Foreign Trade Zone Benefits
Edison, New Jersey
What Benefits do Zones Offer?
• Increased flexibility with just-in-time delivery, quotas
and reduced Customs delays.
• Duty elimination on:
– manufacturing in the U.S. and selling domestically.
– utilizing pick-and-pack operations where the "set" has a lower
duty rate than the individual pieces.
• Duty-deferral until merchandise is shipped from the
Zone into Customs territory. Merchandise may be held in
a Zone indefinitely.
• Ability to hold most merchandise subject to quotas
until the quota opens and/or the ability to bring such
goods into the Zone and subsequently re-export them.
What can you do in an FTZ?
A facility where goods may be:
● received
● stored
● manipulated ● manufactured
● exhibited
● examined
● tested
● calibrated
● destroyed
● exported
● repacked
● assembled
● mixed with domestic goods
● title transferred
Is an FTZ right for You?
IF YOU ANSWER “YES” TO ANY OF THE FOLLOWING
THEN LOCATING IN AN FTZ CAN HELP.
 Do you manufacture, assemble or process with
imports?
 Do you regularly pay more than $485 per week
in merchandise processing fees?
 Do you scrap, reject, destroy, waste, or return
some of your imports?
 Do you export previously imported materials?
Is an FTZ right for You?
IF YOU ANSWER “YES” TO ANY OF THE FOLLOWING
THEN LOCATING IN AN FTZ CAN HELP.
 Do you have to wait long periods of time for your
orders to get through border customs?
 Do you sell your imported products to
companies that reside in Foreign Trade Zones?
 Are you selling to the military?
 Are you currently utilizing a Customs tariffreduction program?
FTZ Savings
•
Derived exclusively from a tax management approach to U.S.
Customs Duties and Fees.
•
Realized in Four Ways:
- Customs Duty Elimination - Scrapping, Exports
- Customs Duty Reduction - Inverted Tariffs
- Customs Fee Reductions - Merchandise Processing Fees (MPF)
- Deferral of Customs Duty Payment – Inventory
(a one time benefit usually the least profitable of the 3)
Duty Elimination
Inbound
Goods
Inbound
Goods
Quality
Control
Receiving Process
May be blanket or
single transaction
Scrapped – Duty Free
Duty Elimination
Assembled New
Product “B”
Imported
Product “A”
Potentially
Dutiable
Import
Duty Free
Exported
Duty Free
EXPORT
Duty Elimination
Imported
Product “A”
Potentially
Dutiable
Import
Duty Free
EXPORT
Duty Free
Inverted Duty Rate
Component B
12% Duty
Component C
8% Duty
Component C
5% Duty
Component A
10% Duty
Component B
5% Duty
Component A
5% Duty
Merchandise Process Fees
Companies outside an FTZ pay a .21% merchandise fee per
shipment. The minimum fee is $25.00 with the maximum
being $485.00. The maximum is reached with a shipment
valued at $230,952.00. In an FTZ the company lumps all
shipments for a week into one filing resulting in a
$485.00/week maximum fee.
15 shipments/week
$485 x 15 = MPF $7275
Shipments into commerce
15 shipments/week
1 entry filed at end of
week. MPF $485
Shipments into commerce with weekly entry
Deferred Duty
Product “A” Duty Owed
Product “A” Duty Paid
One-Time Benefit & Duty
Deferral Explanation
Uncleared
Merchandise
Cleared
Merchandise
Distribution Center/Warehouse
Shipping
Duty paid on
merchandise at
time of clearance
at Customs port of
entry
BEFORE FTZ
OPERATIONS
UR Warehouse, Inc.
One-Time Benefit & Duty
Deferral Explanation
Uncleared
Merchandise
Cleared
Merchandise
Distribution Center/Warehouse
Formerly duty-paid
merchandise being
shipped from
facility
Foreign merchandise
admitted into FTZ; no
duties paid at Customs
port of entry. Shipping dutypaid merchandise using FIFO
inventory record-keeping; no
duties paid at point of
shipment either.
DURING FIRST
INVENTORY TURN
OF ACTIVE FTZ
OPERATIONS
UR Warehouse, Inc.
One-Time Benefit & Duty
Deferral Explanation
Uncleared
Merchandise
Distribution Center/Warehouse
Distribution
center full of
uncleared
merchandise
now.
Cleared
Merchandise
Customs entry now
made on
merchandise which
was admitted into the
Zone. Duty paid at
this point.
AFTER FIRST INVENTORY TURN
UR Warehouse, Inc.
Other Benefits
• Lower administrative costs.
• Lower security and insurance costs.
• No time constraints on storage.
• Shorter transit time – direct delivery.
• Improved inventory control.
• Informed customs officer
FTZ Cost/Benefit Analysis
Warehousing & Distribution
• Benefits – What you save
Merchandise Processing Fee Avoidance
(10 shipments/wk at max.)
.21% of value vs. $485/wk max.
• Deferred Duty Payment @ 7.5%
• ____________________________________Total___
• COSTS
• Brokers Fees Zone Operation v.
Standard Clearance Process
• Operating Costs Change
• Security Administration
• Data Processing
• Duty Payments on Unexpected “Up Adjustments”
• U.S. Customs Assurance Bond
• ____________________________________Total___
• Net Benefit
$ 226,980 (EST)
$ 19,000
$ 245,980
$
0
$
0
$ 10,000
$ 5,000
$ 5,000
$ 1,000
$ 21,000
$224,980
FTZ Cost/Benefit Analysis
Manufacturing & Distribution
• Benefits – What you save
Duty Rate Reduction (Inverted Duty)
Merchandise Processing Fee Avoidance
.21% of value vs. $485/wk max.
• Deferred Duty Payment @ 7.5%
• ____________________________________Total___
• COSTS
• Brokers Fees Zone Operation vs.
Standard Clearance Process
• Operating Costs Change
• Security Administration
• Data Processing
• Duty Payments on Unexpected “Up Adjustments”
• U.S. Customs Assurance Bond
• ____________________________________Total___
• Net Benefit
$ 400,000 (EST)
$ 18,000
$ 19,000
$ 437,000
$
0
$
0
$ 10,000
$ 5,000
$ 5,000
$ 1,000
$ 21,000
$416,000