Foreign-Trade Zone Benefits for Business
Duty Deferral: Customs duties are only paid when and if the merchandise leaves the zone and enters the commerce of the U.S. This results in cash flow savings allowing companies to keep critical funds available for operation while the merchandise remains in the zone. Unlike bonded warehouses, there is no limit on the length of time merchandise can remain in a zone.
Duty Reduction: For merchandise manufactured in a zone, a company may request and elect to pay the lesser duty of the finished product or its foreign components. If the rate on the foreign inputs is higher than the rate of the finished goods the FTZ user may elect to pay the finished product rate therefore reducing the amount of Customs duty.
Duty Elimination: No customs duties are due on merchandise exported directly from the FTZ. Duty can also be eliminated on goods destroyed in an FTZ, waste or scrap.
Reduced Merchandise Processing Fees: Weekly entry is a benefit unique to FTZs allowing the zone user to file only one Customs entry per week, regardless of the number of shipments received, providing economies to both Customs and FTZ users. Customs no longer has to process an entry for each and every shipment and the FTZ user only has to pay the merchandise processing fee weekly. This can translate into significant savings for companies receiving multiple shipments per week.
Operational Efficiencies: Users may apply for Direct Delivery with Customs, which allows containers to be delivered from the terminal without prior approval of the admission from Customs, further reducing the time to access their imports.
Security & Inventory Management: The inventory and security requirements of an FTZ, while extensive, improve inventory management processes and reduce the risk of theft; potentially decreasing insurance premiums. The FTZ program is considered a best practice by the Customs-Trade Partnership Against Terrorism (C-TPAT) program.
Zone to Zone Transfers: Merchandise can be moved from one Foreign-Trade Zone to another in-bond without the duties paid. Customs duties may be deferred until the product is removed from the final zone and enters the commerce of the U.S.
Inventory Taxes: Tangible personal property held in an FTZ may be exempt from state and local ad valorem taxes.
Quotas and Safeguards: U.S. quota/safeguard restrictions do not apply to merchandise admitted into a zone but they will apply when the goods subsequently enter into U.S. Commerce. Quota merchandise can be stored in an FTZ so that when the quota opens the merchandise can be immediately shipped.
Labor, Overhead and Profit: To calculate the dutiable value on foreign merchandise removed from a zone, costs of processing or fabrication, general expenses and profit are excluded. Therefore Customs duties are not owed on labor, overhead and profit attributed to production in an FTZ.