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Foreign Trade Zone

WHAT IS A FOREIGN-TRADE ZONE

The Foreign-Trade Zone is a unique tool that the EDC leverages to achieve the stated mission. A Foreign-Trade Zone (FTZ) 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 U.S.  

According to the FTZ Board’s 2013 Annual Report, over 3,000 companies operate in U.S. FTZs, employing approximately 390,000 people.  The value of shipments into zones exceeded $835 billion.  Warehouse/distribution operations received $264 billion in merchandise.Production operations generated $571 billion.

Prince George’s County’s FTZ #63 is now County-wide.  Companies can access FTZ benefits from anywhere in Prince George’s County, Maryland.

FTZ #63 Strengths:  Location, Location, Location

  • 10-minutes from Washington, D.C., the capital of the United States
  • Access to a consumer market of 5.8 million people
  • Exceptional access to 2 international airports, the deep sea Port of Baltimore and major rail lines
  • Major Interstate highways, including I-95 (from Maine to Miami), Rt. 1, 301, 50 and I-295
  • Significant office, warehouse, industrial and manufacturing/distribution space
  • Most competitive lease/purchase rates per SF in DC/Maryland/Virginia
  • Highly skilled and diverse workforce, median household income of $73K
  • EDC funding and direct assistance to companies
  • Workforce development, recruitment and training services for employers

FTZ BENEFITS TO COMPANIES--Import Duty is:

  • Deferred for products admitted into the FTZ, which improves cash flow
  • Eliminated on products imported, and then re-exported from the FTZ to international markets
  • Reduced by taking advantage of the inverted tariff rule that states if you bring in parts that are manufactured into a whole, you can pay the duty of the whole instead of the parts
  • Eliminated on value added transformations
  • Eliminated on damaged goods that are destroyed in FTZ
  • Deferred for Zone-to-Zone Transfers

Also, companies are able to: 

  • Eliminate individual entry filings by filing one consolidated entry per week, and thus reduce fees
  • Run more efficient inventory control systems
  • Participate in special Customs procedures, such as direct delivery, to expedite the movement of cargo
  • Save money and create good jobs

(Source: www.integrationpoints.com) 

Bottom Line 

When a company’s goods are trucked from the port/airport to its warehouse designated as a FTZ, the goods are considered still outside U.S. commerce.  Therefore, duties are not paid until those goods leave the company warehouse for their customers’ stores or facilities.

NEXT STEPS …

Wondering if your company is a good fit for FTZ program?

Step 1 : Invite EDC to your business for a discussion.

Step 2: Be open to a Cost-Benefit analysis to determine whether program will benefit you.

Step 3: Submit a Letter of Intent to express interest in FTZ participation.

Step 4: Select consultant to ensure company’s compliance with FTZ Board, and U.S. Customs and Border Protection regulations.

Step 5: Submit application to EDC.

Step 6: EDC submits application to FTZ Board.

Step 7: Start importing as a FTZ company within 30-days of submitting your completed and approved application!

Links:

FTZ Board: www.ftzb.gov

Nat’l Assoc. FTZs:   www.naftz.org

 

Glossary 

  • Deferred Duties means that you do not pay duties at the Port (or airport) when your containers arrive, for example, at the Port of Baltimore, BWI Thurgood Marshall Airport or Dulles Airport.  Your products are trucked directly to your warehouse and checked into the customs database at your warehouse.  [For example, when inventory was moving slowly during the snowy winter weeks we just survived, your company would not have shelled out tens of thousands in duties, only to have the inventory stuck on your warehouse shelves.]
  • If a portion of your inventory was intended for other markets, like Canada or Brazil, your company would re-export the goods with no requirement to ever pay duties on those re-exported goods.
  • Inverted tariffs simply means that if your company imports goods that will be used to assemble another finished good, then it does not pay the import taxes associated with components if they are higher; instead, it pays rate that is lower and applied to that imported finished good.
  • And much more…