What is a Foreign-Trade Zone (FTZ)?
FTZs are secure, access-restricted Customs & Border Protection (CBP) privileged areas in or near a U.S. Port of Entry where merchandise both Domestic & Foreign may be Admitted for Storage, Manipulation, Manufacturing, Exhibition, Destruction, &/or Temporary Removal Duty-Free! Duty, certain Taxes & User Fees are only assessed on Merchandise that is Imported into the U.S. Commerce Territory for Consumption. Merchandise that is Exported out of the FTZ abroad is exempt from any Duty, Tax, or User Fees!
Within the U.S. yet outside Customs boundaries, FTZs are designated areas within the United States but considered to be outside the the U.S. for Customs purposes. Companies that utilize FTZs can defer, reduce or completely eliminate Customs duties on imported products & materials. FTZs are considered to be outside the U.S. Customs Territory. Merchandise held in an FTZ is subject to Duty only when it leaves the FTZ for Consumption in the U.S. market. Merchandise in an FTZ is not subject to any U.S. quota restrictions. Foreign products may be used for manufacture in an FTZ & the resulting completed product may still achieve the coveted "Made in USA" label.
Waste materials and damaged merchandise may be destroyed within the FTZ and avoid duties. Merchandise that never Enters the U.S. commerce (e.g., is used in the manufacturer of export products) is not subject to duties or excise taxes.
Merchandise may be stored with in a FTZ for an unlimited period of time. While in a FTZ, Foreign merchandise & also Domestic merchandise may be stored, sold, opened, examined, exhibited, assembled, disassembled, repacked, labeled, distributed, sorted, tested, mixed, graded, cleaned, combined with other merchandise, used in manufacturing or destroyed, duty-free!
FTZs make U.S. manufacturing and distribution more competitive and promotes more trade and jobs.
The FTZ Program was created in 1934 as part of Franklin D. Roosevelt’s “New Deal” Act, designed to stimulate economic development, promote international trade, and create U.S. jobs that would otherwise be lost to foreign competition. Since the passage of the FTZ Act in 1934, the FTZ Program has grown dramatically. Today, there are in excess of 200 General-Purpose Zones and over 400 Subzones in the United States. More than 3,000 companies utilize the Zones and take advantage of the benefits and flexbility offered by FTZ utilization.
Who Utilizes (Uses) FTZs?
Common FTZ Users (Zone Users) are Importers, Customs Brokers, Exporters, Freight Forwarders, Export Trading Companies, Shipping Lines, Trucking Companies, etc.
How can I benefit from FTZs? (Zone Advantages)
Zone Users can decrease their operating costs & increase cash flow savings by reducing, deferring or eliminating Customs duties, user fees, and excise taxes. Eliminate delays in Customs clearances & duty drawback by having shipments delivered directly to your business in the FTZ.
- Cash Flow Savings - Duty Deferral:
- Duties & Federal Excise Tax Deferred on Imports while Goods are in the FTZ.
- Inverted Tariff - Duty Reduction:
- Pay lower finished-product duty rate (Vs. higher individual component duty rates) on products manufactured in FTZ & Entered into U.S. Market.
- Cost of Money - Duty Elimination:
- No Duties on Re-Exports from FTZ.
- Avoid or Expedite Duty Drawback
- Duty Avoidance or Get Your Refund Faster under ZR Status in FTZ.
- Marking Duty Avoidance
- Avoid Extra 10% Duty on Unmarked or Improperly Marked Goods in a FTZ.
- Tax Exemptions
- Taxes are exempt on inventory & federal excise controlled goods ("Luxury Items").
- MPF Reduction - Weekly Entry
- MPF stands for Merchandise Processing Fee. It is a fee NOT duty, non-refundable, charged by Customs to recover administrative costs in the processing of Customs Entries (Customs Clearances). For medium to high volume importers, there can be significant pecuniary savings realized by our customers if they distribute through a FTZ.
- Greater Flexibility
- Importer/Exporter can touch & interact with Product prior to Customs' Review.
- Ease of Paperwork
- Domestic Product requires No Permit. Foreign Products is on an Admission (Not Entry) on CBPF-214 (e214 Available)
- No Bond Required
- Importer's Bond Not Required. Under FTZ Operator's Bond.
- High Security
- Federal Offense for Stealing from a FTZ
- Fine Avoidance
- E.g., Avoid fines in Mexico for Manifest Discrepancies &/or Marking Requirements in Spanish
- U.S. Quota Avoidance
- Avoid Absolute & Tariff Quotas while in FTZ
- Quality Control
- FTZ may be used in a quality assurance program to ensure that only merchandise meeting specifications is imported. Items not meeting specifications may be repaired, returned to the foreign vendor, or destroyed under Customs' supervision.
- Requirements - Export/Destroy
- Export or Destroy any Goods in Zone to satisfy any Government Agency Requirements
- Logistical Benefits (JIT Procedures):
- Firms in FTZs may be able to use streamlined Customs procedures (direct delivery, weekly entry, etc.)
- Reduce Transit Times
- Reduce Lead Times through ePTT procedures / Direct Delivery
- Manage Critical Inventory
- FTZ can offer a greater degree of flexibility for goods subject to just-in-time delivery constraints, quotas or marking requirements. Delays in Customs clearances can be minimizes through utilization of the FTZ.
- Country-Of-Origin Marking/Labeling
- Merchandise may be Admitted into the FTZ to be labeled to meet federal regulations. In addition, foreign parts Admitted into a Zone may be "substantially transformed" with domestic parts to produce a product which, under certain regulations, may be considered to be of U.S. origin.
- Weekly Entry - In-Bond/Export
- 1 Blanket Approval per week for Exports. Brokerage Savings.
- Blanket Permits
- File a Daily 214 for Admission or an Annual 216 for Manipulations/Manufacturing.
- Temporary Removal
- Remove Zone Goods anywhere in the U.S. for 120 days for testing, analysis, exhibition or other incidental operation.
- Indefinite Storage
- Storage in Bonded Warehouses is 5 Years. In a FTZ, it is unlimited (in perpetuity).