FTZ Essentials
What is a Foreign Trade Zone?
Foreign Trade Zones (FTZs) are federally designated sectors of land that while located within the United States are considered to be outside US Customs Territory. Their establishment provides distinctive customs-related avenues and support to U.S. businesses engaged in international trade-related activities.
There are two types of FTZs:
- General-purpose zones involve public facilities that can be used by more than one firm, and are most commonly ports or industrial parks.
- Subzones are sponsored by general-purpose zones, but typically involve a single firm's site which is used for more extensive manufacturing/processing or warehousing/distribution that cannot easily be accomplished in a general-purpose zone.
Who Can Use a Foreign Trade Zone?
Any company with facilities in the US can utilize an FTZ; however establishment of an FTZ does have certain criteria:
- General-purpose zones must be within 60 miles or 90 minutes of a port of entry and should be in close proximity to transportation corridors and areas of economic development with a demonstrated interest in international trade.
- Subzones may be located throughout Georgia if local U.S. Customs and Border Protection (USCBP) concur with the request. Since USCBP has oversight of FTZs, the subzone location must be within a reasonable distance as determined by USCBP.
- Any type of zone request should be based primarily on benefit to the local economy
What are the Primary Benefits of a Foreign Trade Zone?
Participation in the FTZ opportunity enables companies to decrease customs costs, by lowering averting or deferring duties on products assembled or distributed in, or exported from the United States. Specifically benefits include:
- Relief from inverted tariffs—In certain instances, there are import duty relationships that actually penalize companies for making their product in the United States. This occurs when a component item or raw material carries a higher duty rate than the finished product. The FTZ alleviates this problem by allowing companies utilizing the FTZ opportunity to choose to pay duty either on raw materials, or a finished product, whichever duty is lower.
- Duty exemption on re-exports—As FTZs are considered to be outside the U.S. Customs territory when foreign merchandise is brought into an FTZ no Customs duty is owed until the merchandise leaves the zone and enters the commerce of the United States. If the imported merchandise is exported back out of the country, no Customs duty is ever due. This opportunity also eliminates duty on waste, scrap and yield-loss associated with materials brought into the US, but that are discarded and not sold within the country.
- Weekly Entry Savings— Rather than filling a Customs Entry per every shipment of imported of goods, a company utilizing the FTZ opportunity only need file one Customs Entry per week, thus reducing administrative and processing costs.
