FTA vs MFN Rates: Which Applies to Your Shipment?

Every U.S. importer pays one of three possible duty rates for a given product: MFN (Most-Favored-Nation), a preferential FTA rate, or a special GSP/developing country rate. Understanding which applies — and how to claim the right one — can be the difference between a 25% duty and 0%.

MFN Rate: The Default

MFN (also called "Normal Trade Relations" in U.S. law) is the rate applied to all WTO member countries unless a lower rate is available under a trade agreement. MFN rates are set by U.S. law and listed in Column 1 General of the HTS.

Free Trade Agreement Rates

The U.S. has FTAs in force with 20 countries. Key agreements:

AgreementCountriesKey Feature

|---|---|---|

USMCACanada, MexicoMost manufacturing goods: 0%KORUSSouth KoreaPhased-in 0% for most goodsCAFTA-DR6 Central American countries + DRMost goods: 0%US-EUNo agreementMFN appliesUS-ChinaNo FTASection 301 + MFN

How to Claim an FTA Rate

To claim an FTA preferential rate, you must:

1. Determine origin — goods must originate in the FTA country under that agreement's rules of origin (ROI). Not every product assembled in Mexico qualifies; it depends on where the components came from.

2. Obtain or create a Certificate of Origin — USMCA uses a self-certification model; you (exporter, importer, or producer) certify origin. Keep records for 5 years.

3. Declare on entry — use the correct Special Program Indicator (SPI) on CBP Form 7501 (e.g., "MX" for USMCA-Mexico, "CA" for USMCA-Canada).

Practical Example

Importing textile T-shirts (HTS 6109.10.00) from:

**China**: MFN 16.5% + Section 301 (if applicable)

**Vietnam**: MFN 16.5% (no FTA with US)

**Mexico (USMCA-qualifying)**: 0%

**Honduras (CAFTA-qualifying)**: 0%

The origin and rules of origin compliance determine the rate — not just where the final assembly happens.