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October 10, 2023

EY Global Tax Controversy Flash Newsletter (Issue 63) | Free trade agreements provide opportunities for global businesses — but  may increase controversy risk

In today’s global economy, businesses continually seek to enhance efficiency, reduce costs and maintain a 
competitive edge. Free trade agreements (FTAs) are foundational to achieving these goals. FTAs reduce 
international trade barriers and facilitate the unrestricted flow of goods and services.  

Understanding FTAs and using them effectively is essential for international commerce. As supply chains 
shift in response to global disruptive events, businesses must keep abreast of FTA rules to qualify for 
these benefits. Failure to do so can increase the risk of unexpected duty costs, penalties for 
noncompliance and protracted disputes.  

Identifying FTA opportunities and complying with the rules is not always easy, given the volume and 
complexity of FTAs around the world. For example, Latin American countries are involved in more than 
100 FTAs, ranging from bilateral agreements between individual countries to more comprehensive 
multilateral agreements involving multiple nations. Qualifying conditions, such as rules of origin, vary 
between agreements, and the necessary documentation may be hard to obtain from third-party suppliers. 
Active management of the FTA process is crucial to harness their economic benefits and to avoid potential 
controversy with customs administrations.

Key actions include:  

  • Use data analytics to identify FTA opportunities.

  • Develop relationships with overseas suppliers.

  • Rigorously review origin to ensure products qualify for preferential rates.

  • Review the use of Harmonized Tariff Schedule (HTS) codes.

  • Strengthen internal compliance and documentation processes.

  • Engage with teams across the organization (such as sourcing, logistics, compliance and finance 

    departments) to identify opportunities and improve compliance.

  • Stay informed and continuously adapt to changes in the FTA landscape, including new 

    agreements, and changes to tax and customs regulations.  

To read more about FTAs, read TradeWatch magazine from Ernst & Young LLP:

Additional information and links to past newsletters can be found in the attached PDF.

Flash Newsletter attachment (Issue 63)


The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


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