A Foreign Trade Zone (FTZ) is an area that falls outside of US Customs Territory. This means that any cargo imported and held in a FTZ doesn’t need to clear customs until it enters customs territory.
Here are a couple of pieces of information that most people don’t know about foreign trade zones!
- It is permissible to designate a portion of your facility as an FTZ vs the entire facility. This does not require a fenced off area. You need to make sure your inventory is located in your designated FTZ area. Inventory located in the FTZ may be co-mingled with non-FTZ inventory. (ie: Domestic Inventory)
- With authorization from the U.S. Foreign Trade Zone Board in Washington, D.C., merchandise in a zone may be assembled, exhibited, cleaned, manipulated, manufactured, mixed, processed, relabeled, repackaged, repaired, salvaged, sampled, stored, tested, displayed and destroyed before paying a single duty, tax, etc.
- Receiving an FTZ designation can take as few as 120 days!
It’s commonly understood that only companies who plan to manufacture in the Zone can reap benefits from a designation, but that isn’t quite true. The benefits from becoming an FTZ can be massive for many industries. Here’s a sneak peek at what that looks like.
- Supply Chain Efficiency:
- Removes Customs clearance at the time of arrival.
- Facilitate the movement of foreign products without waiting for entry summary scrutiny by Customs officers at the time of arrival.
- Duty Deferral and Elimination:
- Defer duties on average inventory during the first year, capturing capital costs in subsequent years.
- Enjoy duty elimination on exports, returns, scrap/waste/damaged goods
- Hold standing inventory in the FTZ without paying duties, resulting in substantial cash deferment, especially in the first year.
- Value Added and Production Equipment:
- U.S. Value added to merchandise in an FTZ may not be dutiable.
- Certain duty deferral to production equipment.
- Customs and Partner Government Agencies Labeling (PGA)
- Inspect and label PGA goods prior to entry into U.S. Customs territory.
- Eliminate your out of country holding facility and whatever duties/fees come with it by housing cargo mid-transport.
- Utilize your FTZ and eliminate housing in nearby foreign countries taking advantage of duty elimination when shipping via USA.
Times are changing. Interest rates are high, and banks are limiting extended lines of credit.
Every penny counts and right now taking control of your cargo is a huge step toward dominating your market. With complete control over your inventory management system, transportation procedures, and processing you may find yourself saving time, money, and fueling your internal economy.
Here at BDG, we are proud to say that we have successfully assisted several companies with FTZ Designations. If want to know more about if you qualify, were happy to offer a free feasibility study.