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CBA compensation FAQ: Deadline edition

MLB.com @castrovince

This can be a confusing time of year in the world of baseball transactions -- and not just because some of us are sure to be duped by the occasional phony Twitter account dispensing "fake news" on the trade front.

The new Collective Bargaining Agreement has radically altered the free-agent Draft-pick compensation system, and that has a direct impact on the non-waiver Trade Deadline, which passed at 4 p.m. ET on Monday. In the past, it made sense for some would-be sellers to hold onto certain pending free agents because of the Draft pick that could be recouped if he signed elsewhere. But now, that compensation varies according to the team's economic circumstances and the specific dollar amount the player earns elsewhere.

This can be a confusing time of year in the world of baseball transactions -- and not just because some of us are sure to be duped by the occasional phony Twitter account dispensing "fake news" on the trade front.

The new Collective Bargaining Agreement has radically altered the free-agent Draft-pick compensation system, and that has a direct impact on the non-waiver Trade Deadline, which passed at 4 p.m. ET on Monday. In the past, it made sense for some would-be sellers to hold onto certain pending free agents because of the Draft pick that could be recouped if he signed elsewhere. But now, that compensation varies according to the team's economic circumstances and the specific dollar amount the player earns elsewhere.

Here's a handy FAQ to help you understand the new rules and how they apply to the current trade market.

Which free agents will be tied to Draft-pick compensation?

As has been the case since the 2012-16 CBA, only those who turn down the one-year qualifying offer from their clubs will have compensation attached to them. Those players have 10 days to accept or decline the offer, during which time they can negotiate with other teams. The qualifying offer is the mean salary of the league's 125 highest-paid players. It was worth $17.2 million for '17 and will be slightly higher next year.

Which players are eligible for the qualifying offer?

Only those who…

A. Have never received a qualifying offer previously in their career (this is a new wrinkle in the CBA), and
B. Have spent the entire season on that team's roster (so in-season acquisitions are ineligible)

The A stipulation here wouldn't appear to have any impact on this specific Trade Deadline. Jose Bautista, for instance, is a possible trade chip who won't be eligible to receive a qualifying offer (because he got one from Toronto last offseason), but it currently rates as doubtful that he'd command such an offer again this winter if he were eligible.

Yu Darvish, Johnny Cueto (if he opts out of the remaining four years on his contract with the Giants), Mike Moustakas, Eric Hosmer, Lorenzo Cain and Zack Cozart are among the pending free agents who would merit consideration for a qualifying offer.

What kind of compensation pick will the club who loses the player receive?

In a word, depends.

Under the previous CBA, if a team gave a qualifying offer to a player and he signed elsewhere, it would get a supplemental first-round pick (right after the end of the first round). That has all changed.

Under the new rules, if the team that loses the free agent is a revenue-sharing recipient, based on its revenues and market size, then the selection -- if and only if the lost player signs for at least $50 million elsewhere -- will be awarded between the first round and Competitive Balance Round A of the 2018 MLB Draft. If the player signs for less than $50 million, the comp pick for those teams would come after Competitive Balance Round B, which is after the second round.

According to what industry sources told MLB.com's Jon Paul Morosi, the following 16 teams would qualify for these picks: A's, Astros, Braves, Brewers, D-backs, Indians, Mariners, Marlins, Orioles, Padres, Pirates, Rays, Reds, Rockies, Royals and Twins.

If the team that lost the player does not receive revenue sharing and did not exceed the luxury tax the previous season, its compensatory pick will come after Competitive Balance Round B. (The value of the player contract doesn't matter here.)

If the team that lost the player went over the luxury tax, the compensation pick won't come until after the fourth round has been completed. (As with the previous scenario, it doesn't matter how much the player signs for here.)

As a quick rule of thumb, the Draft pick compensation breaks down like this:
*General rule: Compensation after Comp Round B
*Exception 1: Team paid luxury tax = compensation after fourth round
*Exception 2: Team received revenue sharing AND free agent signed for more than $50M = compensation after the first round

So how does the above apply to the Trade Deadline?

Well, a club like the Royals -- eligible for the highest possible compensation picks if the likes of Moustakas, Hosmer and Cain reject a qualifying offer and sign elsewhere for at least $50 million -- must weigh the value of whatever trade offers come in for those guys against the potential value of keeping them the rest of the season for the postseason chase and reaping a Draft pick in, say, the low 30s. When you understand that dynamic, you understand why the Royals might be even more willing to just ride it out with their current core and see what happens in the second half.

On the other hand, a luxury-tax payee like the Tigers had little incentive to keep J.D. Martinez if it deemed itself out of the race. The best the Tigers could have net for Martinez, who they have traded to the D-backs, is a pick between the fourth and fifth rounds.

Has anything else related to Draft compensation changed?

Yes. Though this has nothing to do with the Trade Deadline, it is worth committing to memory in advance of the offseason.

First-round picks -- as well as Competitive Balance picks -- are now totally exempt from forfeiture for signing free agents. Previously, only the top-10 picks were exempt.

But there are still pick penalties for signing players who rejected a qualifying offer. A team that exceeded the luxury tax the previous season will lose its second- and fifth-highest selections after the first round and $1 million from its international bonus pool. A team that receives revenue sharing will lose its third-highest selection after the first round. A team that neither exceeded the luxury tax nor receives revenue sharing will lose its second-highest selection after the first round, as well as $500,000 from its international bonus pool.

Anthony Castrovince has been a reporter for MLB.com since 2004. Read his columns and follow him on Twitter at @Castrovince.