Foreign Trade Zone
WHAT IS A FOREIGN TRADE ZONE?
A Foreign-Trade Zone is a
specially designated area, in or adjacent to a U.S. Customs Port Of
Entry, which is considered to be outside the Customs Territory of the
The following is a partial list of the many benefits you can attain when
using Foreign-Trade Zones or Foreign-Trade Zone Subzone:
- No Duty Is Ever Paid On Re-Exported Merchandise from a Foreign-Trade Zone
- If The Merchandise Is Sold Domestically, No Duty Is Paid Until It Leaves The Zone Or Zones
- Generally, No Duty Is Paid On Waste Or Yield Loss in a Foreign-Trade Zone or Subzone
- Duty On Scrap Is Eliminated Or Reduced in a Foreign-Trade Zone
- Generally, If Foreign Merchandise Is Manufactured within a
Foreign-Trade Zone or Subzone Into A Product With A Lower Duty Rate,
Then The Lower Duty Rate Applies On The Foreign Content When Duty Is
- Merchandise In A Foreign-Trade Zone May Be Stored, Repackaged,
Manipulated, Manufactured, Destroyed Or Otherwise Altered or Change
BENEFITS OF FOREIGN TRADE ZONES
A Few Of The Ways Foreign-Trade Zones 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
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.
Information courtesy of FTZCorp
Tel: (251) 471-6725
Fax: (251) 471-6727