On October 31, 2012 the U.S. Government and Government of Panama announced that the U.S. – Panama Trade Promotion Agreement (often referred to as the Free Trade Agreement, or FTA) – went into effect.
If you are interested in or are already exporting U.S.–made goods to Panama, the FTA is big news! And here is why:
Tariffs have dropped to 0% for 87% of U.S. Exports to Panama. Panama’s tariffs are already relatively low – an average of 7% for industrial goods, around 15% for agricultural products regardless of where the products are made. But a 0% percent tariff is a competitive advantage for U.S.-made goods. And U.S. products and services are already very competitive, with some 30% market share of Panama’s imports. That gives U.S. exporters several advantages:
- Better chance of winning the business. You can drop your price relative to your non-U.S. competitors. That gives you a competitive advantage.
- Better margins. You can alternatively offer the same price and obtain better margins if you win the business. That 7 - 12% that went to paying the tariff now goes to you. In that sense it is just like a tax cut, where you get to keep more of your money.
- Simplified paperwork. For some of Panama’s biggest projects, e.g. the Panama Canal Expansion and the Metro, you can in theory export duty free if eventually your goods will be re-exported or consumed. In reality, these projects are time-sensitive. Your supplies are on critical path. And the contractors don’t have time to file paperwork. So you’ll end up having to quote with duties paid or you’ll have paperwork delays that will cost you the business. With the FTA in place, you don’t have to worry about those issues. You just have to document content of origin.
- Greater Transparency in Public Procurement. Selling to the Government of Panama can be a challenge. Certain clauses in the FTA will make the process more transparent and will give the U.S. Government increased leverage to ensure that you are competing on a level playing field.
- No threat from Panamanian access to U.S. Market. Because Panama is a service-driven economy with almost no industrial sector, U.S. exporters will not face increased competition from Panamanian companies due to the FTA. In fact, Panamanian exports to the U.S. (primarily agricultural products) already come in duty-free, due to the Caribbean Basin Initiative.
Now is the time to look at exporting to Panama! The U.S. already enjoys a 30% market share of all Panama’s imports – it may already be a good market for you now. And Panamanian buyers now know that they can get most U.S.-made goods duty-free – so they are very interested in talking with you.
If you are interested in expanding into Panama or exporting through Panama to the rest of Latin America, please review our Doing Business reports and contact us to discuss how we can help you sell more to Panama. Since Panama is a regional air hub, you can visit the country easily from anywhere in the U.S. And if there are sufficient market opportunities, your goal should be to lay the groundwork now, by securing a representative, agent, or distributor. We can help.
Resources for more information on the FTA.
- President Obama’s Overview of the benefits of this FTA.
- U.S. Trade Representative’s Overview of the FTA (includes links to full text).
- Industry and State-by-State Fact Sheets from U.S. Department of Commerce.
- Tariff Tool – shows you how tariffs will be phased out for any particular good.
Cautionary note: this tool does not show agricultural products. In addition, it is not completely accurate for current tariff rates; instead, it shows what Panama is allowed to charge under the World Trade Organization’s rules (sometimes referred to as “bound” rates). Panama’s actual (or “applied” rates) are frequently lower. Since the tariff tool only shows bound rates, it may overstate your product’s competitiveness for favorable duty treatment. For complete and up-to-date information on what the actual tariff rates are for your product, please see…
- Customs Info Database - shows you tariffs/duties that Panama is currently assessing. Note: Panama already allows duty-free imports for certain projects, e.g. Canal expansion or Metro construction. Please contact us for more information on these exceptions.
- Agriculture – detail on FTA from U.S. Department of Agriculture.
- Sample document for you or your Panamanian buyer to demonstrate that your product qualifies for preferential treatment under the FTA: http://buyusainfo.net/docs/x_9270974.pdf