Ftz Benefits
LogistiCenters that are designated a Foreign Trade Zone (FTZ) have distinct advantages over business parks without the designation. All cargo entering the U.S. from foreign countries is subject to inspection and clearance by U.S. Customs and payment of duty. One major exception is a FTZ, a specially designated area within a U.S. Customs Port of Entry jurisdiction, which is considered to be outside the customs territory of the United States.
A Port of Entry is a place at which a U.S. Customs officer is authorized to accept merchandise, collect duties and enforce various provisions of customs and navigation laws. Within this designated area, foreign and domestic merchandise may be stored, repackaged, manipulated, manufactured, relabeled, repaired, exhibited, cleaned, processed, assembled, destroyed or otherwise altered or changed and re-exported without the usual formal customs entry procedures and payment of duties and taxes. For merchandise that is sold within the U.S., no formal customs entry procedures are required and no duties are paid as long as the merchandise stays within the FTZ.
The FTZ designation saves LogistiCenter tenants money on international cargo shipments and manufacturing and distribution operations, providing all of the advantages of an international gateway. For example, if a company at LogistiCenter imports a container of computer chips from Japan, assembles them into products here – thereby creating local jobs and increasing tax revenues – then re-exports those products, the company pays no customs duties. If the products are distributed here, thereby entering the commerce of the U.S., then they are subject to customs duties; however, that duty is significantly less than were the company to import the chips by conventional means and pay customs upon entry.
Furthermore, if a company imports a raw material like rolled steel from China, uses it to manufacture a product and, in the process, generates tons of scrap steel shavings, the weight of those shavings will be deducted from the duty a FTZ company ultimately pays when its products are sold in America.
FTZ designation requires a three-step process for landowners like DP Partners – sponsorship request to the grantee; application to Foreign Trade Zones Board in Washington, D.C.; and board approval. LogistiCenter tenants that import high volumes of raw materials, components or merchandise from foreign countries will benefit the most from our FTZ designation. Once they move into the park, they will contact the grantee and the U.S. Customs & Border Protection agency and request FTZ activation. It’s a complicated process, but well worth it. Among the benefits of the FTZ are the following:
Deferral of Duties — Customs duties are paid only when and if merchandise is transferred into U.S. Customs and Border Protection territory. This benefit equates to a cash-flow savings that allows companies to keep critical funds accessible for their operating needs while the merchandise remains in the zone. There is no time limit on the length of time that merchandise can remain in a zone.
Reduction of Duties — In a FTZ, with the permission of the Foreign-Trade Zones Board, users are allowed to elect a zone status on merchandise admitted to the zone. This zone status determines the duty rate that will be applied to foreign merchandise if it is eventually entered into U.S. commerce from the FTZ. The process allows users to elect the lower duty rate of that applicable to either the foreign inputs or the finished product manufactured in the zone. If the rate on the foreign inputs admitted to the zone is higher that the rate applied to the finished product, the FTZ user may choose the finished product rate, thereby reducing the amount of duty owed.
Elimination of Duties — No duties are paid on merchandise exported from a FTZ. Therefore, duty is eliminated on foreign merchandise admitted to the zone but eventually exported from the FTZ. Generally, duties are also eliminated for merchandise that is scrapped, wasted, destroyed or consumed in a zone.
To learn more, visit www.naftz.org.
