Reduce, Defer or Eliminate Duty Charges
A foreign trade zone, or FTZ is a secure and enclosed area, located near or in a Port of Entry. An FTZ is considered to be outside U.S. customs territory and border patrol territories. It enables foreign and domestic goods to be moved into it without being subject to U.S. customs duties, until the goods enter U.S. commerce. When merchandise is removed from a FTZ, customs duties may be eliminated if the goods are then exported outside the United States. If the merchandise formally enters into U.S. commerce, customs duties will be applied and possibly reduced.
There are two types of Foreign Trade Zones. General-purpose zones involve public facilities that can be used by more than one firm. These typically consist of ports or industrial parks used by small-to-medium sized businesses for warehousing/distribution and some processing/assembly. Subzones typically involve a single firm’s site, used for more extensive manufacturing/processing or warehousing/distribution, which cannot easily be accomplished in a general-purpose zone.
Benefits of Foreign Trade Zones
- Ability to defer, reduce, or eliminate duty charges depending on the use of the incoming goods and if they are exported or stay in the U.S. Customs duties may be deferred until the product is removed from the zone for entry into U.S. territory.
- In situations where zone manufacturing results in a finished product that has a lower duty rate than the rates on foreign inputs (inverted tariff), the finished products may be entered at the duty rate that applies to its condition as it leaves the zone — subject to public interest considerations.
- Foreign and domestic goods held for export are exempt from state/local inventory taxes. FTZ status may also make a site eligible for state/local benefits which are unrelated to the FTZ Act.
- Ability to take advantage of special customs procedures such as direct delivery and weekly entry to expedite the movement of cargo.