Advantages
What is an FTZ
FTZ Advantages
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Strategic Advantages
Operating in a foreign trade zone offers many strategic advantages that our competitors just can't match. Here are a few of the advantages
of using a foreign trade zone:
Inverted Tariffs
A Manufacturer has the option to pay duties on the components being used at time of admission, or defer duty payment until
final assembly or manufacture is complete. The tariff inversion may result in a lower duty rate or possibly eliminate duties all together.
Duty Exemption on re-exports
Without a zone, if a manufacturer or processor imports a component or raw material into the United States, it is required to pay the import
tax (duty) at the time the component or raw material enters the country. However, a Foreign-Trade Zone is considered to be outside the commerce
of the United States and the U.S. Customs territory. So, when foreign merchandise is brought into a Foreign-Trade Zone, no Customs duty is owed
until the merchandise leaves the zone and enters the commerce of the United States. Only then is the merchandise considered imported and the
duty paid. If the imported merchandise is exported back out of the country, no Customs duty is ever due.
Duty Elimination on Waste and Scrap
Inside an FTZ, an importer pays the Customs duty owed as material is brought into the United States. This is because the material is considered
imported at this point. If the processor or manufacturer is conducting its operations within a zone environment, the merchandise is not considered
imported, and therefore no duty is owed until it leaves the zone for shipment into the United States
Weekly Entry Savings
Weekly Entry can provide huge savings to Foreign-Trade Zone users. Under Weekly Entry procedures, the zone user files only one Customs Entry per week,
rather than filing one Customs Entry per shipment. Customs no longer has to process an entry for each and every shipment being imported into the zone,
and the Foreign-Trade Zone community no longer has to pay for the processing of each and every entry.
Companies located outside Foreign-Trade Zones that do not qualify for NAFTA pay a 0.3464% merchandise processing for each and every formal entry
processed by U.S. Customs. There is a minimum $25 processing and a maximum $485 processing fee per Entry, regardless of the duty rate on the
imported merchandise. The maximum processing fee is reached for Entries (shipments) with a value over $230,952. Companies often receive many
shipments over this amount.
Duty Deferral
Foreign-Trade Zones are outside the Customs territory of the United States, goods are not imported until they leave the zone. Therefore,
Customs duty is deferred until merchandise is imported from a Foreign-Trade Zone into the United States. So, instead of companies having
substantial capital tied up in Customs duties on their inventory, they have use of that money for other purposes.
Ad Valorem Tax Relief
The federal law that established the U.S. Foreign-Trade Zones Program allows companies to obtain exemptions from inventory taxes. Certain
tangible personal property is generally exempt from state and local ad valorem taxes. A small number of states assess local taxes on business
inventories. The Foreign-Trade Zones Act exempts most merchandise from such taxes in Foreign-Trade Zones.
There are many other substantial benefits that the Zones program has to offer manufacturers and distributors in the United States, but
the benefits listed are the key benefits that attract most companies to the Zones program. More and more companies look globally when
deciding to locate or expand a new manufacturing or processing facility. The Foreign-Trade Zones program plays an important role in providing
a level playing field when investment and production decisions are made. While the U.S. government might incur a reduction in Customs duty
revenue by the use of the Zones program, it more than makes up for it by the income tax it gains from the jobs created or retained. In
addition, local governments benefit from sales and property taxes.
The Foreign-Trade Zones program has proven to be a successful trade program by consistently creating and retaining jobs and capital
investment in the United States.
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