PERMITTED ACTIVITIES WITHIN AN FTZ
Within the boundaries of a Foreign-Trade Zone (FTZ), a multitude of value-added activities can take place, opening a wide array of possibilities for businesses. From repackaging and relabeling to testing, grading, mixing, manufacturing, kitting, or even salvaging goods, the opportunities are extensive. You can even destroy merchandise in the FTZ without the payment of duties if needed (an advantage not afforded to traditional imports). The freedom of operation is vast, with one primary caveat: engaging in retail trade within the FTZ is off-limits. Beyond that, once your zone is established and approved, the opportunities to optimize your business processes and receive zone benefits become available now and for future business growth. Whether you’re looking to distribute, manufacture, assemble, or warehouse merchandise, the FTZ program allows for a unique set of benefits through this long-standing and proven trade mechanism.
INDEFINITE STORAGE WITH FTZ
One standout perk that sets FTZs apart, particularly in comparison to customs bonded warehouses, is the ability to store goods indefinitely within an FTZ. This provision aligns perfectly with modern supply chain needs, offering the flexibility and control that businesses require. Unlike other bonded storage solutions, an FTZ warehouse does not impose time limitations on storage, allowing for a more strategic approach to inventory management and strategic inventory positioning. The FTZ provides an opportunity to have goods on hand, ready for action, without the pressure of time constraints. Coupled with the foreign-trade zone advantages, it’s a unique benefit that can be a game-changer for companies engaged in international trade. It’s a place where goods are not just stored but poised for the next strategic move, giving you the freedom to make decisions based on market demands and not storage deadlines.
BONDED WAREHOUSE vs FTZ WAREHOUSE
Although both FTZ warehouses and bonded warehouses serve as advantageous storage locations, they differ in critical ways. While bonded warehouses provide secure storage for dutiable goods with a five-year limit, an FTZ warehouse operates outside U.S. Customs commerce, offering more flexible control over goods and the unique advantage of indefinite storage. This distinction allows goods to move without standard Customs procedures within the FTZ. Foreign and domestic goods may also be stored together in the FTZ.
REDUCED MERCHANDISE PROCESSING FEES (MPF)
Instead of filing multiple Customs entries per week, file as little as one per week, capping the MPF payment to $538.40 per week or approximately $28k per year.
COST-SAVING ADVANTAGES OF OPERATING IN AN FTZ
FTZs open doors to numerous cost-saving and compliance opportunities that can transform the way you conduct business internationally. From reducing or eliminating duties to enhancing supply chain integration, zones offer invaluable competitive cost advantages. More than just a financial benefit, they are a valuable strategic tool, uniquely designed to elevate your global trade operations, positioning your business at the forefront of the international market.
REDUCED MPF FEES
An FTZ also offers the advantage of reduced Merchandise Processing Fees (MPF). While businesses outside an FTZ must pay MPF fees for each shipment, those within can consolidate these into weekly entry filings with U.S. Customs. By consolidating entries into weekly filings, MPF fees are capped, which can lead to substantial annual savings depending on the volume of entries. Even for high volume importers with low to no duty associated with their products, MPF savings can be significant. It is important to note that weekly entry filing will not impact your shipping flexibility and supply chain, as you can ship continuously from the zone while filing weekly entries.
DUTY ELIMINATION AND DEFERRAL
FTZs enable duty elimination on goods that are re-exported, destroyed, or scrapped. This exemption from customs duties on such goods eliminates unnecessary costs, promoting operational efficiency and strategic inventory management.
DUTY REDUCTION WITH INVERTED TARIFF RELIEF
One unique benefit of operating within an FTZ is the ability to utilize inverted tariff relief for many finished goods. With approval from the Foreign-Trade Zones Board, this provides companies the choice to pay duty on either the finished product or its individual components, depending on which is lower. For instance, an automobile manufacturer within an FTZ could pay duty on the value of imported components but at the duty rate of the completed vehicle rather than on every part, leading to substantial reductions in overall duty payments. When exporting the finished vehicle outside the U.S., no duties are paid at all.
MORE EFFICIENT SUPPLY CHAIN
FTZs enable streamlined operations by enhancing inventory management, reducing processing times, and improving turnover rates. These operational efficiencies can greatly reduce overall costs, making FTZs integral to efficient global trade strategies.
CUT COSTS WITH SUPPLY CHAIN INTEGRATION
Utilizing an FTZ can foster a competitive advantage through the integration of supply chain operations. By moving goods in-bond without paying duties, as demonstrated by an automotive manufacturer working with a tire supplier, significant cumulative cost advantages can be achieved across various industries.
MORE EASILY MEET EXPORTATION REQUIREMENTS
FTZs offer flexibility in inventory management, facilitating the transfer of goods to satisfy export requirements. This ability to simplify the export process and potentially reduce associated costs aligns with the broader cost-saving strategies inherent to FTZs.
