September 2021
What Are Foreign-Trade Zones (FTZs), and How Can They Benefit Importers and Exporters?
There are a lot of fees and expenses in the importing and exporting industry. It’s important to stay in compliance and pay those fees and expenses, of course. It’s the right thing to do, after all - and the fines for noncompliance are going to dwarf any savings that a questionable agency might enjoy by skirting the rules.
You’ll never be free of duties and taxes in this business, but there are certain opportunities you should be aware of that can help you to reign your costs in. Chief among these is the Foreign-Trade Zone. These zones were created by Congress in the FTZ Act of 1934. The Foreign-Trade Zones that this act established were designed to better meet the needs of American companies competing in a more and more competitive global economy.
Basically, FTZs are the United States version of the free-trade zones commonly found in other parts of the world.
Why Move Foreign and Domestic Merchandise Into Foreign-Trade Zones?
Foreign-Trade Zones are good for importers and exporters like you, and they’re good for the economy as a whole. So good, in fact, that the FTZ Board reported 193 active programs across the US in 2019. These programs employed about 460,000 people across about 3,300 businesses. When all was said and done, US Foreign-Trade Zones saw over $767 billion dollars in shipments imported. Why are FTZs so inviting? Well, they offer many unique benefits to importers and exporters throughout the country.
Foreign-Trade Zones are typically located in a United States Port of Entry. If not directly within the Port of Entry, they’ll be found adjacent to them. There are currently more than 230 FTZs and almost 400 subzones in the United States. Any merchandise entering an FTZ in the United States can be stored, sampled, salvaged, repackaged, processed, displayed, repaired, destroyed, manipulated, assembled, cleaned, relabled, mixed, or manufactured. That provides a lot of opportunity within these zones, with one glaring exception: retail trade.
In addition to offering improved inventory control and security, which can lead to improved compliance with US Customs and Border Protection, FTZs also offer Customs supervision that may help to reduce security and insurance costs. Logistics can be streamlined, and applicable Harbor Maintenance Fees are due quarterly, rather than upon arrival of imports. That’s just scratching the surface of FTZ benefits, though.
5 Major Benefits of Foreign-Trade Zones for Importers and Exporters
Let’s take a closer look at 5 prime benefits of using a Foreign-Trade Zone for importers and exporters.
FTZs offer duty exemption. When re-exporting from an FTZ, standard duties and quota charges do not apply. Any goods destroyed in the FTZ are free of duty as well, which is good news for manufacturers or those dealing in fragile goods.
Duties and federal excise tax are also deferred until imports are shipped back out of the FTZ and reenter the US Customs territory. There is also no limit regarding how long merchandise can be kept in an FTZ, regardless of whether or not duty is owed on the merchandise.
Manufacturers may also enjoy lower US Harmonized Tariff rates, rather than rates on foreign imports, if the finished product is entered into US Customs Territory. There is also no duty owed on overhead or labor in an FTZ.
Merchandise Processing Fees are lower, too, and are only paid on those goods that enter the US Customs territory. FTZ users only need to file a single entry for everything they ship from the zone in any given 7-day period. That saves money when compared to filing for every shipment.
Once Customs has given their approval, users can deliver imports directly to the FTZ. One entry can be filed for all entries and exports within a seven consecutive day window.
What Role Does Customs and Border Protection Play in Foreign-Trade Zones?
The US Customs and Border Protection (CBP) needs to approve all zones’ activation before any merchandise can be admitted. These are secure sites, and the CBP is in charge of transferring goods in and out of any given Foreign-Trade Zone. Additionally, the CBP oversees the collection of revenue in the FTZ.
Each FTZ is located in a port, and the Port Director of CBP responsible for that port is responsible for overseeing the activity within that Foreign-Trade Zone. All laws that the CBP would typically enforce relevant to FTZs are enforced by the Port Director for that zone. A team of FTZ coordinators also ensures compliance to all laws and regulations through reviews and periodic visits, and zone security is subject to particular scrutiny.
Don’t miss out on the benefits that secure Foreign-Trade Zones have to offer Importers and Exporters.
If you’re not leveraging the benefits of Foreign-Trade Zones in your importing and exporting business dealings, you’re leaving money on the table. These zones exist for one purpose and one purpose only - to help importers and exporters just like you maintain a competitive edge.
After the couple of years we’ve all had, you should take every benefit you can get.
If you have any further questions, don’t hesitate to contact the global logistics experts at JF Moran. We can answer any questions you may have regarding FTZs, their regulations, and how you can start enjoying the benefits they offer.