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The July 2nd International Free Agent Signing Period - A FAQ

After the draft comes the confusing, corrupt, and usually not very dramatic signing of international free agents. Have Questions? We have Answers!

MLB: All Star Game-Futures Game
Lucius Fox, the last big money signing the Giants made in International Free Agency, and the reason this year is important.
Jasen Vinlove-USA TODAY Sports

Confused about the opening of next week’s international free agent period? Well, we’re here with some answers, in relatively plain English and bad jokes.

What is the July 2nd Signing Period?

Basically, it’s the start of the international prospect signing season.

Major League Baseball allows teams to sign internationally-based prospects every year in a period that begins on July 2nd until mid-June the next year. While these signing periods are essentially a free-for-all, there are some limits that have been imposed. Currently, that is bonus pools.

Bonus Pools, enacted in the 2016 CBA and first seen in 2017, are a true hard cap. Teams may not sign players over their bonus pools. This is a change from the past, that allowed teams to spend over their bonus pools if they paid a penalty.

How are Bonus Pools calculated?

The current system is fairly simplified. If you were in the “Competitive Balance Round B” of the draft, you get the (slightly) highest amount of bonus pool money. If you were in “Competitive Balance Round A”, you get a little less. Every other team gets the same amount. This weights things (slightly) in favor of those smaller market teams. All bonuses count against this pool total, unless the bonus is $10,000 or less.

Pools can be affected by other factors:

  • If a team signs a “Qualifying Offer Free Agent”, they lose either $1 million or $500K from their bonus pools (in addition to draft pick compensation). That money then gets redistributed equally among the other clubs.
  • Teams can trade bonus pool money. There is no limit to the amount of bonus money in a single year that teams can collect.

This year, the Basic Pool is $4,983,500. Here is the list of Bonuses and the teams that have them:

Signing Bonus Pool B ($6,025,400): Reds, Marlins, Brewers, Twins, Athletics, Rays

Signing Bonus Pool A ($5,504,500): D-backs, Orioles, Indians, Rockies, Royals, Pirates, Padres

Signing Bonus Pool ($5,004,500): Cardinals

Signing Bonus Pool ($4,983,500): Braves, Red Sox, Cubs, White Sox, Tigers, Astros, Angels, Dodgers, Yankees, Mets, Mariners, Giants, Rangers, Blue Jays, Nationals

Signing Bonus Pool ($3,949,000): Phillies

That’s Not A Lot Of Money...

Nope. That’s what happens when the terms of your signing bonuses are negotiated by a union without your interests in mind (or at least, not as a priority). Hell, with the terms of the last CBA, it’s arguable their own members weren’t their priority for some reason.

What if a team goes over?

They can’t. Baseball won’t certify the deal.

If a team can’t go over, why are there penalties limiting the bonuses a team can use this year?

For the most part, it’s for teams who went over their Bonus Pool in the period that started in 2016. The new CBA changed the rules in that winter, but penalties incurred before the new CBA were still enforced.

Next year, almost no one will be limited. Only the Braves will be. See below on that.

Who is eligible?

I’m going to bullet point this list:

  • Anyone who does not qualify for the Rule 4 Draft (so, basically, no Americans or Canadians).
  • Any player who would turn 17 by the end of the first year of his contract. (Very detailed way to say, about 16.)
  • If a player is at least 25 with six seasons in a foreign professional league are exempt from these rules.

Why aren’t Japanese players covered under this system?

Who said they aren’t? They absolutely are, including Shohei Otani last year. The key is that players must be free from contracts in other (foreign) leagues, and Japan and Korea both have very well-developed professional leagues. So, with Japan and Korea, players who have signed there must be “Posted” by their existing teams, so those teams get a cut of the bonus money as compensation.

Players like Ohtani who come over young enough to qualify under these rules are rare, because of the bonus pools limiting what they can make. Most players from East Asia wait until they are 25 (or 23, as was the pre-2016 rule), so they can make any amount as a free agent, though if they are still under contract to the Nippon Professional Baseball team (Japan) or a team from the Korea Baseball Organization, posting rules still apply.

What about professional leagues in the Caribbean? Don’t they have a posting system? What do they get for losing a player?

Nothing, if they ever got to have a player at all. They have no bargaining power. NPB and KBO are well-established leagues with good money for the players, and players can stay there and improve against quality (if sub-MLB) opponents. Most of the leagues in Latin America have neither opportunity. They don’t bring anything to the table. Thus, most young players sign with American or Asian teams right away as teens.

There is the Mexican League, which is generally equated with a Triple-A level of quality, but... we’ll come back to them.

Why isn’t there a draft, like there is with U.S. prospects?

There are a few reasons I’m not privy to, but it comes down to complications trying to make such a draft happen internationally in the past, from laws and regulations to trying to scout even more potential players, to now there being an active push by current Latin American players to not have a draft.

