Foreign Trade Zone Overview FTZ Networks, Inc. Foreign Trade Zone No. 77, Site 19 4505 Delp Street Memphis, Tennessee 38118 Direct 901.857.5583 wcoleman@ftznetworks.com
What is a Foreign-Trade Zone? • A Secure Area Located in or near a Port of Entry • Legally Outside the U.S. Customs Territory • In a Zone – Merchandise may be assembled, exhibited, cleaned, manipulated, manufactured, mixed, processed, relabeled, repackaged, repaired, salvaged, sampled, stored, tested, displayed, & destroyed – Retail Trade is Prohibited
Establishment of Foreign-Trade Zones • To encourage and expedite U.S. participation in international trade • To foster dealing in foreign goods imported not only for domestic consumption but also for export after combining with domestic goods • To defer payment of duties only until goods are entered into the commerce of the U.S.
FTZ - A Trade Program • Concept unsuccessfully introduced in the U.S. Senate in 1894 • Successfully reintroduced in 1934 as part of The New Deal • H.R. 9322: “ to provide for the establishment, operation, and maintenance of FTZs in ports of entry of the United States, to expedite and encourage foreign commerce. ”
Types of Foreign-Trade Zones • General Purpose Zone – Often an industrial park or port complex whose facilities are available for use by the general public – 1 GPZ may be comprised of multiple sites – Serves as the sponsoring zone for the subzone • Subzone – Normally single-purpose sites when the operations cannot feasibly be moved to, or accommodated in a general purpose zone; often manufacturing plants or large distribution centers
Current Statistics • Over 250 Approved General Purpose Zone Projects – At least one in every state plus Puerto Rico • Over 500 Approved Subzones – Approximately 90% of activity (measured by value) in the FTZ program takes place in subzones. • In excess of $300 billion (in value) of merchandise is received at FTZs annually.
What Benefits do Zones Offer? • Increased flexibility with just-in-time delivery, quotas and reduced Customs delays. • Duty reduction/elimination on: – Manufacturing in the U.S. and selling domestically and internationally. – Duty Inversion, where the finished product has a lower duty rate than the individual components. • Duty-deferral until merchandise is shipped from the Zone into Customs territory. Merchandise may be held in a Zone indefinitely. • Ability to hold most merchandise subject to quotas until the quota opens and/or the ability to bring such goods into the Zone and subsequently re-export them.
What Benefits do Zones Offer? • Merchandise Processing Fees may be reduced by filing weekly entries. • Brokerage costs may be reduced by consolidating multiple entries into fewer entries or into a single entry. • Certain state, local & federal taxes are eliminated on foreign goods or material brought into the Zone • Transportation savings by having ability to change mode-of-transportation from premium to standard – I.e.- expensive (with high duty rate/cost), heavy product moving from air to ocean by building up inventory.
What can you do in an FTZ? A facility where goods may be: ● received ● stored ● manipulated ● manufactured ● exhibited ● examined ● tested ● calibrated ● destroyed ● exported ● repacked ● assembled ● mixed with domestic goods ● title transferred
Is an FTZ Right for You? IF YOU ANSWER “ YES ” TO ANY OF THE FOLLOWING, THEN LOCATING IN AN FTZ CAN HELP. Do you manufacture, assemble or process with imports? Do you regularly pay more than $485 per week in merchandise processing fees? Do you scrap, reject, destroy, waste, or return some of your imports? Do you export previously imported materials?
Duty Elimination Inbound Goods Quality Control Receiving Process May be blanket or Scrapped – Duty Free single transaction
Duty Elimination Assembled New Product “ B ” Imported Exported Product “ A ” Duty Free Potentially Dutiable EXPORT Import Duty Free
Duty Elimination or Imported Product “ A ” Potentially Dutiable EXPORT Import Duty Free Duty Free
Inverted Duty Rate Component C Component B 8% Duty 12% Duty Component C 5% Duty Component B Component A 5% Duty 10% Duty Component A 5% Duty
Merchandise Process Fees Companies outside an FTZ pay a .3464% merchandise fee per shipment. Minimum fee is $25.00 maximum fee $485.00. The maximum MPF paid is reached with a shipment valued at $140,000.00. In an FTZ the company lumps all shipments for a week into one filing resulting in a $485.00/week maximum fee. 15 shipments/week $485 x 15 = MPF $7275 $363,750/year Shipments into commerce, NO FTZ 15 shipments/week 1 entry filed at end of week. MPF $485 $24,250/year Shipments into commerce with weekly entry
Deferred Duty Product “ A ” Duty Owed Product “ A ” Duty Paid
Benefit & Duty Deferral Explanation Uncleared Cleared Merchandise Merchandise Distribution Center/Warehouse Shipping Duty paid on merchandise at time of clearance at Customs port of BEFORE FTZ entry OPERATIONS
Benefit & Duty Deferral Explanation Uncleared Cleared Merchandise Merchandise Distribution Center/Warehouse Formerly duty-paid merchandise being shipped from facility Foreign merchandise admitted into FTZ; no duties paid at Customs port of entry. Shipping duty- DURING FIRST paid merchandise using FIFO INVENTORY TURN inventory record-keeping; no OF ACTIVE FTZ duties paid at point of OPERATIONS shipment either.
Benefit & Duty Deferral Explanation Uncleared Cleared Merchandise Merchandise Customs entry now made on Distribution Center/Warehouse merchandise which was admitted into the Zone. Duty paid at this point. Distribution center full of uncleared AFTER FIRST INVENTORY TURN merchandise now.
Other Benefits • Lower administrative costs. • Lower security and insurance costs. • No time constraints on storage. • Shorter transit time – direct delivery. • Improved inventory control. • Informed customs officer
Summary • Significant reduction in MPFs (Merchandise processing fees) • Increased flexibility with just-in-time delivery, quotas and reduced Customs delays. • Duty reduction/elimination on: – manufacturing in the U.S. and selling domestically. – Duty Inversion - where the "set" has a lower duty rate than the individual pieces. • Duty-deferral until merchandise is shipped from the Zone into Customs territory. Merchandise may be held in a Zone indefinitely. • Ability to hold most merchandise subject to quotas until the quota opens and/or the ability to bring such goods into the Zone and subsequently re-export them.
Thank You FTZ Networks, Inc. Foreign Trade Zone No. 77, Site 19 4505 Delp Street Memphis, Tennessee 38118 Direct 901.857.5583 wcoleman@ftznetworks.com
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