Foreign Trade Zone Overview FTZ Networks, Inc. Foreign Trade Zone - PowerPoint PPT Presentation

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