The draft is very controversial, even among the owners. Generally, a free agent system favors big market teams with lots of money, leaving small market teams out in the cold. A draft would give the small market teams equal (or even better) chances at the best international players. The general thinking is that a draft would also greatly limit the salaries of players.

If the draft mixes American and Latin American players, it will also put the latter at a disadvantage. Puerto Rico is pointed to as an example of this. There is less competition and exposure for Puerto Rican high school players. Since Puerto Rico was included in the draft, high-level Puerto Rican prospects have dwindled where the island used to produce many All-Stars.

The current bonus system was designed to try and give small market teams an equal shot at young players, but it definitely lowers the bonuses they get. Is this to take away one of the arguments against an international draft in the next CBA? Hm…

Is this a good system? How did we get here?

Nope. This system sucks. But the whole system sucks.

Let’s talk about recent history.

It used to be that the bonus caps were soft, meaning teams would pay a penalty if they went over, including having years where they would be extremely limited in signing players (Giants fans remember this, with the Lucius Fox signing). But then there was the Red Sox and Yoan Moancada.

Despite having a bonus pool of around $4 million, the Red Sox flaunted the limits by paying Moncada $31.5 million. They didn’t care that this ultimately cost them $63 million, because they had to pay a 100% tax. Even the Yankees balked at that price. That’s saying something. While Moncada is an amazing young player, this was an example that proved the difference between the have and have-nots. Almost a third of the teams would be in penalty phase every year.

So that system really crippled small market teams from being able to compete.

On the other hand, the system is rife with corruption at nearly every end. Players are often exploited by ill-intended “agents”, or family (or threats to family), or more. Cuban players like Yasiel Puig were exploited trying to leave the island (luckily, that is no longer needed for those players to come to MLB).

And then there’s the issue of fake identities. Baseball has suffered a spate of players who played under assumed identities, especially in the late 00’s. Giants fans, remember former Giant Manny Mateo? Probably not. That was the fake name used by Merkin Valdez, whose identity was discovered after the Giants traded for him in 2002.

Why would players do this? Because it looks better to look younger. Especially as a teen, a year of aging is a big change in ability. But if someone thinks your 17-year old physical development is actually a 16-year old’s body, they’ll pay more for you.

Wow, that sounds insane...

Of course, there’s also corruption on the MLB side. Aside from the borderline collusion limiting bonus pool salaries, teams try to break the rules all the time. Last winter, MLB caught the Atlanta Braves cheating on signings, and absolutely hammered them in punishments, including banning their then-General Manager for life, voiding 13 contracts and limiting their ability to sign anyone through 2019.

And then there’s the problem in Mexico. The Liga Mexicana de Beisbol has long been considered a Triple-A level international league. Players could be signed, and it would be under the International Free Agent rules. However, there is no posting system, so teams there had an informal deal that part of the signing bonus the player got would go to the team. But by part, it seems to be most of the bonus, if not all. And they would not be clear about how much went to the teams. Due to this corruption, MLB has placed a ban on all transactions with players in the LMB.

That will be situation worth watching to see if a posting-style system happens, or if Major League Baseball’s “Plan B” that was mysteriously referred to becomes a reality, whatever it is. It’s a corrupt system. It’s definitely not healthy. I don’t think that it should be a free-for-all for anyone to sign at any amount, but my opinion is also that players deserve chances at more salary. What’s a better system? At this point, I’m not sure.

Why does it seem that everyone knows who the top prospects will sign weeks before the deadline?

If you haven’t seen, Baseball America has published their Top 50 players available this year. 23 of the Top 25 prospects are already connected to teams, and one of the others is a player not yet cleared by MLB to sign.

How does this happen? Because tampering isn’t a thing.

The way to connect with young players in baseball today is to start young, to get to know the players and their families when they are kids, and develop that relationship. Want to know why Ohtani signed with the Angels?

I mean, sure, in every sport there are pre-draft meetings and interviews that players can do with teams, but if you’re a Giants fan, look at this:

Those are two guys who can’t be signed until July 2nd, working out in the Giants camp in full Giants gear. It’s even been reported that Marco Luciano (one of the Top 2 guys in the signing period) will get around $2.5 million.

It almost seems like the deals are done before the signing period. And truthfully, they probably are, and it’s probably all legal.

It takes a lot of the drama out of the signing period, which isn’t necessarily the worse thing. At this point, the most fun thing will be seeing if there are any BA gets wrong.

So, that’s what you’ll see in July. Maybe there’ll be some surprises. But almost none of these players debut very soon, many take 4-5 years to develop since they are signed at very young ages. And you never know.

Yoan Moncada, the $63 million player that broke the system, is in his first truly full season and batting .227/.297/.412, and he has 109 strikeouts in 311 plate appearances, so there are no players who are guaranteed to be good.

Have a good signing period, teams!