What are the benefits of using a Foreign Trade Zone?

Foreign-Trade Zones (FTZ) are secured, designated locations around the United States in or near a U.S. Customs Port of Entry where foreign and domestic merchandise is generally considered to be in international commerce and outside of US Customs territory. As a result, activated businesses in an FTZ can reduce or eliminate duty on imports and take advantage of other benefits to encourage foreign commerce within the United States. The benefits associated with zone use will vary depending upon the type of operation involved and authority granted by the Foreign-Trade Zones Board and Customs. Zones may provide some or all of the following benefits: duty exemption duty deferral, duty reduction or inverted tariff, merchandise processing fee (MPF), reduction, streamlined logistics, quota avoidance. Other benefits: better inventory control and security lead to better compliance with CBP requirements; customs supervision may result in lower security and insurance costs. Duty payable on FTZ merchandise does not need to be included in the calculation of insurable value, again lowering insurance costs. Reduced transportation costs may also result from streamlined logistics. Harbor Maintenance Fee is paid quarterly instead of at the time imports arrive. Merchandise Processing Fees are paid at the time goods leave the zone.

From large manufacturers to individuals, any size importer or exporter can take advantage of a foreign-trade zone (FTZ). Utilizing an FTZ can significantly reduce costs from customs duties, taxes and tariffs; improve global market competitiveness, and minimize bureaucratic regulations. Outside the United States, there are many other names for FTZs, including free, foreign, or export processing zones. Below are some benefits of using an FTZ: Deferral, reduction, or elimination of certain duties; Relief from inverted tariffs; Duty exemption on re-exports; To take advantage of an FTZ, companies need to be able to track their inventory; trace manufacturing and production orders; determine whether material came from domestic or international sources, and classify goods for duty deferrals and reductions. How much a company saves by using an FTZ depends on the size of the company and its business model. Reducing merchandise processing fees alone can save a company a substantial amount of money.