Preferential Rate
A reduced duty rate available under a free trade agreement or preference program.
A preferential rate is a duty rate lower than the MFN rate, available when goods originate in a country with a qualifying trade agreement or preference program. In the US, these include USMCA (for Canada and Mexico), CAFTA-DR (Central America), bilateral FTAs (Australia, Korea, etc.), and unilateral programs like GSP. In the EU, preferential rates exist under the EBA (Everything But Arms), GSP, GSP+, and bilateral agreements. Claiming a preferential rate requires proof of origin.
Related terms
MFN Rate
The default tariff rate applied to imports from most countries under WTO rules.
General Rate of Duty
The standard duty rate in Column 1 of the US Harmonized Tariff Schedule, equivalent to the MFN rate.
Rules of Origin
Criteria that determine where a product was made, used to qualify for preferential tariff rates.