A foreign-trade zone is a designated location in the United States that is outside of Customs territory for purposes of collection of US Customs duties and fees. Foreign goods and merchandise admitted duty-unpaid to a Foreign Trade Zone where they can be stored, processed, repackaged, transformed, destroyed or otherwise handled by company employees providing value-added work before they leave the FTZ (when a formal entry is filed) or exported. FTZ users enjoy many cost-saving benefits in cost of goods stored, produced/assembled in FTZ’s as well as cost reductions in transportation, distribution and other components of their supply chains.
In an FTZ, merchandise may be assembled, exhibited, cleaned, manipulated, manufactured, mixed, processed, relabeled, repackaged, repaired, salvaged, sampled, stored, tested, displayed and destroyed. Retail trade is prohibited.
The U.S. Foreign-Trade Zones Board is comprised of the Secretary of Commerce and the Secretary of the Treasury. The Board is chaired by the Secretary of Commerce. The Commissioner of U.S. Customs and Border Protection also plays a key role, as it did prior to its recent move from Treasury to the Department of Homeland Security, providing a position during the FTZ Board voting process with respect to customs security, control and resource matters. The Board has delegated action authority on most matters to a Committee of Alternates, which is composed of the Assistant Secretary of Commerce for Enforcement and Compliance and the Deputy Assistant Secretary of the Treasury for Tax, Trade, and Tariff Policy. Learn more about the FTZ Board.
The intent of the FTZ program is to stimulate economic growth in the U.S. It's designed to promote American competitiveness by reducing, deferring or eliminating duties on goods sourced overseas then brought into Zones for value-added work by U.S. employees, and thereafter entered into U.S. commerce or exported. The program is an incentive for firms to maintain and expand operations in the U.S. and entice foreign companies to establish U.S. operations.
Companies utilizing an FTZ are typically either a warehouse/distributor or a producer/manufacturer. Companies in the following industries are the top FTZ operators:
- Vehicles / vehicle parts
- Oil/Petroleum
- Electronics
- Machinery/Equipment
- Textiles/Footwear
- Pharmaceuticals
- Consumer Products
- Chemicals
Yes, General Purpose Zone and Subzone.
- General Purpose is often an industrial park or port complex which offers facilities for use by the general public. It must be located within 60 miles or 90 minutes from a U.S. Customs office.
- Subzones are normally single-purpose sites when the operations cannot feasibly be moved to/or accommodated in a General-Purpose Zone. Subzones can be located outside of the 60-mile/90-minute limit. Frequently, this is an established manufacturing or large distribution operation. 3PLs with a physical presence can also be Subzones.
Yes, FTZ to provide additional logistical benefits that include:
-
Improved Customs & Border Protection compliance - FTZs are recognized as a “best industry practice” by USCBP because they significantly improve supply chain security.
-
No limit on length of time merchandise can be in the FTZ
-
Reduced inventory cycle time
-
Lower security and insurance costs
-
Improved inventory control and streamlined logistics
-
Source component products at competitive prices
-
Production equipment - deferral
-
Zone-to-Zone transfers
If a company is interested in pursuing FTZ designation for its facility, the process under the FTZ Board's 2012 regulations is quick (as little as 30 days with a maximum time of 5 months, depending on the specific procedure used by the applicant) and straightforward. The GKCFTZ can provide guidance on specific procedure to follow and assist in preparing the application.
Any company interested in applying for production authority in a zone should perform a cost-benefit analysis to make sure that the FTZ benefits outweigh the costs of operating in the zone. The first step to request production authority is to submit a "Production Notification."
The standard timeframe for the FTZ Board to make a decision on a production notification is 120 days from submission. If the FTZ Board determines not to authorize certain activity at the end of the notification process, the applicant may choose to use the more extensive "application" process for production authority.
Companies should analyze the potential savings based on import volumes and value, customs and MPF fees, export volumes, scrap losses, potential for inverted duty and other elements. The costs to participate in the FTZ program will differ based on the size and nature of the FTZ operation. Costs include first year application and activation, personnel training costs, grantee fees and U.S. Customs Bond. If the company decides to move forward with an FTZ, there is an application and activation process that the GKCFTZ would support.