Inside
foreign trade zones, many companies are able to achieve
such dramatic savings that they can effectively compete
with manufacturing plants located outside the U.S.How much your company can save by
operating in an FTZ obviously depends on a long list of
factors unique to your business. Here are some of the
most likely benefits:
Inverted Tariff
Benefits--In many instances, duty rates are higher for
component parts than the rates charged on an assembled
product. For example, an imported machine part may
require a duty rate of 8%, while a finished machine that
included the part may be charged at only 3% duty rate.
Improved Cash Flow--By
delaying tax and customs duty payments, you can use cash
for other needs. Goods enjoy a dutyfree status until they
enter the customs territory of the United States. Goods
may also be transferred to or from other ports of arrival
in the U.S. to a foreign trade zone under approved U.S.
Customs procedures without a Formal Customs Entry or
incurring duty charges. Imported merchandise can be
re-exported without paying duty charges.
Lower inventory
costs--When companies pay taxes and insurance premiums on
inventory imported from abroad, the value of inventory
normally includes any duties, taxes and brokerage fees.
Those costs are lowered for an inventory maintained in an
FTZ because no duty is charged until the goods enter the
U.S. Customs territory.
Security and Quality
Assurance--The U.S. Customs Service requires extra
security measures for FTZ’s, so they are normally
more secure than areas immediately around them. With
stricter security and because federal penalties are
assessed for taking goods out of an FTZ without
authorization, there is usually less theft from an FTZ.
Some insurance companies charge lower premiums on goods
stored in an FTZ.
Distribution
Savings--Freight carriers usually charge by weight or
size and in many instances, partially disassembling an
item enables a shipper to fit more items into a
container. When a company ships parts in bulk for
assembly in an FTZ, it can often lower its per unit
transportation costs.
Other Benefits--Imported
goods subject to quota limits can be held in an FTZ until
the quota reopens. Scrap or waste materials may be thrown
away and the amount of duty paid lowered by the value of
the scrapped goods. Your business can also elect to
freeze duty rates at the rates in effect when the goods
enter the zone. This is valuable when you know duty rates
are scheduled to increase or when a manufactured
product's duty rate is higher than that of its
components. You can also elect to pay the rate in effect
when the merchandise leaves the zone. This produces
savings when you know duty rates are scheduled to go
down.
