FTA Preferences: Saving 5-25% on Duty

The US has 14 free trade agreements covering 20 partner countries. For goods that qualify as originating under one of these FTAs, the preferential duty rate replaces the MFN rate, typically dropping to zero. Importers who source from FTA countries but do not claim preferences leave significant duty money on the table.

This guide explains how to claim FTA preferences, the qualification rules, and the typical savings per agreement.

The 14 US free trade agreements

Not in force: TPP/CPTPP (US withdrew 2017), TTIP (suspended). USJTA is a partial agreement covering certain goods only.

How preferences work

Each FTA has:

1. Tariff elimination schedule: lists each HTS subheading and the staged reduction (often immediate to zero on day one, or staged over 5, 10, or 15 years).
2. Rules of origin (ROO): defines what makes a good "originating" in the FTA partner country. Usually a combination of tariff shift, regional value content, and specific process requirements.
3. Certification requirements: a certificate of origin issued by the producer, exporter, or importer (self-certification under most US FTAs).
4. Recordkeeping: typically five years.

To claim:

1. Verify the good is originating per the ROO.
2. Obtain a certificate of origin.
3. Claim the preference on the entry summary using the appropriate special program indicator (SPI) code.
4. Retain records for five years.

Typical savings by category

The biggest dollar savings come from high-MFN consumer categories (apparel, footwear, leather goods). FTAs make these significantly cheaper.

USMCA-specific note

USMCA has the unique advantage in 2026: USMCA-originating goods are exempt from Section 122. This is in addition to the standard MFN savings.

For example, a 100,000 USD shipment of cotton T-shirts (HTS 6109.10): MFN 16.5 percent saves to zero under USMCA. Section 122 at 15 percent also waives. Total saving: 31.5 percent of FOB, or 31,500 USD per 100,000 USD shipment.

This makes Mexican and Canadian USMCA-qualifying production extremely attractive in 2026.

KORUS-specific note

KORUS preferences continued in 2026 but the Section 122 carve-out for KORUS is partial. The March 2026 amendment carved out semiconductors (HTS 8541, 8542), EV battery raw materials, and certain pharma APIs. Other KORUS-qualifying categories (auto parts, consumer electronics, machinery) still pay 15 percent Section 122.

For semiconductors specifically, KORUS plus Section 122 carve-out delivers true zero duty.

Qualification: the tariff shift and RVC framework

Most US FTAs use a similar structure for origin:

1. Wholly obtained in the territory (raw materials, naturally grown goods).
2. Tariff shift: non-originating materials change tariff classification at the heading or subheading level when used in the FTA country.
3. Regional value content: a percentage of the value originates from the FTA territory.

Specific PSROs (product-specific rules of origin) are in the agreement annexes. Each HTS subheading has its own rule.

For example, USMCA Annex 4-B for HTS 6109.10 (cotton knit T-shirts) requires:

• The yarn from non-originating cotton must be spun in a USMCA country (yarn-forward rule), and
• The fabric must be knit in a USMCA country, and
• The garment must be cut and sewn in a USMCA country.

If any of those steps happens outside USMCA, the T-shirt does not qualify.

Worked example: Honduran cotton apparel under CAFTA-DR

A US importer buys 200,000 USD of cotton knit polo shirts (HTS 6105.10) from a Honduran factory. CAFTA-DR yarn-forward rule applies. The yarn was spun in the US, knit into fabric in Honduras, cut and sewn in Honduras.

Qualifying analysis:

• Yarn spun in US (USMCA originating, fungible with CAFTA-DR originating for some lines; CAFTA-DR specifically: yarn from US, Canada, Mexico, or any CAFTA-DR country qualifies).
• Knit fabric in Honduras: USMCA-equivalent ROO under CAFTA-DR.
• Cut and sewn in Honduras: yes.

Qualifying: yes.

Duty: CAFTA-DR rate 0 percent vs MFN 19.7 percent (6105.10 cotton knit men's shirts). Savings on this 200,000 USD shipment: 39,400 USD in MFN duty plus 30,000 USD in Section 122 (CAFTA-DR is not exempt from Section 122 in 2026; only USMCA is).

Wait: CAFTA-DR still pays Section 122 because the exemption is only for USMCA. So in 2026 the CAFTA-DR FTA delivers the MFN savings but not the 122 exemption.

Net duty under CAFTA-DR: 200,000 x 15% = 30,000 plus MPF (capped at 614). Net duty under MFN (no FTA): 200,000 x (19.7% + 15%) = 69,400 plus MPF. Savings from CAFTA-DR: 39,400 USD.

The certification

For most US FTAs, the certificate of origin is self-certified by the producer, exporter, or importer. There is no formal CBP form anymore (NAFTA's Form 434 was retired; USMCA uses a free-form declaration).

Required data elements vary by FTA. USMCA: nine specific data elements (see USMCA Origin Rules: What Qualifies and What Doesn't). KORUS: 12 elements.

The certifier signs and dates. The importer keeps the document for five years.

How CBP verifies

CBP verification of FTA claims:

1. Random and risk-based selection of entries claiming FTA preferences.
2. Written information requests to the importer for supporting documentation.
3. Site visits to the producer in the FTA country (rare).
4. Mutual assistance with the partner country's customs authority.

A failed verification denies preference for the audited entries and may trigger broader review of the importer's program. Penalties can apply if the false claim is found negligent or intentional.

Common pitfalls

• Assuming FTA equals origin: a Mexican-made article using Chinese components and minimal Mexican processing may not qualify under USMCA's tariff shift or RVC requirements, even though it ships from Mexico.
• Missing yarn-forward documentation: apparel claims must trace yarn origin.
• Not retaining certifications: claim denied if certification cannot be produced on audit.
• Wrong SPI code: each FTA has a different code (USMCA: "S" or per current guidance; KORUS: "KR"; CAFTA: P or S depending; etc.).
• Confusing GSP with FTA: GSP is one-way preferences (lapsed in any case); FTA is mutual and based on origin rules.

How the calculator handles FTAs

The LandedFees calculator:

1. Identifies whether the origin country has an FTA with the destination.
2. Asks if the goods qualify under the FTA's origin rules.
3. Applies the preferential rate (typically 0 percent) instead of MFN.
4. Notes Section 122 exemption status (USMCA full, KORUS partial, others none).
5. Computes the savings vs MFN.

Related guides

• USMCA Origin Rules: What Qualifies and What Doesn't
• What is Section 122? The 2026 Reciprocal Tariff Explained
• Calculate Import Duty: Mexico to USA
• Calculate Import Duty: South Korea to USA
• Calculate Import Duty: India to UK
• Duty Drawback: Are You Owed a Refund?

Check your FTA savings on the LandedFees calculator.