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Understanding Foreign-Trade Zones: Benefits and Opportunities for Businesses

A Foreign-Trade Zone (FTZ) is a designated area within the U.S. that allows goods to be imported and processed without Customs duties until they leave the zone. Businesses can utilize FTZs for distribution, storage, testing, assembly, and manufacturing, resulting in cost savings through duty deferral, elimination, and reduction. By strategically managing imports, companies can optimize their supply chain, reduce costs, and enhance competitiveness. Learn how FTZs can offer significant financial benefits for your business operations.

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Understanding Foreign-Trade Zones: Benefits and Opportunities for Businesses

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  1. What Is an FTZ? Trey W. Boring, Sr. Vice President IMS Worldwide, Inc. Consultant to the City of West Memphis, Arkansas FTZ #273

  2. What Is an FTZ? • An area inside the United States that is designated as being outside Customs Territory. • Where items are brought into the Zone duty free. • Where Customs duty is determined when the merchandise leaves the Zone.

  3. What Is a Zone Site? • An Industrial Park. • An Industrial Development Inside a Port or Airport. • A Company’s Facility.

  4. What Can I Do in an FTZ? • Distribute • Store • Test and Inspect • Repack • Assemble • Repair • Manufacture

  5. How Do I Make Money in an FTZ? • Duty Deferral • Duty Elimination • Duty Reduction • MPF Savings

  6. Duty Deferral • Duty is not paid when an item enters the Zone. • An item enters the Zone in January. • Duty is paid when the item leaves the Zone. • The item leaves the Zone in April. • Four months of duty deferral.

  7. Product A Duty Owed Received January Foreign-Trade Zone Shipped April Product A Duty Paid

  8. Duty Elimination • Testing and inspection is conducted in the Zone duty free. • All rejected and destroyed items are duty free. • Exports are duty free. • All items exported from the Zone are duty free.

  9. Foreign-Trade Zone Inbound Goods Inbound Goods Quality Control Receiving Process Scrapped Duty Free

  10. Product A Exported Duty Free Export Imported Product A Foreign-Trade Zone

  11. Duty Reduction • For manufacturing Zones. • The Zone allows a company to choose the lowest duty rate associated with its components and finished product(s). • A company imports 3 components. • A has a duty rate of 10%. • B has a duty rate of 9%. • C has a duty rate of 8%.

  12. Duty Reduction • The company’s finished product has a 5% duty rate. • The company will pay for the value of the components at the finished product rate. • A from 10% to 5%. • B from 9% to 5%. • C from 8% to 5%. • This reduction means a savings of 5% to 3%.

  13. Foreign-Trade Zone Final Product 5% Duty Rate Component A 10% Duty Rate Manufacturing Process Component A 5% Duty Rate Component B 9% Duty Rate Component B 5% Duty Rate Component C 8% Duty Rate Component C 5% Duty Rate

  14. Merchandise Processing Fee Savings • Each entry into the United States is assessed a Merchandise Processing Fee (MPF). • Foreign-Trade Zones are allowed one entry per week. • The MPF is collected on that one entry.

  15. 15 shipments per week. MPF $7,275 Shipments into commerce Foreign-Trade Zone 15 shipments per week; one entry filed at end of week. MPF $485 Foreign-Trade Zone Shipments into commerce with weekly entry.

  16. IMS Worldwide, Inc Foreign-Trade Zone Consultants Over 197 Projects Completed Nationwide Rated #1 in Customer Service for over 30+ years

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