The U.S. government created the Foreign Trade Zone Act of 1934 as a way to motivate economic growth and development in the United States. What was a good idea then continues to offer advantages to importers and exporters today.
With a Foreign Trade Zone (FTZ), merchandise is under the security of U.S. Customs and Border Protection and not subject to U.S. duties or excise taxes. Applicable duties and taxes are paid when the merchandise moves out of the zone and into U.S. commerce. Duty and tax rates may change based on what happens to the merchandise while it’s in the zone.
Here’s a partial list of how an FTZ could benefit your business.
- Inverted duty – Parts and finished products have different duty rates. With an FTZ site, the manufacturer that imports parts and ships final goods to U.S. consumers can choose which duty rate is most advantageous.
- Inventory transfer – Duty deferral benefits are available when transferring product “in bond” from one zone to another, an advantage for firms with multiple FTZ sites or for stores with regional warehouses each holding an FTZ designation. It is possible to pay duty on the original value of the component to the first FTZ user, and not on the subsequent value.
- Weekly entry procedures – Zone users file only one Customs Entry per week, rather than one per shipment. We have a customer that saved nearly $200,000 in just four months because of this.
- Export savings – If a manufacturer produces and exports from a zone, CBP reasons that the goods never enter U.S. commerce and, therefore, are duty free.
- Scrap-, waste- or obsolete-part savings – If an imported part is scrapped and destroyed in an FTZ, it never officially entered U.S. commerce and no duty is paid.
Currently, there are over 200 Foreign Trade Zones (FTZs) located at port and interior locations across the country, and more are pending.