If you do business internationally, the Foreign-Trade Zone (FTZ) program might save you time, money and inefficiencies. Depending on the company and the type of activities you wish to do, benefits to the FTZ program might include these and other benefits:
Duty Deferral or Duty Aversion – Imports may be admitted and held in a foreign-trade zone without paying U.S. Customs duties. Customs duties are paid only when imported merchandise is shipped into U.S. Customs territory. This benefits the cash flow operation of the business. Items leaving the U.S. are never subject to import taxes. Items can be transferred between FTZs without being subjected to taxes.
Inverted Customs Duty Savings – FTZ users can pay the duty rate applicable to either raw materials or the finished product manufactured from the raw materials, depending upon which is lower.
Weekly Entry – Provides the zone user with the ability to operate their business 24/7 and file one Customs entry per week, rather than per shipment, saving merchandising processing fees. Filings also are generally electronic for quicker processing.
Merchandise Processing Fee (MPF) – The Weekly Entry reduction translates into significant savings in MPFs over the course of a year. The maximum weekly entry is capped at $485. For a company not operating in a zone, it must pay an MPF for each individual entry.
U.S. Quotas – Most merchandise may be held in the FTZ, even if it is subject to absolute quota restrictions. When the quota opens, the merchandise may be immediately shipped into the U.S. Customs territory. Items can be stored indefinitely in a FTZ unlike a bonded warehouse.
Security – The FTZ is subject to Customs supervision and security procedures, saving you, the FTZ users, expenses for security and insurance.
Harbor Maintenance Fee – Fees are paid quarterly on merchandise admitted in the FTZ, not on U.S. Customs entry.
Inventory Control – FTZ operations require careful accounting on receipt, processing and shipment of merchandise. Firms find that the increased accountability cuts down on problems with inaccurate receiving and shipping as well as waste and scrap.
Consumed Merchandise – Merchandise consumed during processing in the FTZ is generally not subject to Customs duties.
Inventory Taxes – By federal statute, tangible personal property imported from outside the U.S., and tangible personal property produced in the U.S. held in a zone for export are not subject to state and local ad valorem taxes. Most state and county tax authorities exempt all merchandise in the FTZ from inventory tax.
Exhibition Merchandise – May be held for exhibition without Customs duty payments. Many companies use FTZs as display areas for merchandise and machinery.
Reduced Insurance Costs – The insurable value of merchandise held in the FTZ need not include the Customs duty payable on the product. Therefore, insurance costs should be less.
Country of Origin Marking and Labeling – No country-of-origin labels are required on merchandise admitted to the FTZ, saving a complicated procedure and up-front expense. If needed, the labels can be applied in the FTZ.
Transfer of Title – Title to merchandise may be transferred in the FTZ, as long as there is no “retail” sale. The global supplier can own it until it is shipped just-in-time to local manufacturers.
Direct delivery – The opportunity for foreign merchandise to be transported in-bond directly to the zone user’s facility without Customs clearance at the first port of unloading, and without the in-bond carrier needing to report to the local Customs office prior to the delivery of the goods to the zone site.
Indefinite Storage – Allows for any size or quantity of merchandise to be placed in a foreign trade zone and stored for an indefinite period of time.
No Quotas – Foreign goods brought into a foreign trade zone are not regulated by quotas. Zone users can bring in bulk shipments and store quota goods in a zone until the next quota period allows importation and distribution into the United States, while also deferring the duty on those goods until the actual importation occurs.
Use these benefits to save cost or time for your business! Contact us immediately so we can help you gain access to the program!
See example numbers related to the value of these benefits here Savings Examples & Calculator.
The costs of establishing and operating a foreign trade zone will vary for each company, depending on its size and specific needs. The initial costs not directly associate with the Grantee that a company should consider before continuing with an application or activation include: cost-benefit studies and associated costs, initial investment in Customs-compliant software, any physical security modifications to the property requested by Customs, consultant and/or legal fees, and other related costs.
The fixed charges associated with the application and ongoing operation of a foreign trade zone through the Foreign-Trade Zone program, as administered by the Grantee, are made public through a Zone Schedule and available for review on the U.S. FTZ Board website. An initial application charge is required only for specific applications, as described in the Zone Schedule. The monthly charges to operate a zone are based on active square feet, as reflected in the original application and subsequent modifications. To learn more about the Grantee charges, please contact INzone.
If your company is not currently able to undertake the cost or burden of becoming an Operator, you may consider becoming a User instead. The costs to become a User of a zone through an existing Operator will vary depending on the Operator chosen. You must contact the Operator directly to receive a quote on the costs of becoming a new User. To receive a list of Operators that might be able to offer services as a third-party, please contact INzone.