How free trade agreements can help you maximize duty savings in your supply chain design

Global trade relationships continue to face significant disruption due to ongoing geopolitical tensions, including the USA - China trade war, retaliatory tariffs, comprehensive sanctions inflation, political instability, Russia's invasion of Ukraine, and emerging supply chain vulnerabilities exposed by recent global events. To adapt, global companies are reevaluating their supply chain design to prevent disruptions from sourcing scarcity, price fluctuations, and ever-changing regulatory hurdles. Such tasks are often undertaken out of defensiveness and fear, but a thorough supply chain analysis also represents an opportunity to diversify sourcing options, build extra resiliency, and ensure that a company is extracting as much value as possible from its sourcing strategy.

Although overlooked at times, free trade agreements (FTAs) are an area of both potential duty savings and sourcing stability. FTAs allow goods and services to flow between countries without burdensome tariffs or other restrictions and generally create a more favorable trade environment for participation in the global marketplace.

The free trade agreement advantage in supply chain and global trade management

When you look at the benefits, leveraging FTAs in your supply chain design may seem like a no-brainer. But the truth is that many companies have avoided using them in the past because of the false perception that complying with FTAs is time-consuming and ultimately not worth the effort.

Yes, FTAs often require adhering to strict regulations, managing a wealth of origin documentation, and interpreting complex rules of origin. FTA qualification for a supply chain with thousands of different parts can certainly be difficult – but that’s only true if you are manually maintaining documentation and origin determination calculations. There is an easier, more efficient way that gives you a direct return on investment (ROI).

Modern advances in supply chain and global trade management software, including AI and machine-learning capabilities, can automate the burden of FTA recordkeeping and provide predictive analytics for compliance optimization. Used wisely, FTAs can help “future-proof” corporate supply chains and lower overall duty spend, which in turn can increase profits, lower the overall cost of goods to customers, and improve price competitiveness. There is ROI when you transform your trade compliance department from a cost center into a profit center and save your company money.

How to evaluate free trade agreements and a closer look at the USMCA

Still, it can be difficult to determine whether and how an FTA may benefit a company that does not already utilize them. The USA has FTAs in place with 20 countries, while the European Union maintains over 40 trade agreements, and other major economies. As of mid-2025, WTO has stated that there are 375 regional trade agreements in force. All have different requirements. The benefits, too, depend on the product or service under consideration, as well as the costs associated with compliance.

To get a clearer idea of how companies can benefit from an FTA, consider some provisions included in the United States-Mexico-Canada Agreement (USMCA), which went into effect on July 1, 2020 and replaced the 25-year-old North American Free Trade Agreement (NAFTA). The USMCA has now been operational for over four years, providing concrete data on its impact and effectiveness. Of particular relevance to current users of the FTA is the upcoming six-year review of the USMCA, which will begin in July 2026. Public consultation periods have just started, with the United States publishing its Federal Register Notice last week and Mexico issuing a notice for public comment as well. Additionally, ongoing negotiations surrounding various Trump-era tariffs are expected to have a significant impact on this review process and the future direction of the agreement.

Since the implementation of various Trump tariffs, customs authorities have increased post-entry verifications and supplier origin audits, heightening the importance of documentation quality and traceability.

Beyond the automobile industry, USMCA’s rules influence electronics, medical devices, chemicals, textiles, and agriculture.

• Electronics and medical devices. USMCA streamlined some regulatory procedures and strengthened intellectual property protections, helping reduce administrative costs and legal risk.
• Apparel. Many Column 1 duty rates for apparel imported into the U.S. can approach 10%. Qualifying products under USMCA remain duty-free, delivering meaningful preferential savings.
• Dairy and agribusiness. Expanded access to the Canadian market created opportunities for U.S. producers of cheese, ice cream, and other dairy products, though quota administration and disputes require close monitoring of compliance and allocation processes.
• Regionalization benefits. Production within the USMCA block supports faster, more resilient fulfillment for e-commerce and just-in-time models compared to long-haul sourcing.

Key 2025 consideration — forced labour enforcement has intensified. Companies must maintain end-to-end supply chain visibility and supplier attestations; preferential treatment does not shield goods from detention if they violate forced labor rules. There is particular attention on this issue for goods exported from Mexico to the United States, as in recent years, China — known for its history of forced labor — has shifted numerous operations to Mexico in attempts to circumvent tariffs and Uyghur Forced Labor Prevention Act (UFLPA) actions. This development underscores the importance of robust compliance measures and vigilance throughout the supply chain for companies engaged in cross-border trade under the USMCA.

Questions to ask yourself when considering potential free trade agreements

USMCA is not the only option. The U.S. has bilateral FTAs — for example, Australia, Chile, and Israel — and multilateral agreements such as the Dominican Republic-Central America FTA (CAFTADR) with Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic. Outside the U.S., major economies continue to leverage the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the EU’s growing FTA network, and regional pacts to reroute supply chains. This creates both competitive pressure and opportunity. Each FTA can enable diversification and savings depending on your footprint. For example, manufacturers diversifying from China toward Southeast Asia are increasingly evaluating qualification under regional pacts to preserve duty preferences, while keeping a “China-plus-one” resilience strategy. If geopolitical conditions shift, alternatives within FTA blocs — for example, moving from Vietnam to a CAFTADR country for U.S. imports — may sustain preferential access. To begin, at minimum:

For individual companies, however, the decision to utilize an FTA involves several different factors, and the calculus is rarely easy. To begin the process, a company should at the very least:

• Assemble relevant data on products the company manufactures worldwide
• Identify the most significant products or parts in the company’s supply chain
• Review the applicable regulations and other requirements
• Understand the FTA-specific rules of origin that apply to the company’s products and supply chain
• Conduct a cost/benefit analysis for compliance with the FTA

Companies considering an FTA should also ask themselves:

• How much duty do you currently save or spend on import/export activities?
• How much would you save under the FTA you’re considering?
• How thorough is your duty avoidance program?
• Are your trade compliance processes documented? If so, would they stand up to an audit?
• How much do you currently spend on legal, administrative, and other costs associated with import/export activities?
• Do you have controls for emerging requirements, such as forced labor screening, supplier sustainability data, and carbon-related disclosures?

FTA management software: The essential tool for modern FTA programs

Evaluating FTAs can be complex, especially for multinationals. The broader question is whether leadership is confident the company is fully leveraging global duty optimization programs. This does not need to overwhelm your team. Automation platforms, such as ONESOURCE Free Trade Agreement Management, virtually eliminate guesswork and reduce manual workload. Modern capabilities include:

• Scenario modeling to compare current and future FTAs and selecting the most advantageous preference program where overlaps exist
• Automated supplier outreach and certificate management to collect, validate, and renew origin documentation at scale
• Rules-of-origin engines to determine qualification using tariff shift, regional value content, and de minimis calculations
• Real time monitoring across the inventory lifecycle, with alerts for regulatory changes and expiring certificates 
• Custom reporting to quantify savings, track key performance indicators (KPIs), and provide audit-ready documentation
• Integration with product lifecycle, enterprise resource planning (ERP), and supplier management systems to keep data synchronized and reduce errors
• Enhanced risk controls for 2025-2026 priorities, including forced labor due diligence, restricted party screening, and audit trail retention

Despite the clear benefits, FTAs remain underutilized by many global companies. A capable FTA management solution helps establish a disciplined, repeatable approach that captures savings, strengthens compliance, and supports resilient supply chain design.