28 Jan Benefit ABC’s of the FTZ
When is a foreign country not a foreign country for the purposes of customs, manufacturing, and duty assessment? When it’s actually here in the United States, is called a Foreign Trade Zone (FTZ) and allows U.S. companies to perform a wide spectrum of activities, all of which can delay payment of duties, reduce costs through a single entry fee, and cap Merchandise Processing Fees. As a bonus, it allows goods of multiple classifications and ad valorem duties to be imported, manufactured, and be removed, or “exported,” as a different finished product at an even lower duty rate, or even potentially duty-free.
Foreign Trade Zones (FTZ) are secure and cost-effective options for importers who need cargo held indefinitely or have cargo that will undergo an alteration such as manufacturing, mixing, assembly or repair. Most merchandise can be imported into an FTZ without formal customs entries or duties, which aren’t required until the goods enter the commerce of the United States. In a specifically designated location under FTZ rules, goods are still considered “international commerce” which means duty can be deferred until the goods leave.
There are a number of benefits of using an FTZ:
- Duty deferral – Duties aren’t due until the goods leave the FTZ.
- Inverted tariff relief – if components or raw materials have a higher duty than finished goods, an FTZ allows manufacturers to pay the lower cost. Further to this, manufacturers won’t pay duties on waste, scrap, and loss as the finished goods are all that leave the FTZ as US consumer goods.
- Duty-free re-exports – If goods are entering the US just to be reexported to another country (Canada and Mexico being exceptions with their own rules and duties) an FTZ can act as an international point because technically the goods aren’t in the US and don’t have to pay duties.
- Single entry filings – using an FTZ means that an importer only needs to file a single Customs entry each week instead of filing one for each shipment.
- Inventory storage – Goods can be held at an FTZ for an indefinite period so cargo with quota restrictions is handled and duty is deferred permanently if the goods never leave.
- Enhanced security and tracking – FTZ’s by their very nature are tightly controlled.
- Easier identification and classification – this can be done at the FTZ and not at a port or Customs control location.
While there are exceptions to every rule, a Foreign Trade Zone offers a number of valuable solutions across 193 active FTZ programs across the United States, at approximately 3,300 businesses, and importing over $767 billion in shipments. If you’re interested in learning more about how your cargo can benefit from adding an FTZ to the routing, reach out to your Future Forwarding representative today to discuss the benefits available to you.