Mailbag: International Free Agent Cap

Yankees agree to re-sign Freddy Garcia to one-year contract
Saturday Open Thread

Anonymous asks: Do you know if the IFA cap is already in place? By the CBA summary, it seems like it doesn’t go into effect until 2012-2013 signing season, but it’s not really clear. Just wondering if Jorge Soler would count against the cap if the Yanks signed him soon. Thanks.

The spending limit on international free agents starts next July 2nd, so the 2012-2013 signing season. Teams are free to spend as much as they want on players for the next seven months or so. For that first year, each club will be allowed to spend $2.9M on international amateurs, then the budgets will be based on winning percentage in the subsequent years. That’s an average amount but peanuts for the Yankees, who typically spend about twice that most years.

Clubs can exceed their signing budgets, but there is a taxation system like the draft. Here’s the penalty breakdown courtesy of The Biz of Baseball

Excess of Pool Penalty (Tax on Overage/Draft Picks)

  • 0-5% – 75% tax
  • 5-10% – 75% tax and loss of right to provide more than one player in the next signing period with a bonus in excess of $500,000.
  • 10-15% – 100% tax and loss of right to provide any player in the next signing period with a bonus in excess of $500,0000.
  • 15%+ 100% tax and loss of right to provide any player in the next signing period with a bonus in excess of $250,000.

The penalties are already harsh and they will be increased starting in 2014, so hooray for that.

Soler — a 19-year-old Cuban outfielder the Yankees have their eye on — can sign for whatever a team is willing to offer him before next July 2nd. The only problem is that he hasn’t been declared a free agent yet, which MLB will do once they’ve looked into his age and stuff. It only took a few weeks for them to declare Aroldis Chapman a free agent, but that was helped out by his participation in the 2009 World Baseball Classic. He’d already been through the process before, whereas Soler has not.

We really have no idea when Soler will be allowed to sign with clubs, but hopefully it’s soon, just for his sake. He stands to lose a lot of money if the process drags on into next summer and past July 2nd.

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Yankees agree to re-sign Freddy Garcia to one-year contract
Saturday Open Thread
  • Plank

    I wonder if we will see cash for cap trades. The acquiring team pays perhaps more than the tax rate but would avoid the other penalties (loss of future spending) and the team trading away cap space would get free money.

  • The Fallen Phoenix

    It’s still kind of disgusting that the owners more-or-less negotiated a hard-cap on amateur bonuses, both domestic and international. Sure, teams can technically exceed the caps, but these penalties are ridiculously harsh.

    • Urban

      I still wonder if it’s legal. Sure, the deal is collectively bargained, but the people being impacted — amateur free agents, both domestic and international — are not part of MLB or the player’s union. I’m guessing it’s legal since there are a ton of legal people on both sides who have worked this agreement, but then again, maybe all it requires is someone with the desire and resources and to challenge it.

      • Rich in NJ

        …maybe all it requires is someone with the desire and resources and to challenge it.

        Yes, in civil cases, legality often turns on whether or not the “aggrieved” party has sufficiently deep pockets to pursue litigation against an extremely well-funded adversary, who has an army of lawyers that can put forth numerous obstacles (motions, discovery, etc.) to prevent a swift resolution of a contested issue at a reasonable cost.

        It’s hard to imagine that amateur free agents or those who represent their interestss can do that.

        • Andy In Sunny Daytona

          Too bad Gerrit Cole and his bajillionaire father have already signed.

          /Richestmanever

        • Urban

          I was thinking that as I wrote it. It takes money to challenge and I can’t see a young kid, even with backing, trying to be the amateur version of Curt Flood. That wasn’t a happy ending for Curt. I can see a Scott Boras type (and other agents) having the desire, but not the willingness to put up the resources.

      • Ted Nelson

        Have no idea about the legality of it, but the NBA has had hard slotting it the draft for a while without it being overturned. someone like LeBron already had very deep pockets from his Nike deal when drafted and could have challenged if there were any legal grounds

  • Mister Delaware

    Some of the biggest beneficiaries of American capitalism implement their own little socialism. Poetic.

    • Ed

      How is this in any way socialism?

    • Ted Nelson

      MLB is not particularly capitalistic. It’s a network of monopolies. Closer to communism.

