Companies end up overpaying duties due to a lack of awareness of free trade agreements, rules of origin and proper import procedures, a new report finds.
Jonas Kasteng, Senior Adviser of the Department for Trade and Policy Developments of the National Board of Trade wrote a new report “How Companies Use Free Trade Agreements” by the National Board of Trade Sweden.
The findings and policy recommendations in this report are based on a survey to Swedish exporters and importers in trade with South Korea. The EU’s free trade agreement with South Korea has been in force 10 years on 1 July 2021.
The report is divided into two parts:
Part I presents the main findings and policy recommendations and
Part II presents a detailed analysis of the statistical data.
The report is unique in the sense that it provides information about both exporters and importers, companies of different sizes and the role of customs brokers in the use of free trade agreements.
Importers seem to be much more unaware of the free trade agreement than exporters: As many as 45 per cent of the importers claimed that they were unaware of the free trade agreement, which is about 20 percentage points higher than for exporters. Importers might, accordingly, benefit from more awareness-raising activities.
Companies that are aware of the free trade agreement tend to use it: About 80 per cent of the companies that are aware of the free trade agreement also use it. This seems particularly the case for micro exporters and large importers (more than 90 per cent of these companies use the free trade agreement).
The use of customs brokers does not seem to correlate with the awareness of or influence the use of the free trade agreement: It is, accordingly, unclear whether customs brokers have an economic incentive to inform and provide specific assistance to their clients in order to make them aware of, and facilitate, their utilization of tariff preferences. This should be further explored.
Rules of origin are not difficult to comply with: The large majority of the exporters (80‒90 per cent) do not consider that the rules of origin or related procedures constitute a problem for utilizing the tariff preferences. These findings hold true for both micro exporters and large exporters.
Link to the report
Report: How Companies Use Free Trade Agreements | Kommerskollegium