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Origin and trade agreements

Trade agreements and customs unions for cross-border sellers

How free trade agreements and customs unions cut duty, why goods must meet rules of origin, how to claim a preference, and the main agreements by region.

Updated · 13 official sources

A trade agreement lowers or removes customs duty only on goods that originate in its member countries under its rules of origin, and only when the importer claims it with the proof the agreement asks for; shipping goods between two members isn't enough. The WTO counted 388 regional trade agreements in force on 1 October 2026.

Rules as of 30 October 2026.

What is the difference between a free trade area and a customs union?#

A free trade area removes duties on substantially all trade in goods originating in its members, while each member keeps its own tariff toward the rest of the world. A customs union goes further: its members become a single customs territory and apply substantially the same duties to outsiders. Both are defined in Article XXIV of the GATT.

The difference shows up at the border. Inside a free trade area, rules of origin decide which goods qualify, because a member can't tell from the route alone whether goods were made inside or outside the area. A customs union has one external tariff, so goods it covers can move between members without paying duty again once they've entered. The EU is a customs union, and it has customs unions of its own with Andorra, San Marino and Türkiye, which the UK's customs code list records against those countries.

Free trade area Customs union
Duty between members Removed on originating goods Removed on goods in free circulation
Tariff toward outsiders Each member sets its own One common tariff
Rules of origin between members Needed for every claim Not needed for goods in free circulation
Examples USMCA, the EU-UK Trade and Cooperation Agreement, RCEP The EU; the EU with Türkiye, Andorra and San Marino

What does a trade agreement do for a parcel?#

For a parcel, a trade agreement replaces the destination's regular duty rate with the preferential rate, often zero, if the goods originate under the agreement and the importer claims it. It doesn't cover goods that only passed through a member country, and import VAT, GST and sales tax are normally charged as usual.

The savings can be large. The US general rate for cotton T-shirts under HTS 6109.10.00 is 16.5%, while goods qualifying under the US agreements with Australia, Bahrain, Chile, Colombia, Israel, Jordan, Korea, Morocco, Oman, Panama, Peru and Singapore, under CAFTA-DR and under USMCA enter free. On a $2,000 shipment that's $330 or nothing.

Low-value rules change the picture. Where a parcel is below the destination's duty threshold there's no duty to cut, which is why preferences used to matter little for small parcels; see de minimis. That has changed in two big markets. The US has suspended de minimis indefinitely, so duty is owed on low-value parcels and a preference counts again. In the EU, the temporary €3 duty on parcels worth up to €150 doesn't apply to goods with preferential origin, as long as the VAT wasn't collected through IOSS and the goods are declared on a full customs declaration.

How do rules of origin work?#

Rules of origin set what a product must go through inside the member countries to count as originating. Each agreement has product-specific rules, most often a required change of tariff classification between the imported materials and the finished product, sometimes with further conditions, and goods wholly obtained in a member always qualify.

That's why a product can be "made in" a member country and still not qualify. Goods can be of Mexican origin for ordinary customs purposes and still fall short of the USMCA rule for their HTS line, for example because too much of the material came from outside the region in a form the rule doesn't allow. The rule is tied to the code, so the right HS code comes first. The general idea of origin is in country of origin.

How do you claim a preference?#

To claim a preference, the importer declares the preferential treatment on the entry and holds the proof the agreement requires. In the US, a USMCA claim is made by putting "S" or "S+" in front of the HTS subheading, based on a certification of origin from the importer, exporter or producer that the importer holds when claiming.

  1. Check that the agreement covers both the country of origin and the destination.
  2. Find the product-specific rule for the goods' HS code and check the goods meet it.
  3. Get the proof the agreement accepts, such as a certification or a statement on origin; certificates of origin explains each kind.
  4. Declare the claim on the entry.
  5. Keep the records. USMCA exporters and producers keep theirs for at least five years.

A preference cuts the regular duty, not every duty. In the US, some Section 232 duties apply to USMCA goods too, at their own rates; the US tariffs page lists each one with the origins it covers, and the US tariff changes guide explains what moved in 2025 and 2026.

Which trade agreements matter most for cross-border sellers?#

The agreements that matter most for parcels link big consumer markets with the countries goods are made in. The table lists the main ones by region with their official status on 30 October 2026. Coverage and rules of origin differ between agreements, so check the agreement for each product before you claim.

Region Agreement Members Status
North America USMCA United States, Mexico, Canada In force
Americas CAFTA-DR United States, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua In force
United States Free trade agreements 20 countries, per the US Trade Representative In force
Europe EU customs union 27 EU member states, plus customs unions with Andorra, San Marino and Türkiye In force
Europe EU-UK Trade and Cooperation Agreement EU, United Kingdom In force since 2021
Europe and Asia EU-Japan Economic Partnership Agreement EU, Japan In force since 2019
Europe and Asia EU agreements with South Korea, Singapore and Vietnam EU and each partner In force since 2015, 2019 and 2020
Europe and Americas CETA EU, Canada Provisionally applied since 2017
Europe and Americas EU-Mercosur interim trade agreement EU, Argentina, Brazil, Paraguay, Uruguay Provisionally applied since 1 May 2026
Europe and Americas EU-Chile interim trade agreement EU, Chile In force since 2025
Europe and Pacific EU-New Zealand EU, New Zealand In force since 2024
Asia-Pacific RCEP 10 ASEAN members, Australia, China, Japan, South Korea, New Zealand In force since 1 January 2022 for the first 10 parties, later for others
Asia-Pacific and beyond CPTPP New Zealand and 11 other economies In force

The US has agreements with 20 countries: Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru and Singapore. Our US guides cover the US trade agreements one by one, including USMCA, KORUS, the US-Australia agreement, the US-Israel agreement and NAFTA.

Common questions#

Does shipping from a trade-agreement country qualify goods for the lower rate?#

No. The goods have to originate under the agreement's rules of origin. Shipping, storing or repacking them in a member country doesn't make them originating.

How many trade agreements are in force?#

The WTO counted 388 regional trade agreements in force on 1 October 2026, and says at least 84 more in force hadn't been notified to it.

Does a trade agreement remove import VAT or sales tax?#

No. Trade agreements cut customs duty. Import VAT, GST and sales tax are normally charged at the usual rates.

How many countries does the US have free trade agreements with?#

Twenty, according to the Office of the US Trade Representative.

Sources#