  • Andy In Sunny Daytona

    Cespedes participated in the WBC, what’s taking so long to declare him a free agent? Maybe the player’s association want their members to have first dibs on the FA money?

  • Plank

    I thought the cap was already in place and is $2.9MM for all clubs.

    • Urban

      It can’t be. The current CBA doesn’t expire until 12/11.

      • Plank

        That may be right, but some rules were changed (type A/type B) while the old CBA had not yet expired.

        • Urban

          Yeah, that’s true. I guess they wanted to provide clarity on that since it impacts current free agents. Less incentive for them to change the international free agent rules.

          Back to your original question, I also read somewhere that Soler would be impacted by the 2.9 million cap, but I’ve also read it doesn’t take effect until next year. Lots of confusion out there still, so I don’t actually have great faith in anything I’m reading out there right now.

      • Gonzo

        I believe the old CBA is no longer in effect. It is tossed as soon as a new one is signed.

  • Gonzo

    Mark Polishuk at MLBTR wrote a piece there that said Soler is under the $2.9mm budget plan. The CBA is a little unclear as it states for IFA that it takes effect “this offseason” and “2012-2013″ signing period.

  • Fin

    SO what does this mean for players of Darvish’s ability going forward? They will no longer be interested in MLB becasue no one can sign them for the money they are already making in Japan?

    • Plank

      Japanese players are under a different set of rules. They will still use the posting system. The new rules only applies to brown people.

      • Gonzo

        Hey my mom is from Colombia and she’s pretty pale-skinned.

        • Plank

          I’m sure they would have been okay with her getting a big bonus then.

          • Gonzo

            Too bad she was a point guard back in her hometown. Wrong sport.

            • Plank

              Do they play baseball in Colombia?

              • Gonzo

                Of course! Edgar Renteria and a few others come to mind.

      • Fin

        Hmm, wonder what this is going to do to the brown people’s desire to play baseball. Bah, we dont need them, they arent very good at the sport anyway.

    • Gonzo

      Japanese players like Darvish are not subject to IFA budget constraints.

  • Gonzo

    Ben Badler tweeted a couple days ago that they are still trying to figure out how the new CBA effects Cubans. He said this in reference to a Soler question.

  • j

    The restrictions do not effect IFA 23 years old or older. That is what exempts Yu and Cespedes.

    • Fin

      That at least makes a little sence. As they seem to be trying to limit thier risk. Theoretically, a player older than 23 should be more of a known quantity. However, if we thought the latin american players were going through great lengths to be younger before, this would seem to give them insentive to bring it to a whole new level. Puljos could be just turning 25 under this new system.

      • Fin

        lol actually i guess it goes the other way. They will now claim to be older than they are. Watching the Michigan game and not thinkng.

      • Gonzo

        Maybe if a Cuban kid was 21/22, he could play in a non-MLB professional league for a year or two. An agent could spot him $. He would have to be amazing to be worthwhile.

      • j

        I can sort of see why the made that rule. The bonuses for IFA were getting a bit out of hand. Giving a 16 year old kid 5 million is damned crazy, considering you have no idea how they will develop. I still think any cap is bad for baseball, though.

        • alcan

          I don’t see why it is crazy… kids like Jesus Montero were signed at 16. So what? why is it crazy? It is free market economy… If your son invented a new technology or lets say wrote a program for a new video game at the age of 15 which is very probable nowadays to do… would you want a cap on how much he could get? I say hum-bug to all the commies on this page.

  • Mister Delaware

    Ed: How is a pooling and assigning of dollars and draft picks an artificially limiting costs a form of sports socialism?

    (I have no idea how to make this a reply on my phone. And I’m pro salary cap/floor and more socialist than capitalist, but at least I’m consistent across the board. Something tells me most ownership groups aren’t.)

  • deadrody

    Sounds to me like they are going to end up making college baseball into an even bigger deal than it is now. College basketball already has a sizable number of foreign players. So now, instead of signing with a pro team when you are 16, you end up going to the US to play college baseball for a couple years and the talent comes in the draft via college players instead of luring high school kids out of their scholarships with big money.

    There will be a period of time where the talent coming into baseball will be down some, but ultimately, it will probably come back up again and teams will be end up with more stable talent and less risks.