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In the era globalized supply chain, trade arrangements such as Preferential Trade Agreements (PTA), Regional Trade Agreements (RTA) or Free Trade Agreements (FTA), are designed to help organizations be more competitive in the global marketplace through reduced tariffs – or even no tariffs at all in the case of FTAs.
At a geopolitical level, the Free Trade Agreements instrument has also been designed with a much wider objective to reduce trade barriers and, by that, facilitate cross-border import and export, and even “provide mechanisms that can contribute to economic stability, recovery, and resilience” as per the United Nations Conference on Trade and Development.
Despite uncertainty and rapidly evolving rules, a recent Gartner Research paper – Benchmarking Chief Supply Chain Officer (CSCO) Perspectives on the Shifting Tariff and Trade Environ..., still identified that “More than half (59%) of surveyed CSCOs see opportunities to benefit their organization amid the evolving global trade environment, such as relaxed or reduced regulations, lower corporate tax rates and openings to make gains against competitors”.
This is a clear indicator that companies are looking at making use of all the options available to them to strengthen their market presence. Including using tariff optimization of course.
With each preferential agreement containing a protocol specifying the conditions under which a product is regarded as an originating product of the signatory states, getting a formal proof of origin or a compliant self-certification declaration is easier said than done. And it is the duty of the company itself to determine applicability of preferential trade legislation programs.
Thankfully, Trade Preference Management capabilities, including rules of origin rule sets for instance, are available in SAP Global Trade Services or help organizations document and automate the process. SAP Global Trade Services can then determine for each product whether the specifications of the preferential agreements are met with regard to the sufficient working or processing of non-originating materials, etc.
Since this is much more than just an IT feature activation, I wanted to invite experts in the domain to offer their insights on best practices in terms of free trade agreement implementation: where to start and to go on about it. And I was very fortunate that Greta Bhatia Villagran – CEO and Founder of Pinary Inc agreed to share her deep expertise on the matter.
Who is Pinary?
If you have been researching SAP Global Trade Services, you may have already come across our joint customer story highlighting Pinary’s expertise with SAP Global Trade Services: Simplifying global trade complexities.
If this is not the case, allow me to briefly introduce this expert SAP partner in the domain of international trade management. Pinary is a woman-owned business, defined by its commendable core values of honesty, transparency, and a pro-client approach. Thanks to their industry expertise, technology insights, and vast experience in this domain, Greta and her team boast a zero-defect go-live rate. Not bad, don’t you think?
And you will be able to find much more details on their expertise and service offering at the following location: Pinary Inc.
From your experience, what trade agreement best practices would you recommend companies implement?
When implementing Free Trade Agreements (FTAs) in SAP Global Trade Services (GTS), it is important to recognize that success is not only driven by system design and configuration, but equally by business process readiness and supplier engagement. While rules of origin are often provided by trusted third-party content providers and uploaded into GTS, governance over how the rules are applied and the accuracy of underlying master data remains essential. Although GTS significantly automates preferential calculations and reduces the day-to-day workload for the business, strong governance and ongoing internal training must be made a key part of the program to ensure sustainable compliance. Automating preferential calculation relies heavily on clean product data, complete bill of materials (BOMs), and accurate material classification with the tariff codes, and timely supplier declarations. Therefore, it is critical to involve suppliers early in the process, especially when introducing automation of Long-Term Supplier Declarations (LTSDs). Educating suppliers on the benefits of timely and accurate completion, such as, smoother trade flows, cost savings, and improved competitiveness ensures stronger participation and reduces delays. Internally companies should also establish a clear ownership of trade compliance responsibilities, maintain robust monitoring of key compliance metrics, and set up escalation paths for exceptions. Regular training, internal alignment between trade, procurement, and logistics teams, and a focus on data governance build a strong foundation for a sustainable FTA program.
Where and how would you suggest companies start their Free Trade Agreement automation project?
Companies should start by evaluating their current trade compliance processes and data landscape. A readiness assessment to review product master data, supplier management processes, and existing trade agreements that are in scope is a critical first step. It is advisable to prioritize agreements that deliver the highest commercial value and align with key markets. From there, building a phased approach that includes supplier onboarding, data cleanup, and system integration milestones will help the organization manage complexity and reduce risk. It is equally important to also secure executive sponsorship early, to ensure cross-functional buy-in and resources. Typically, successful projects start small, therefore it is recommended to implement a pilot covering selected products and suppliers, which can be expanded once the processes are tested and stabilized. Keeping business objectives in clear view, rather than treating FTA automation as purely a system implementation, results in stronger adoption and long-term return on investment.
Finally, what are some pitfalls you recommend companies pay particular attention to when working on Free Trade Agreement initiatives?
Several pitfalls can derail FTA initiatives if not proactively addressed. First, underestimating the importance of clean and structured data, both in the material master and in supplier declaration is a common risk. Accurate tariff classification is especially critical, as errors at this stage can lead to incorrect preferential qualification, compliance risks, and potential penalties. Second, lack of supplier communication can significantly delay onboarding and jeopardize preferential claims. Suppliers must understand not only the new requirements but also the benefits to them, and processes should be put in place to manage non-responsiveness. Third, companies should resist the urge to overcomplicate the initial scope; focusing on too many agreements, products, or automation features at once can lead to unnecessary delays. A phased approach typically delivers better results. In addition, thorough testing of preferential calculation logic and end-to-end scenarios is essential before go-live to identify potential gaps. Investing in user training is equally critical to ensure business teams understand not only the system but also the underlying compliance responsibilities. Finally, continuous monitoring after go-live is often overlooked. Trade compliance is not static, and changes in regulations, sourcing, and product design must be managed to keep the program compliant and audit ready.
As you can read, this is undoubtably a complex process. But, in a highly competitive environment, companies can make use of trade agreements to achieve great benefits including:
 | Reduce customs duties with preferential origin duty rates |
 | Avoid “worst case” determinations for multi-sourced products |
 | Improve competitiveness by reducing duty costs |
What about you, does your company leverage trade agreements to improve its competitiveness? I look forward to reading your thoughts and comments either on this blog or on Twitter @TFrenehard
