Global Logistics and Supply Chain Strategies - August 2008 - (Page 52) for preferential treatment is valid. A lot of companies don’t have the confidence in their data to make this claim and so they let it pass. Our system gives them the confidence to make those claims, knowing they have the data to support them.” Now, You Execute Once savings opportunities have been identified, the next step is to document a product’s qualification for that duty savings. This is done through a solicitation process, explains van de Heetkamp. “You go to your suppliers and solicit from them a statement as to the origin of the products you are buying from them. They provide you a proofof-origin certificate that you can use to substantiate your claim in an audit.” Compliance solutions like TradeBeam’s can automate this exchange of documentation, she notes. Once the origins of all components and assemblies are entered into the system, “the software application takes the bill of materials and calculates what percent of an end product originated in the country from which you are importing and will compare that to the rules of origin to see if the product qualifies for preferential treatment,” says Pieri. Usually the threshold is 60 percent to 70 percent or more. “If you meet the requirements, your duty rate will be reduced, in many cases to zero,” he says. The trouble comes when a company does not have enough originating content in the product to qualify, but takes the duty savings anyway. “If that is discovered in an audit, penalties will be imposed that are much higher than the original duty rate,” says Pieri. If an analysis shows that an end product is short of meeting the requirements, a company might engage in tariff engineering, says Enslow. “This again involves using simulation capabilities to see how a product might be altered to change its treatment under a free-trade agreement,” she explains. Barry Prevor, who along with Steve Shore is the co-CEO of Steve & Barry’s University Sportswear, explained in an interview with U.S. News & World Report that changes such as mixing more cotton than polyester in a garment or fashioning a garment to be waterproof, which would change the tariff code, might enable his company to take advantage of more economical duty classifications. This kind of engineering is “part of our ability to bring low-cost products” to market, he said. “Companies with a many-to-many supply chain environment that are manufactur- 52 AUGUST 2008
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