Foreign Trade Zone BenefitsForeign Trade Zone Benefits

Edison, New JerseyEdison, 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?

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 tariff-reduction program?

Is an FTZ right for You?

IF YOU ANSWER “YES” TO ANY OF THE FOLLOWING THEN LOCATING IN AN FTZ CAN HELP.

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

Receiving Process

Inbound Goods

Inbound Goods

Quality Control

Scrapped – Duty FreeMay be blanket or single transaction

Assembled NewProduct “B”

Exported Duty Free

Imported

Product “A”Potentially

Dutiable

EXPORT

Duty Elimination

ImportDuty Free

Imported

Product “A”Potentially

Dutiable

EXPORT Duty FreeImport

Duty Free

Duty Elimination

Inverted Duty Rate

Component A10% Duty

Component B 12% Duty

Component C 5% Duty

Component B 5% Duty

Component C 8% Duty

Component A5% Duty

Merchandise Process FeesCompanies 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

UR Warehouse, Inc.

Uncleared Merchandise

Cleared Merchandise

Distribution Center/Warehouse

Duty paid on merchandise at time of clearance at Customs port of entry BEFORE FTZ

OPERATIONS

Shipping

One-Time Benefit & Duty Deferral Explanation

UR Warehouse, Inc.

Uncleared Merchandise

Cleared Merchandise

Distribution Center/Warehouse

Foreign merchandise admitted into FTZ; noduties paid at Customsport of entry. Shipping duty-paid merchandise using FIFO inventory record-keeping; no duties paid at point of shipment either.

Formerly duty-paid merchandise being shipped from facility

DURING FIRST INVENTORY TURN

OF ACTIVE FTZ OPERATIONS

One-Time Benefit & Duty Deferral Explanation

UR Warehouse, Inc.

Uncleared Merchandise

Cleared Merchandise

Distribution Center/Warehouse

Distribution center full of uncleared merchandise now.

Customs entry now made on merchandise which was admitted into the Zone. Duty paid at this point.

AFTER FIRST INVENTORY TURN

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 saveMerchandise Processing Fee Avoidance

(10 shipments/wk at max.) .21% of value vs. $485/wk max. $ 226,980 (EST)

• Deferred Duty Payment @ 7.5% $ 19,000

• ____________________________________Total___ $ 245,980

• COSTS

• Brokers Fees Zone Operation v. Standard Clearance Process $ 0

• Operating Costs Change $ 0

• Security Administration $ 10,000

• Data Processing $ 5,000

• Duty Payments on Unexpected “Up Adjustments” $ 5,000

• U.S. Customs Assurance Bond $ 1,000

• ____________________________________Total___ $ 21,000

• Net Benefit $224,980

FTZ Cost/Benefit AnalysisManufacturing & Distribution

• Benefits – What you saveDuty Rate Reduction (Inverted Duty) $ 400,000 (EST)Merchandise Processing Fee Avoidance .21% of value vs. $485/wk max. $ 18,000

• Deferred Duty Payment @ 7.5% $ 19,000• ____________________________________Total___ $ 437,000• COSTS• Brokers Fees Zone Operation vs.

Standard Clearance Process $ 0• Operating Costs Change $ 0• Security Administration $ 10,000• Data Processing $ 5,000• Duty Payments on Unexpected “Up Adjustments” $ 5,000• U.S. Customs Assurance Bond $ 1,000• ____________________________________Total___ $ 21,000• Net Benefit $416,000