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Presented by:

Jim Chester J.D., LL.M, CHB, CCS

About Jim Chester Managing Attorney, CHESTER pllc Of Counsel, Klemchuk Kubasta, LLP

Adjunct Professor, Baylor University School of Law

  I advise entrepreneurs, start-ups and privately-held companies of all sizes in a variety of industries regarding trademark, copyright, and trade secret protection, licensing & enforcement in the US and abroad. In addition, I assist companies in international business transactions and joint ventures.  To date, I have advised clients on business deals involving almost 100 countries. I also coordinate with foreign counsel on legal projects around the world on behalf of U.S. clients, and serve as legal advisor to foreign companies doing business with or in the U.S.  Of course, to be an effective international business attorney, I must also have significant experience and expertise handling domestic business matters, including entity formations, transactions, acquisitions, contracts and other legal issues commonly faced by my clients. MY international practice also involves advising clients regarding international trade regulations, including compliance and enforcement issues involving Customs/import and export laws, ITAR, and the FCPA.  I have represented numerous clients before US Customs & Border Protection, US Department of Commerce, US Department of Defense Trade Controls, the Office of Foreign Asset Controls, the US International Trade Administration, and other state, federal and foreign governing bodies and agencies. In addition to being admitted to practice law in Texas and Washington, DC., I am a licensed US Customs Broker. In addition to my work at the firm, I am an adjunct professor of law at Baylor University Law School, teaching courses on International Trade Law and International Business Transactions.  I also previously served as an adjunct professor of Business Law at the University of Dallas.

HONORS   “Super Lawyers - Rising Stars Edition,” Law & Politics Magazine published in Texas Monthly & Texas Rising Stars (2008, 2009, 2011)   “AV® Preeminent” Peer Review Rating by Martindale Hubbell® 

EDUCATION   LL.M., International Economic Law, University of Houston School of Law, 2000   J.D., South Texas College of Law (Law Journal, Varsity Mock trial), 1997   B.S., Economics/Political Science (Double major), magna cum laude, Texas A&M University, Commerce, 1994

CREDENTIALS   Licensed U.S. Customs Broker   Certified Customs Specialist (NCBFAA)   Admitted to practice in Texas & Washington, DC

Foreign-Trade Zones (FTZs)

Areas located in the United States, but designated by the federal government as lying outside the U.S. Customs territory

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Foreign-Trade Zones (FTZs)

  Created by FTZ Act of 1934

  FTZs are in all 50 states, plus Puerto Rico

  FTZ received $180 billion in merchandise - 87% into Subzones   Employment at zone sites is approx. 350,000

  Exports from FTZs = $18 billion

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Foreign-Trade Zones (FTZs)

 Currently about 250 general purpose FTZs have been granted  Plus over 500 special purpose

“Subzones”

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Types of Industries Using FTZs

  Automotive

  Oil Refining

  Pharmaceuticals

  Computers

  Telecommunications

  Other High-Tech

  Chemicals

  Shipbuilding

  Apparel

  Aerospace

  Medical

  Other Consumer Products

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General Purpose FTZs

  Granted to a public, non-profit entity

  Many possible users and uses

  Must be within 60 miles (or 90 minutes drive) of Customs Port of Entry

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Dallas Area FTZs

  General Purpose FTZs

D/FW Airport (39)

Midlothian (113)

Dallas (168)

Alliance Airport (196)

Durant, OK (227)

Waco (246)

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FTZ Subzones

  Cannot be accommodated within existing General Purpose FTZ

  Attached to General Purpose FTZ

  Typically designated for a single company’s operations

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Dallas Area FTZs

  Subzones

General Motors (Arlington)

Sanden International (Wylie)

Pier 1 Imports (Mansfield)

Fossil Partners (Richardson)

Zale Corp. (Irving)

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FTZ Benefits - Domestic Economy

  Job creation/preservation

  Economic Growth

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FTZ Benefits - Private Industry

