BENEFITS & MODELS FOR SUCCESS

FOREIGN TRADE ZONES

FTZ BENEFITS

FOREIGN TRADEZONES

Customs Entry: Goods withdrawn into the US are eligible for weekly entry and MPF is capped at $485

Duty Exemption:No U.S. Duty, MPF, Federal Excise Taxes, or Anti-Dumping Duties Applied to Re-Exports

Are you an importer interested in the opportunity to defer duty and tax or reduce cost associated with duty and tax altogether? Foreign Trade Zones (FTZ) might be a viable option. An increasing number of companies are utilizing foreign trade zones as a means to reduce exposure. The FTZ model is one of several special trade programs and is an example of an import duty and tax deferral, reduction and elimination model.

Zones have many forms including Foreign-Trade Zones (U.S. only), free trade zones, export processing zones, special economic zones, and bonded warehouses and maquiladoras. Each country has their own set of rules and regulations for use and operation. However, the general goal of any FTZ is to encourage job creation, sustainability and local manufacturing processes. In the U.S., an FTZ is a defined area, where foreign and domestic merchandise is considered outside the U.S. Customs territory. Merchandise may be stored, exhibited, manufactured, mixed, or manipulated as provided in the Foreign-Trade Zones Act and other applicable laws and regulations. Merchandise may be destroyed within or exported from the zone without duty payment. Duties and tax are due when the goods are transferred into the Customs territory.

$12, 125/week$630,500/year

MPF of$485X =

25 SHIPMENTSExample without an FTZ

Example with an FTZ

25 SHIPMENTS

FTZ = $485/week$25,220/year

Weekly entry capped at $485

BENEFITS & MODELS FOR SUCCESS

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Case Study 1 – Retail SportsActivity: A sports retailer is distributing Golf clubs and accessories to company stores. Set-up: Requirements consist of establishing retailer into an Existing Activated Zone and notification letter to Customs.Benefit: MPF Reduction

FTZ MODEL 1• Simplified inventory control• Weekly entry filed immediately

after verification at receiving dock• Third-Party Operator responsible

for FTZ management

SAVINGS: $625,000 per year

FTZ INDUSTRY CASE STUDIES & ASSOCIATED MODELS

Direct Delivery:Certain FTZ Operators are eligible to transport goods in-bond directly to the FTZ and file admission declarations after receipt

Inverted Tariff Relief:FTZ operator of production operation allowed to elect duty rate of either imported inputs or finished product

Duty Deferral:Unlimited storage period, U.S. Duty and Federal Excise Taxes Deferred until Withdrawn into U.S.

Destruction / Scrap:Duty will not be assessed on product destroyed or scrapped

Inventory Tax Exemption:Imported goods, and domestic goods held in a zone for export are exempt from State / local tangible personal property ad valorem taxation.

FTZ

FTZ

Value$200

2.5% = $5.00(Using FTZ saves 50%)

1% = $0.30(Duty stays the same)

1% Duty Rate = $0.30

5% Duty Rate = $10

Value$5 each

(Total Value $30)

Admission - IN

Entry - OUT

3rd Party Receiving Dock

Customer

FOREIGN TRADE ZONESBENEFITS & MODELS FOR SUCCESS

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EXPEDITORS’ EXPERTISEExpeditors provides services to companies participating in free trade zone programs. Our network offers customers with a variety of FTZ business models to reduce, defer or eliminate duties dependent on the country specific rules and regulations. Expeditors offers FTZ services within our own key distribution centers, through FTZ partnerships, or in support of customer operated free trade zone facilities. Such facilities may include Free Trade Zones, Bonded Logistics Parks, Export Processing Zones, and U.S. Foreign-Trade Zones.

Our Expeditors FTZ services are complimented by an FTZ Distribution zone management system, called CustomZone™ (CZ). CZ is a process-driven FTZ system solution uniquely designed to perform the functions of managing, reporting and controlling U.S. FTZ activities and would be used for non-manufacturing FTZ processes. We’ve leveraged our extensive industry knowledge in such areas as Customs Compliance, brokerage, and distribution activities to develop this state-of-the-art zone management distribution system.

We also offer specialized FTZ consulting services through Tradewin, a wholly-owned subsidiary of Expeditors. Our services include feasibility studies, preparation and filing of Foreign-Trade Zone Board applications, and U.S. Customs and Border Protection activation requests, as well as U.S. FTZ training to assist you through the complex process of establishing your facility as an FTZ. Tradewin’s staff has experience with over 120 U.S. FTZ establishment projects covering a wide range of industries. Tradewin can review the current operations of a company, assist with examining the benefits of an FTZ, and identify a FTZ model that is tailored to your specific needs.

One thing to note, one size does not fit all. Below are some points to consider when determining the best FTZ model for your company. • Analyze import sourcing, manufacturing and distribution activities• Does it make operational sense?• Multiple ports add complexity as the process varies by port• Analyze duty and fee payment history• Factor in export activity• Overlay Trade Mechanism Benefits• Quantify net benefits

Case Study 2 – PharmaceuticalActivity: Pharmaceutical company produces drug tablets from imported chemicals

• Imported Chemicals: 6.5% duty rate• Drug tablets: Duty free

Set-up: 6 months with multiple agency application approvals. Benefits: Inverted Tariff Relief (pay duty on either the imported chemicals or finished product, in this case, drug tablets)Simplified FDA Weekly Entry Procedures

FTZ MODEL 2• Rigorous inventory control• Account for all merchandise from

admission thru transfer, includinginventory shortages and overages

• Typically requires extensiveintegration of FTZ System andcompany inventory system

SAVINGS: $75 million per year

FOREIGN TRADE ZONES

Admission - IN

Receiving Dock

Production Area

Shipping Dock

Entry / Export / Destruction - OUT

BENEFITS & MODELS FOR SUCCESS

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