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,
• peration, 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

Receiving Process Inbound Goods

Quality Control

Scrapped – Duty Free

May be blanket or single transaction

Assembled New Product “B” Exported Duty Free Imported Product “A” Potentially Dutiable

EXPORT

Duty Elimination

Import Duty Free

Imported Product “A” Potentially Dutiable

EXPORT Duty Free

Import Duty Free

Duty Elimination

• r

Inverted Duty Rate

Component A 10% Duty Component B 12% Duty Component C 5% Duty Component B 5% Duty Component C 8% 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 Shipments into commerce, NO FTZ 15 shipments/week 1 entry filed at end of

• week. MPF $485

Shipments into commerce with weekly entry $363,750/year $24,250/year

Deferred Duty

Product “A” Duty Owed Product “A” Duty Paid

Benefit & Duty Deferral Explanation

Uncleared Merchandise Cleared Merchandise Distribution Center/Warehouse Duty paid on merchandise at time of clearance at Customs port of entry

BEFORE FTZ OPERATIONS

Shipping

Benefit & Duty Deferral Explanation

Uncleared Merchandise Cleared Merchandise Distribution Center/Warehouse Foreign merchandise admitted into FTZ; no duties paid at Customs port of entry. Shipping duty- paid merchandise using FIFO inventory record-keeping; no duties paid at point of shipment either. Formerly duty-paid merchandise being shipped from facility DURING FIRST INVENTORY TURN OF ACTIVE FTZ OPERATIONS

Benefit & Duty Deferral Explanation

Uncleared Merchandise Cleared Merchandise Distribution Center/Warehouse Distribution center full of uncleared merchandise now. Customs entry now made on merchandise which was admitted into the

• Zone. Duty paid at

this point. AFTER FIRST INVENTORY TURN

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