Oct 13, 2020 | Industry
Foreign trade zones, typically centralized around major international airports, seaports, or national frontiers, are special economic zones wherein goods and merchandise are permitted to land, be repackaged, modified, manipulated, re-labeled, further manufactured, and re-exported under specific regulations without Customs authorities stepping in.
Obtaining FTZ status offers several benefits, helping global shippers maximize their savings and shrink down their operational costs. In addition to cost savings, FTZs also speed up Customs clearance and eliminate tedious paperwork. Plus, an FTZ offers warehousing options, storage, distribution facilities, manufacturing, consumption entry, and re-export operations. However, as an FTZ operator, it is critical that you take customs compliance seriously to avoid potential penalties or sanctions.
Once approved by Customs, imports may be directly delivered to the zone. You can also request permission to break and affix Customs seals as part of your FTZ application. Plus, as an FTZ operator, you benefit from massively streamlined filing procedures. That means that you can file a single entry in your ABI software for ALL goods shipped from a zone in a consecutive seven-day period instead of one entry file for each shipment (excluding merchandise subject to live entry). What’s more, goods destined for an FTZ are not delayed at the port for Customs because they are given priority for pier-side movement.
When you receive FTZ status, you are exempt from duties and quota charges on re-exports to Canada and Mexico under USMCA. Plus, you don’t pay duty on goods that are destroyed in your FTZ zone, which can benefit you particularly if you deal in fragile or perishable goods.
What’s more, imports that are typically subject to quota can be stored within a Foreign-Trade Zone even once a quota has been reached (with some exceptions). This can give you and your customers greater access to volume discounts or time-sensitive deals.
Another FTZ benefit is deferred duties and federal excise tax on imports - until they leave the zone and enter the U.S. Customs territory. Merchandise is permitted to move in-bond, and Zone-to-Zone transfers are allowed without payment of duty. You also gain the freedom to store foreign goods in a zone indefinitely, regardless of whether it is subject to duty or taxation.
If you are manufacturing goods within your FTZ and those goods have a lower US Harmonized Tariff rate than the rates on foreign inputs, the finished product can enter the U.S. Customs territory at a reduced duty rate. Plus, there is no duty owed on the labor or overhead costs that are attributable to the manufacturing operations. Also, you will only owe MPF on goods entering the U.S. Customs territory.
Download the new white paper about Foreign Trade Zones!