Benefits of using a foreign trade zone:
- While in the zone, your goods are not subject to U.S. Customs duties or excise taxes.
- Duty is not paid until your goods are imported from the trade zone into the U.S., so your cash flow is flexible. If your goods are exported from the trade zone, no duty is paid.
- Your goods may be cleaned, stored, tested, assembled, manipulated (subject to required approvals) or destroyed while in the zone. If you combine domestic and foreign goods in an FTZ, duty is paid only on the foreign content of the product imported into the U.S. market. Incomplete or improperly marked merchandise may be placed in the FTZ and labeled (with country of origin) to meet U.S. Customs’ requirements.
- Goods brought into the country in large quantities may be repackaged and shipped to customers in smaller quantities.
- By holding your goods in the FTZ, you can wait for improved market conditions. Your goods may be held for an indefinite period.
- The zone provides 24 hour protection for all your merchandise. Higher security in the FTZ means lower insurance costs.
- Your goods are readily available at all times and merchandise may be displayed in the FTZ for sampling or purchase.
- Customs procedures are minimal within the zone and you have the opportunity to pay the lowest duty possible on imported goods.
- No duty is paid on valueless waste products of zone operations, and any damaged goods can be salvaged to minimize losses.
- Merchandise under quota restrictions can be stored until quotas are changed or lifted. Quota restricted goods may also be processed in a zone into products not subject to a quota.
A few ways a foreign trade zone can save your company money
- DUTY EXEMPTION ON RE-EXPORTS: If merchandise is re-exported after being placed in a FTZ or shipped to another FTZ and then re-exported, then no duty is ever paid.
- RELIEF FROM INVERTED TARIFFS: Generally, if foreign merchandise is brought into a Foreign-Trade Zone or Subzone and manufactured into a product that carries a lower duty rate, then the lower rate applies.
- FOR EXAMPLE: A Foreign-Trade Zone user imports a motor (which carries a 5.3% duty rate) and uses it in the manufacture of a vacuum cleaner (which has a 1.4% duty rate). When the vacuum cleaner leaves the FTZ and enters the commerce of the U.S., the duty owed on the motor drops from the 5.3% motor rate to the 1.4% vacuum cleaner rate.
- DUTY ELIMINATION ON WASTE AND SCRAP: No duty is charged on most waste and scrap from production in Foreign-Trade Zones.
- NO DUTY ON REJECTED OR DEFECTIVE PARTS: Merchandise found to be defective or faulty, may be returned to the country of origin for repair or simply destroyed. Whichever choice is taken, no duty is paid. Many companies suffer from the "double duty crunch." That is, they pay duty on imported merchandise, find it to be faulty and return it to the country of origin for repair, and then pay duty again when the merchandise reenters the United States. If you are a Foreign-Trade Zone user or Subzone, the "double duty crunch" is never a problem, because your merchandise never enters the commerce of the United States.
- DUTY DEFERRAL: No duty is ever charged on merchandise while it is in a Foreign Trade Zone, and there is no limit on the length of time merchandise may be kept in a Foreign-Trade Zone. By deferring the duty, capital is freed for more important needs.
- NO DUTY ON DOMESTIC CONTENT OR VALUE ADDED: The "value added" to a product in a FTZ (including manufacture using domestic parts, cost of labor, overhead, and profit) is not included in its dutiable value when the final product leaves the Zone. Final duties are assessed on foreign content only.
- RELIEF FROM LOCAL AD VALOREM TAXES: Foreign merchandise stored in Foreign-Trade Zones, or merchandise held in a zone for export, is not subject to any state or local ad valorem taxes.
- NO DUTY ON SALES TO THE U.S. MILITARY OR NASA: No duty is charged on merchandise sold from a Foreign-Trade Zone to the U.S. Military or NASA, returned to the country of origin for repair or simply destroyed. Whichever choice is taken, no duty is paid.