The United States has Free Trade Agreements (FTAswith many countries--Australia, Singapore, Israel, Morrocco, to nave a few. Soon there will be an FTA with Korea.

FTAs with each beneficiary country are identical in some ways and significantly different in others.

One commonality among the FTAs is that the imported product must be fully produced in the FTA country or, if made in whole or substantial part from foreign materials, that the foreign materials had been "substantially transformed" there. Documenting this can be difficult. A recent Customs survey found that 28% of the claims for free entry under the FTAs were not properly documented. This resulted in the retroactive loss of the duty exemption and in some cases penalties as well as the curtailment of an otherwise highly successful import program.

Often, the importer is not sensitive to its exposure. It may have been importing goods duty-free under an FTA for years without any objection or question from Customs. Then a request for production documentation for a specific (usually recent0 shipment is made and it is found that the factories did not maintain sufficient records.

Production documentation is often extensive--for some products, running to more than one hundred pages. Few importers find it practical to require them for each shipment, even though it is the importer's obligation to maintain records justifying the claim for free entry. Rather, the importers request it of the manufacturers when the request comes from US Customs. Only then is it learned that the factories' documentation is insufficient.

For starters--and this is far from the only measure you should take to minimize exposure to an unexpected duty assessment or more--we suggest that if you import under an FTA , you request production documentation from each factory you use for a recent shipment from it--- and require as a contractual matter that such documentation--if your review satisfies you that it is sufficient--be provided for any other shipment within 30 days of request.

Please regard this as a general informational message. It is not advice that will insure that you qualify under an FTA or anything near an exhausive listing of measures you should take to protect your company.