Foreign Trade-Zones Benefits
FOREIGN-TRADE ZONE BENEFITS
With 296 Zones established throughout the U.S., this federal program offers importers, manufacturers, retailers and third-party service providers with cost-saving benefits and an expedited supply chain. The following are the key benefits that can be realized by operating within an FTZ:
- Weekly Entries – 1 per week, versus 1 per bill of lading
- Duty Free Export – including AD/CVD duties
- Duty Deferral until goods enter U.S. Commerce
- Inverted Tariff benefits for manufacturers
- Best Practices in Supply Chain Security
- Improved Supply Chain Velocity – 1-2 days faster receipt
- Huge Tax Savings in Arizona, Texas and Kentucky
IMS Worldwide, Inc. has been active in the FTZ Industry for 40 years. We assist Grantees, Zone Operators, Zone users and third-party logistics providers/brokers in defining the benefits of establishing the Zone and providing best-practices applications, activations, operator training and procedures that pass all audit requirements the first time. IMSW is an internationally recognized authority on the establishment, marketing and operation of Foreign-Trade Zones, providing sound advice, application and activation assistance to Grantees on coastal and inland ports nationwide.
Our Team provides the following Zone services and can provide them in any combination to suit the client’s needs:
- Magnet Site or Expansion Applications (to add or modify an industrial park)
- Usage-Driven or Minor Boundary Modification Applications (to add a company-specific location)
- Subzone Application (to add a company specific location or locations within a Zone)
- New Zone Formation (create new Zone projects in unserved or underserved markets)
- Feasibility Studies (pre-application work to determine benefits and demand for new Zone or site locations)
- Activation Assistance and Operator Training (Provide assistance and training to the Zone User to move designated site to operational CBP activated status)
- Zone Audit/Reviews (provide operational Zones with audit and review services to determine compliance levels and recommend actions to implement)
IMSW has successfully applied for and secured nearly 300 FTZ projects across the U.S. These manufacturing, production or distribution centers not only provide importers or logistics service providers with economic and security benefits, but they also provide the communities with a much more stable employment situation. Because of the commitments made to the location or community, companies who operate FTZs are more likely to retain jobs and benefits to the local community. Of all General-Purpose FTZ projects that IMSW has been involved with, our activation ratio is over 85%. The nature of the industry indicates this level of success is remarkably above standard. Bottom line: our FTZ projects work. They yield the desired results for the Grantee, industrial park developer and Zone user.
In IMSW’s latest new Zone project, which was created as a third Zone Project within a Port of Entry, IMSW has achieved a huge success. This Zone was evaluated by Elliot Pollack and Associates as part of an Economic Impact Study. Their findings were as follows: “The full and total economic impact of this Zone on the community and its citizens demonstrates a projected economic benefit of over $1 Billion in economic impact based on the first 5 years of operation and projected 5 years to come.” Again, IMSW Zones work!
How to Use Foreign-Trade Zones
The U.S. Foreign-Trade Zones (FTZ or Zone) program was created by the FTZ Act of 1934, in order to “expedite and encourage foreign commerce” in the United States. For a number of years, the program was largely ignored, and by 1970, there were only seven FTZs in the country. With the dramatic increase in import volumes and a better understanding of the advantages of the FTZ program, Zones have become much more popular. Today there are 296 FTZs within the nation.
By definition, an FTZ is a government-designated site where foreign and domestic materials remain in a kind of international commerce limbo. While the goods remain in the Zone, the materials may be stored, manipulated, mixed with domestic and/or foreign materials, used in assembly or manufacturing processes, or exhibited for sale without triggering the payment of U.S. Customs and Border Protection (CBP) duties and excise taxes.
Imports may flow directly into the Zone and be held there indefinitely duty free. Duty is assessed only when those goods are shipped out of the Zone and into the United States marketplace. However the most important new benefits are those that result in supply chain efficiencies and velocity improvement, while cutting costs from the Supply Chain. These new benefits are known as Weekly Entry and Direct Delivery. In the State of Arizona there is an additional state defined tax benefit further detailed in the section below.
- Weekly Entry was added to the FTZ benefits stream in the year 2000, by the Trade and Development Act. This benefit allows the importer to file a consolidated entry to CBP instead of the regular “entry per Bill of Lading” that normally occurs in shipping. By reducing the number of CBP entries, huge economies of scale can lower an importer’s internal paperwork processing costs and reduce the fees paid to CBP for each entry. This fee reduction can be $200,000, $300,000 up to $1 Million of savings annually for a large box, Distribution Center (DC) operator. The cost savings are so significant that the FTZ program is now being used by 45 of the top 100 importers in the U.S.
- Direct Delivery is a CBP procedure, only allowed in an FTZ. This benefit gives the users/tenant the ability to “Sign for” CBP upon receipt of goods that normally have to go to another location for signature, BEFORE the goods can be delivered to the DC. With Direct Delivery, the importers can cut out 1 – 2 days of inbound time on their receipt of goods. This is being proved out every day by Huffy Bikes, Black & Decker, Skechers, and other importers who have announced publicly that they are receiving improved supply chain velocity within their FTZ
FTZs can offer a number of benefits to importers, including:
- Eliminating delays in customs clearance. This is particularly important in this time of unprecedented longer supply chains, port security and continued port congestion.
- Eliminating duty drawback. Goods that are imported and stored in an FTZ may be re-exported without ever incurring duties. This eliminates the need to file for duty