  No duties are owed until goods are shipped from FTZ into Customs territory

  No duties incurred for goods exported

  Duties reduced or eliminated on materials subject to defect, damage, obsolescence, waste and scrap

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  Choice of paying duty on raw materials or on final products, whichever is lower

  Can hold quota merchandise in FTZ until window opens (limited)

  No hassle of Customs clearance and duty drawback

  Materials consumed in FTZs not subject to duties

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FTZ Benefits - Private Industry

  Most FTZ merchandise exempt from local and state ad valorem taxes

  Can transfer goods to other zones without paying duty

  Ability to take advantage of special Customs programs (e.g., weekly entry procedure)

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FTZ Administration: FTZ Board

  Agency within the Department of Commerce

  Comprised of the Secretary of Commerce and Secretary of the Treasury.

  Day-to-day administration by Executive Secretary

  Issues and administers FTZ grants pursuant to its regulations (15 CFR Part 400)

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FTZ Administration: Customs

  Customs & Border Protection (CBP/Customs)

  Part of Department of Homeland Security

  Local representative of FTZ Board

  Supervise FTZ operational activities pursuant to Customs’ FTZ regulations (19 CFR Part 146)

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Establishing an FTZ

  Application to FTZ Board   Must show “public benefit” from FTZ

  Approval often takes approximately 1 year

  “Grantee” receives the grant of authority to establish the FTZ

  Grant defines FTZ scope and activity

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Establishing an FTZ

  Activation by CBP

  “Operator” activates the zone by getting Customs approval of procedures

 Operator must post a special “FTZ Operating Bond”   in addition to the import bond, if applicable

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FTZ Operations: Terminology

  Entry   Customs Entry

  Goods are imported and duties are assessed

vs.

  Admission   Goods brought onto FTZ

  No Customs entry

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FTZ Operations: Admissions

  Customs Form 214

  Declare status of the goods

 Domestic  Privileged Foreign

 Non-Privileged Foreign

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FTZ Operations: Domestic Goods

 U.S. origin goods, or goods that have already been entered into U.S. Customs territory and duty (if any) has been paid.

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FTZ Operations: Privileged Foreign (PF) Goods

 Locks-in the duty on the raw materials on the date they are admitted into the zone

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FTZ Operations: PF Duty Savings Example

  ABC, Inc., admits three components into an FTZ

  If duties were assessed on the components, they would total $200

  Once the components are assembled into the final product, they are imported into the U.S.

  Duties on the final product total $1,000

  ABC, Inc., pay only $200 in duties

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FTZ Operations: Non Privileged Foreign (NPF) Goods

  Duty will be assessed on the finished products as a whole, not on the raw materials   A.k.a. “Inverted tariff ”

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FTZ Operations: Inverted Tariff (NPF)

Example

  ABC, Inc., admits three components into an FTZ

  If duties were assessed on the components, they would total $1,000

  Once the components are assembled into the final product, they are imported into the U.S.

  The final product qualifies for duty-free entry

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FTZ Operations: Zone Restricted Goods

 Goods admitted onto the FTZ for use only in the FTZ

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Activity in the FTZ

  Mixing

  Assembly

  Display

  Storage

  Testing

  Repairing

  Processing

  Salvage

  Labeling

  Destruction

  Repackaging

  Cleaning

  Sampling

  Manufacturing (1949)

  Refining

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Activities Prohibited in FTZs

 Retail Trade

 Living in the FTZ

 Any other activities prohibited by US law

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 General Purpose Zones   Little Up-front cost   Ongoing (mostly out-source)

  E.g., Document and storage costs of FTZ operator

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 Subzones   Up-front cost (application, activation, software)

  $100k - $200k (some savings if more than one zone at a time)

  Ongoing -- depends on in-house v. outsource

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Contact Us

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Email info@chester-law.com 214.988.9248

Toll Free 877-34-WORLD