Benefits of FTZs - Kent Ottawa Muskegon Foreign Trade Zone

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Benefits of FTZs KOMFTZ #189 Important Links FAQ About Us Contact Us	Benefits of FTZs Types of FTZs A U.S. Foreign-Trade Zone (FTZ or Zone) is a designated area, which for Customs purposes, is considered outside the U.S. Nearly any imported merchandise can be brought into a Zone for almost any kind of manipulation, duty-free. A FTZ is a secure and enclosed area, operated as a public venture located in or adjacent to a port of entry. It is considered outside of the United States for purposes of Customs' Duty payments. Any foreign and domestic material or merchandise may be moved into a FTZ without being subject to U.S. Customs Duties on that merchandise. While in the FTZ, the merchandise may be stored, manufactured, repackaged, exhibited or combined with domestic goods to qualify for a lower duty. Duties can, therefore, be deferred until the merchandise leaves the FTZ and enters U.S. territory for domestic consumption. If merchandise is exported to a foreign destination, no Customs' Duty is levied. There are two types of FTZs: General-Purpose Zone: One or more central locations in which multiple users conduct a variety of business activities. Subzone: Established for an individual company for a particular purpose at their existing location. Can be established for firms whose activity cannot be accommodated in a General-Purpose Zone. Users of Subzones enjoy most of the same benefits as those in General-Purpose Zones. Through utilization of an FTZ, imported material avoids any Customs duties under the following scenarios: Any previously imported material re-exported. Rejected, scrapped, destroyed, waste, or returned-to-vendor material. Sales to companies operating in other U.S. FTZs. (There are nearly 2500 companies utilizing Zones and nearly 250 manufacturing Subzones.) RE-EXPORTS Merchandise that is imported into the U.S. for admission into a Foreign-Trade Zone and later re-exported from the Zone is never assessed any Customs duties. REJECT, SCRAP, AND "CONSUMED" MERCHANDISE Imported merchandise which is admitted into a Zone and then rejected, scrapped, or consumed in the Zone, is not assessed any Customs duties whatsoever. Duties are reduced significantly for all merchandise that is scrapped through a manufacturing operation in a Foreign-Trade Zone, and then sold from the Zone as commercial scrap. ZONE-TO-ZONE TRANSFERS Imported merchandise, which is admitted into a Zone and then shipped to another U.S. Foreign-Trade Zone, can be shipped duty-free to the receiving Zone with the receiving Zone's concurrence. As duty-free transfers, Zone-to-Zone shipments allow both the shipping Zone and the receiving Zone to reduce their duty exposure. Duties are eliminated completely on imported components that are transshipped through several Zones and eventually re-exported. DUTY AND EXCISE TAX DEFERRAL Companies that utilize some imported goods in their processes plus wholesale and retail businesses can defer the payment of duty and federal excise taxes on large shipments that are stored in the zone. Duty and excise taxes are paid when the goods are withdrawn and only on the quantities withdrawn. DUTY AND EXCISE TAX AVOIDANCE Companies that import components to be used in products for re-export can avoid the payment of duty and federal excise taxes altogether by conducting their operations within an FTZ and re-exporting from the zone DUTY REDUCTION Businesses can achieve lower customs duties in an FTZ or sub-zone by combining several components (either foreign or domestic) into a finished product with a lower duty rate. The lower rate is paid only on the percentage of the final value that the imported goods represent. This is the so-called "inverted tariff benefit. DUTY-FREE MANIPULATION OF IMPORTED GOODS Goods imported into the zone may be tested, inspected, re-packaged, re-labeled, aged, cured and exhibited; all without payment of duty. Again, duty and federal excise taxes are paid only when the goods are withdrawn from the zone, and only on the quantities withdrawn. DUTY AVOIDANCE ON WASTE, SPOILAGE AND OFF-FALL When manufacturing and inspection activities result in waste, spoilage or of fall of the imported materials, no duty is required on the percentage lost if the non-marketable materials are destroyed in the zone. QUOTA TIMING Goods in excess of any U.S. imposed quota may be held in the zone until the next quota period opens. Goods subject to quota may be manufactured into a product that is not subject to quota for importation. INVERTED TARIFFS When components are imported and admitted into a Foreign-Trade Zone, they can be manufactured into a new product for re-export or sale in the U.S. In these cases, the importer may elect to apply the finished product duty rate, or the component duty rate, whichever is lower. When the finished product rate is lower than the imported component rate, the importer can save the difference between the two rates. INVENTORY TAXES In states that assess taxes on business inventories, all imported merchandise, and even domestic merchandise when held for export, can be stored in a Foreign-Trade Zone without having to pay business inventory taxes. MERCHANDISE PROCESSING FEE Customs assesses a "Merchandise Processing Fee" (MPF) per entry which is calculated as 0.21% of the full declared value of the merchandise, up to a maximum of $485.00. Foreign-Trade Zones are only required to submit one entry per week for all shipments from the Zone, thus ensuring a maximum MPF of only $485 per week, reducing MPF costs to importers who currently file several entries per week, and pay more than $485 total per week for all entries. Could your company benefit from using a Foreign Trade Zone? Click here to find out.
	Last Modified Date: February 27, 2007
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