SUMMARY Foreign-trade zones, or FTZs, are physical areas within the United States that are treated by customs as though they were outside of the U.S. border. The creation of an FTZ must be federally approved by the Foreign-Trade Zones Board. This designation offers many potential benefits for warehousing/distribution and manufacturing operations. If your company:
...then you can likely benefit from a foreign-trade zone. FTZs help U.S. companies overcome competitive disadvantages stemming from U.S. trade laws and procedures. Within a Foreign-trade zone, companies are permitted to perform a number of procedures before the merchandise is charged duty. These procedures include sampling or inspecting merchandise (and destroying faulty merchandise without ever paying duty on it), storing and warehousing, re-labeling, repairing, displaying, assembling, manufacturing, and processing. Through membership in an FTZ, companies are allowed to overcome bureaucratic inefficiencies and streamline the import/export process. These steps allow companies to benefit from interest on capital by delaying duty payment and permitting goods in the zone to be used as capital against loans. FTZs also drastically reduce the number and aggregate costs of entry fees. Companies may perform manufacturing before passing through customs, thereby reclassifying the materials in an effort to avoid inverted tariffs, or avoid duty altogether on merchandise which is re-exported. FTZs also allow a quicker turnaround on drawback, reduced insurance costs, and the ability to hold goods for an extended period of time to work most effectively within quota limits. As a member of the Greater Mississippi Foreign Trade Zone, Tupelo/Lee County couples these FTZ benefits with a long-standing history of community support for manufacturers. With eight FTZ sites including over 5,881 acres of land, 2,780 developable acres, 15 million square feet of manufacturing space, 6.1 million square feet of warehouse/distribution space, and over a hundred companies already receiving the benefits of FTZ operation, Tupelo/Lee County provides not only the most beneficial import/export status, but also the leadership and cooperative spirit that have made us one of the foremost manufacturing locations for over a half century. We encourage you to look over the benefits that we have to offer, utilize the FTZ worksheet to see how Foreign-trade zone status can specifically help your company, and take a look at some of the FTZ sites and buildings we have to offer. If you have any questions please contact Shane Homan at (800) 523-3463 or firstname.lastname@example.org. Or you may contact Greg Giachelli at the same number, or via email at email@example.com. FOREIGN-TRADE ZONE BENEFITS Relief from inverted federal tariffs – users pay the lower duty rate of either the imported material or the finished product manufactured in the zone Dutiable inventory deferral – no duty is paid until the merchandise enters the commerce of the United States No federal duty on re-exports – U.S. duty is not paid on merchandise exported from the zone (except to Canada or Mexico) Federal duty rate reduction or elimination on scrap – U.S. duty is not paid on merchandise destroyed in the zone Direct delivery – a procedure where the in-bound merchandise is delivered directly to the receiving dock. The driver need not report to Customs. The zone operator informs Customs of the receipts on the next business day. Weekly entry – multiple shipments from the zone are reported on a single Customs entry each week Reduction in federal merchandise processing fees – each Customs entry is charged a merchandise processing fee of 0.21% on the value of goods within the entry with a fee cap of $485 or $230,952 worth of goods. The weekly entry limits your entries to a maximum of 52 per year. Reduction in personal property taxes – since imported goods, as well as finished goods manufactured and held in a zone for exportation, are considered to be in international commerce, they are not subject to state and local ad valorem taxes No federal duties on labor, overhead and profit – in calculating the dutiable value on foreign merchandise removed from a zone, users are authorized to exclude zone costs of processing or fabrication, general expenses and profit. Therefore, duties are not owed on labor, overhead and profit attributed to production in an FTZ. Zone to zone transfers – a vendor located in one FTZ may sell goods to a buyer in another zone anywhere in the U.S. and transfer those goods with no duty paid on the goods. International returns – No duty is paid on obsolete, discontinued, surplus, damaged or any other goods in an FTZ that are returned to their international source. COST SAVINGS ESTIMATE WORKSHEET To assist you in estimating your cost savings, we have provided an FTZ Cost Savings Worksheet Packet which can be downloaded by clicking on the links below. Download FTZ Worksheet Packet with instructions and sample completed worksheet.