Benefits of Utilizing a Foreign Trade Zone

Made in the USA Label

Since the U.S. added value is not subject to duty, a manufacturer that adds U.S. content to foreign product at a rate of 51%or more may qualify for the “Made in the U.S.A.” label thus avoiding duty altogether.

Ease of Paperwork & Quick Turnaround

When using a FTZ, placing foreign (bonded) products in an FTZ does not require complicated warehouse entry procedures, and domestic merchandise may be admitted with a simple packing list. Specific merchandise ID is unnecessary. Weekly entry procedures significantly reduce paperwork and expense.

Storage

Imported merchandise may be stored for an uncertain or prolonged period of time, destined for various locations and may be exhibited for potential buyers. This allows cash flow and interest expense savings. Businesses may have sufficient quantity of merchandise available for market and potential buyers to examine U.S.

International Returns

A number of firms that export have a percentage of exports returned to the U.S. Customs duties are owed each time merchandise of foreign origin that has not been registered with Customs is returned. This further avoids the problem of American Goods Returned that are not American.

Avoidance of Quota Restrictions

Quota merchandise may be stored in a FTZ duty-free until the next quota period reopens.

Temporary Removal

Products may be removed from a FTZ for 120 days while under bond for repair or exhibition.

Tax Savings

In a contract or bonded warehouse, inventory taxes are levied on January 1^st of each year on all merchandise. In a FTZ, foreign merchandise is not taxed and domestic merchandise held for export is not subject to any state or local ad valorem taxes.

Avoid Fines & Penalties

A FTZ offers importers the unique ability to interact with their merchandise prior to Customs review, thus allowing for greater control over shipments, minimizing risks and acting as a final check point, allowing companies to avoid fines and penalties. Also, a FTZ is the only place where an importer con commingle foreign (bonded) and domestic goods.

Export Savings

U.S. domestic goods may be shipped into a FTZ and considered exported for the purpose of duty drawback and excise-tax rebates. No U.S. Customs duties are paid on merchandise exported from a FTZ.

Savings on Merchandise Processing Fees (MPFs)

FTZ importers may consolidate all shipments into one weekly entry, avoiding multiple fees.

Direct delivery to your facility

Customs inspectors visit your site; deliveries are not held up at a distant port of entry; containers remain sealed until the shipment reaches your facility. Special direct delivery procedures expedite the receipt of merchandise in company facilities, reducing inventory cycle time. Cargo insurance rates should be reduced, up to 40%, because imported merchandise is shipped directly to a FTZ.

Not in U.S. Customs Territory

FTZs are not in U.S. Customs territory; therefore, duty is paid only when imports are shipped into Customs territory. No duty is owed on in-bond, FTZ to FTZ transfers of FTZ merchandise. Inventory may be held in a FTZ without duty payment.

Savings on consumed, unusable, or not in use materials

Duties are reduced or eliminated on materials subject to defect, damage, obsolescence, waste, and scrap. Spare parts may be stored, returned, or destroyed without paying duty. Quality control inspections can identify substandard goods to be destroyed without duty payment. Materials consumed in FTZ processing are generally not subject to duties.

Savings on Non-Material Expenses

Duties are not owed on labor, overhead, or profit attributed to FTZ production operations. If the same production operation were done overseas, the value of labor, overhead, and profit would be subject to duty.

More choice on Duty Rates and Methods

FTZ users may pay the duty rate on component material or merchandise produced, whichever is lower. In some cases, the rate may be zero or “duty free.” The reduction or elimination of U.S. Customs duty is significant. Businesses may elect to freeze duty rates at the rate in effect when goods enter a FTZ. This is valuable when it is known that duty rates are scheduled to increase or when a manufactured product’s duty rate is higher than that of its components. First-in-first-out and foreign first methods are acceptable.

Under Customs Supervision

Because FTZs are under Customs supervision of procedures, the FTZ user saves on individual security expenses and insurance. Duty payable on FTZ merchandise need not be included on insurable value. Increased accountability can reduce problems with inaccurate inventory, receiving and shipment, and helps track waste and scrap.

Savings on Fees

FTZ users may pay harbor maintenance fees quarterly, creating a cash flow advantage. Users may be able to reduce Customs brokerage fees.

Savings on Machinery Duties

Machinery for use in a zone may be assembled and installed before duties are owed on either the parts or the finished product rate.

Reduction on Federal Laws

Merchandise may be admitted into a FTZ without being subject to a wide array of Federal laws that would otherwise prohibit the importation. Upon shipment into a U.S. Customs territory, the merchandise must meet all applicable requirements.

Ability to Adjust to Changing Laws

As U.S. laws and especially U.S. Customs laws change, location in a FTZ allows a firm greater flexibility in addressing these changing circumstances.

Better Ability to Compete

Inside FTZs, many companies are able to achieve such dramatic savings that they can effectively compete with manufacturing plants located outside the U.S.

Savings on Distribution

Freight carriers usually charge by weight or size. In many instances, partially disassembling an item enables a shipper to fit more items into a container. When a company ships parts in bulk for assembly in a FTZ, it can often lower its per unit transportation costs.