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FTA Tariff Tool Transcript

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Hello, I'm Justin Hoffmann with the InternationalTrade Administration of the U.S. Departmentof Commerce. In today's video we are introducing an exciting new tool to help companiestake greater advantage of the free trade agreementsthe United States has negotiated with other countries. This FTA Tariff Tool makes it easier to obtain tariff and trade information, relatedto our free trade agreements.

Hey Tory, can you help answer a question for me?

Sure! So a guy from a small Pennsylvania company called me looking for some help. He's interested in finding new markets in which to export his products. Okay has he considered some of our free trade agreement partners? The United States has negotiated agreements with some 17 countries that provide preferential access to our goods into those markets.

Actually he is very interested in our FTA partner markets, especially our FTA partners in Latin America, but he is having areally hard time finding out what the tariffswould be on his products.

I know what you mean. It can be hard for companies-especially small companies-to find out how their products are treated under the FTAs. The tariff schedules alone are the size of phone books! Exactly the problems this exporter is facing. He has spent hours simply trying to find the tariffs for his products before giving up and calling me.

Well, did you know about the new online FTA Tariff Tool? It is a huge time saver and was designed just for this purpose. A key advantage of this toolis that allows exporters to research potential new markets for business development and expansion. The tool is also useful from the perspective of researchers who would like to gather more in-depth trade information.

Here, let me show it to you.

Okay, let's figure out what tariffs this exporter will face in some of our FTA partner markets. Let's start

"What's My Tariff"

What's one of the market she is interested in? He mentioned Peru. Okay, let's take a look at Peru.

Second question, what isthe HS code for his product? What's an HS code? It stands for "HarmonizedSystem" It's a numeric code that identifies specific products in countries' tariff schedules. Depending on the country, the code can be as short as six digits or as many as 12 digits. Every country classifies products exactly the same at the four and six-digit level. But some countries may want to show more detail and create unique eight, ten,or even twelve digits codes.

I see, I still don't know what the HS code is.

Okay, that's not a problem. In fact most companies don't know what their HS codes is. The database takes account of that and provides this search function provided through the Census Bureau so you can start with the products category and narrow it down.     

Do you know whatproduct he ships?

He makes lead-acidcar batteries.

Okay, let's start by searching for batteries.     

I'm pretty sure car batteries are rechargeable. And you said they were lead-acid, and for a car, which has a piston-engine. Yeah okay so it lookslike the HS code for lead-acid carbatteries is "8507 10"

Yes that's correct.

Now let's enter that in the FTA Tariff Tool.

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But this is in Spanish?

Yes, the tool incorporates the official tariff schedules negotiated under the FTA,  in this case Peru's tariff schedule is in Spanish. But, since we already verified the HS code, we can be fairly confident that this is acurate.

Okay lets click for more detail.

Neat! Tori

What's a "staging basket" and what's a "base rate"?

Okay in a free trade agreement, countries will negotiate on how quickly or slowly they will draw back the tariffs in this case, Peru originally had a tariff of 12 percent that's the "base rate" -- and they will reduce that tariff or "stage" it back over ten years hence a ten year staging basket.     

So in 2011, the tariff Peru charges under our FTA is 8.4 percent. But then next year it will drop to 7.2 percent and will be completelyeliminated by 2018. Right! Okay, What are these rules of origin at the bottom of the page refering to?

They've linked back up to the Rules of Origin text of the orininal agreement and that determines whether or not a product will qualify for preferential treatment. They are also organized by the HS code.     

Okay, I saw on the main search page that this tool also shows the tariffs the United States charges on imports from FTA partners?    

Yes that's correct. It will provide the same information for products the United States imports.

Okay. You also mentioned that this tool could help exporters in their market research and planning.

Yes! Thats correct, the United States has three trade agreements the United States has concluded, but has not yet been implemented.

With Korea, Panama,and Colombia, right?

Right. So, your business owner could look and see how his product might betreated under those agreements when they are implemented. So if we do a similar search and choose Korea, we will see that Korea currentlycharges an 8 percent tariff on exports of U.S. car batteries.

But that tariff will be eliminated immediately when the agreement goes into effect. That's really helpful. Okay so businesses may not simply be interested in just the tariffs.

The data base incorporates another application called the Market access tool. This goes a step further providing a blend of tariff and trade statistics.The tool's especially useful for providing a overview of how specific sectors will beimpacted by the various FTA's.     

For example,a chemical exporter and learn more about how Bahrain treats U.S. chemical exporters. They can choose exports, Baharain and chemicals. So, under the U.S.-Bahrain FTA, tariffs were immediately eliminated on 99 percent of U.S. chemical exports to Bahrain?

That's correct if you click on the staging category, you can see, for example, which products are subject to the longest tariff elimination period. What does this mean,"10-Years, Non-Linear".Okay so usually under trade agreements, the tariffs are reduced each year in equal amounts, or in a linear manner.

However, in other instances, tariffs on some sensitive products may be reduced in a non-linear manner, lets small cuts in the first few years, followed by larger cuts until it the tariff is completely eliminated.

In this example, the five percent tariff remains in effect until it is completely eliminated in 2015. I see thats helpful! 

Another useful applicationof the database is the "FTA Snapshot" application. It combines tariff and tradeinformation but it focuses on gathering information on and comparing the FTA partner markets.

Here let me show you. So if we take a look at US chemicals exports to Peru. The first page of results shows the chemicals sector organized by the tariff schedule chapter numbers. Thats the first two digits. You'll notice that for pharmaceuticals -chapter 30- the average tariff for all pharmaceuticals was 12 percent before the U.S.-Peru Trade Agreement went into effect. Today, Peru's average pharmaceutical tariff is 1 percent. And you will also notice that U.S. exports of pharmaceuticals havebeen increasing steadily since the FTA went into effect. You can even clickon the chapter number and get the same informationat a more detailed level.

That's amazing. Thanks so much for showing this to me. Now I feel comfortable going back to the small Pennsylvania business and explaining that this tool can identify current and future FTA tariffs as well as providemarket research.

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