Foreign Trade Zone
The Foreign-Trade Zones Program is a federal program. Foreign-trade zones are established to encourage and expedite U.S. participation in international trade. Foreign goods may be admitted to an FTZ without being subject to Customs duties or certain excise taxes. Zones were also established to defer payment of duties until goods are entered into the commerce of the United States.
Foreign-trade zones were designed to increase capital investment and the use of American labor, parts, and overhead by equalizing the customs treatment of U.S. activities as compared to similar activities that might take place offshore or overseas.
Foreign-trade zones were authorized by the Foreign-Trade Zones Act of 1934 (the FTZ Act) and are administered under regulations issued by the Department of Commerce and the Department of Treasury.
Importers authorized to operate under foreign-trade zone procedures may receive a number of economic and operational benefits. The following examples are indicative of some of those benefits:
- Duty deferral - FTZ users have the opportunity to avoid paying duties on imported merchandise until the merchandise is removed from the FTZ and enters the commerce of the United States. Imported merchandise that is re-exported without entering the commerce of the United States is not subject to U.S. customs duties.
- Inverted Tariffs/Duty Reduction - Companies that import goods to use in the manufacture of products may have the opportunity to reduce duty liability. Zone users have the opportunity to elect the lower duty rate on goods produced in the zone when the finished goods incur a lower duty rate than the imported parts and components.
- Duty elimination - Benefits are available to exporters that currently file duty drawback claims with Customs & Border Protection.
- MPF reduction - Zone users who file multiple Customs & Border Protection entries each week and pay significant fees in MPF each year may benefit from reduced merchandise processing fees. The weekly entry process allows one entry per week generally capping the MPF payment to $485 per week or approximately $26k per year.
- No time constraints on storage – Merchandise may remain in a zone indefinitely, whether or not it is subject to duty.
- Satisfy exportation requirements – Merchandise entered into the U.S. on an entry for warehousing, temporary importation under bond, or for transportation and exportation may be transferred to a foreign-trade zone from the Customs territory to satisfy a legal requirement to export the merchandise.
- Security and insurance costs – Customs & Border Protection security requirements and federal criminal sanctions are deterrents against theft. This may result in lower insurance costs and fewer incidents of loss for cargo imported into an FTZ.
Foreign-trade zones also benefit the public:
- Helps facilitate and expedite international trade
- Provides special Customs & Border Protection procedures as a public service to help companies conduct international trade related operations in competition with foreign plants
- Encourages and facilitates exports
- Helps attract offshore activity and encourage retention of domestic activity
- Assists state/local economic development efforts
- Helps create employment opportunities
- Global Supply Chain Enhancements