What is a FTZ?
It is a designated site in the United States, in or near U.S. Customs port of entry, where merchandise is generally considered to be outside U.S. customs territory. Under procedures, foreign and domestic merchandise may be admitted into zones for operations such as storage, exhibition, assembly, manufacture, and processing, without being subject to formal Customs entry procedures, the payment of Customs duties or federal excise taxes. When merchandise is removed from a Foreign-Trade Zone, Customs duties may be eliminated if the goods are exported from the United States. If the merchandise formally enters into U.S. commerce, Customs duties and excise taxes are due at the time of transfer from the Foreign-Trade Zone.
Types of Foreign-Trade Zones
General-Purpose Zone: State or local governments and port authorities typically operate general-purpose zones. They involve public facilities that can be used by more than one firm, and are most commonly ports or industrial parks used by small to medium sized businesses for warehousing/distribution, inspection, exhibition, and some processing/assembly.
Sub zone: Sub zones, on the other hand, are sponsored by general-purpose zones, but typically involve a single firm's site which is used for more extensive manufacturing/processing or warehousing/distribution that cannot easily be accomplished in a general-purpose zone. Sub-zones must be located at or near a port of entry. Sub zones require the approval of the Grantee.
Distribution Uses
In Foreign-Trade Zone 68 distributors may:
- Store goods indefinitely and free of duty or quota restrictions until they enter U.S. territory, if exported, no duty is levied.
- Inspect merchandise for quality, breakage and loss before duty is paid. Substandard goods may be discarded, destroyed or returned without duty.
- Remark, repackage, etc. in order to satisfy customer requests or Customs requirements.
- Borrow on goods stored in the FTZ through the issuance of warehouse receipts.
- Store goods while awaiting quota openings or favorable exchange rates.
- Avoid fines for improperly marked items or lost documents- merchandise may be stored until documents are found or identification is corrected.
- Sample merchandise in order to determine quality before actual payment is required.
- Exhibit or market goods before payment of duty.
Manufacturing Uses
In Foreign-Trade Zone 68 manufacturers may:
- Conduct complete processing or assembly operations and defer the payment of duties until the product enters U.S. territory.
- Combine foreign and domestic components through processing, manufacturing or reassembly of products in order to qualify for lower duties. U.S. overhead or materials are also duty free.
- Avoid payment of duties on scrap and waste due to processing or manufacturing.
- Avoid payment of duties on materials used in manufacturing and on exported materials.
- Place goods intended for exports in the FTZ in order to qualify for tax rebates.
Temporary/Interim Manufacturing Authority (T/IM)
If a project is located in a designated zone site and meets the eligibility criteria, a company can apply for T/IM authority for a period of up to two years. A decision on T/IM cases is usually made within 75 days, and an application for permanent authority can be made during the two year period.
