other potential disruptions to distributed supply chains.
However, direct materials are only one part of the cost of goods. Leading companies also leverage trade agreements to reduce landed costs by reducing duty obligations.
Special trade programs, including free trade agreements (FTAs), preferential trade programs and other duty reduction schemes, are a pact or program between two or more nations that have agreed to give preference by eliminating or reducing tariffs and quotas on certain goods and services traded between them.
Trade agreements promote commerce between regions, increase labor and sourcing opportunities within those regions, and open foreign markets to exporters.
Using trade agreements effectively requires deep compliance expertise. Using them efficiently requires a rich regulatory content database and connections to the rest of the supply chain, in addition to a technology platform with robust capabilities for global compliance execution.
