What Is an FTZ?

Trey W. Boring, Sr. Vice President

IMS Worldwide, Inc.Consultant to the City of West Memphis,

Arkansas

FTZ #273

What Is an FTZ?

• An area inside the United States that is designated as being outside Customs Territory.

– Where items are brought into the Zone duty free.

– Where Customs duty is determined when the merchandise leaves the Zone.

What Is a Zone Site?

• An Industrial Park.

• An Industrial Development Inside a Port or Airport.

• A Company’s Facility.

What Can I Do in an FTZ?

• Distribute

• Store

• Test and Inspect

• Repack

• Assemble

• Repair

• Manufacture

How Do I Make Money in an FTZ?

• Duty Deferral

• Duty Elimination

• Duty Reduction

• MPF Savings

Duty Deferral

• Duty is not paid when an item enters the Zone.– An item enters the Zone in January.

• Duty is paid when the item leaves the Zone.– The item leaves the Zone in April.

• Four months of duty deferral.

Received January

Shipped April

Product ADuty Owed

Product ADuty Paid

Foreign-Trade Zone

Duty Elimination

• Testing and inspection is conducted in the Zone duty free.– All rejected and destroyed items are duty free.

• Exports are duty free.– All items exported from the Zone are duty free.

Inbound GoodsInbound Goods

ScrappedDuty Free

Foreign-Trade Zone

Receiving Process

Quality Control

Foreign-Trade Zone

ExportImportedProduct A

Product AExportedDuty Free

Duty Reduction

• For manufacturing Zones.– The Zone allows a company to choose the

lowest duty rate associated with its components and finished product(s).

• A company imports 3 components.– A has a duty rate of 10%.– B has a duty rate of 9%.– C has a duty rate of 8%.

Duty Reduction• The company’s finished product has a 5%

duty rate.• The company will pay for the value of the

components at the finished product rate.– A from 10% to 5%.

– B from 9% to 5%.

– C from 8% to 5%.

• This reduction means a savings of 5% to 3%.

Foreign-Trade Zone

Component C 5% Duty Rate

Component B5% Duty Rate

Component B9% Duty Rate

Component C 8% Duty Rate

Final Product5% Duty Rate

ManufacturingProcessComponent A

10% Duty Rate Component A5% Duty Rate

Merchandise Processing Fee Savings

• Each entry into the United States is assessed a Merchandise Processing Fee (MPF).

• Foreign-Trade Zones are allowed one entry per week.

• The MPF is collected on that one entry.

Foreign-Trade Zone

Foreign-Trade Zone

Shipments into commerce

Shipments into commercewith weekly entry.

15 shipments per week.MPF $7,275

15 shipments per week; one entry filed at end of week. MPF $485

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