What is a Foreign Trade Zone?
A Foreign Trade Zone is a secured area of land within the boundaries of the United States but considered OUTSIDE of the U.S. Customs Territory. Customs entry procedures do not apply to foreign merchandise when admitted to the Zone because the Zone is considered to be in international commerce (not in U.S. Commerce territory). The objective of the FTZ #227 is to provide businesses with global market opportunities and attract new economic development activity.
Advantages of using the Foreign Trade Zone
- Cash Flow – Payment of duty is deferred until goods are actually brought into the U.S. Customs Territory. This results in cash flow savings.
- Waste/Scrap/Defect/Damage – Duties are reduced or eliminated on materials subject to defect, waste, scrap and damaged.
- Exports – No U.S. Customs duties are paid on merchandise exported from an FTZ.
- Inverted U.S. Customs Duty Savings – In an FTZ, the FTZ user may elect to pay the duty rate applicable to either component material or the finished product manufactured from the component material, depending upon which is lower (must be chosen at time of entry into the Zone). The reduction or elimination of duties is significant.
- Reduced Cycle Time – Delays relating to U.S. Customs clearances are eliminated. Special direct delivery procedures expedite the receipt of merchandise in company facilities, reducing inventory cycle time.
- Production Machinery/Merchandise Consumed – Machinery for use in a zone may be assembled and installed before duties are owed on either parts or finished product rate. Merchandise used/consumed in Zone processing is generally not subject to duties.
- No Duties on Labor, Overhead and Profit – U.S. Customs duties are not owed on labor, overhead and profit attributed to production operations in an FTZ. If the same production operation were done overseas, the value of the labor, overhead and profit would be subject to U.S. Customs duty.
- Storage – The goods may be stored indefinitely.
- Quota – Most merchandise subject to U.S. quotas may be held in a Zone until quotas open.
- Zone to Zone Transfer – Transfers between Zones are permitted with no entry or duty requirement.
- Security – Lower insurance costs: the Zone is a high security area.
Related Links: About FTZ #227 – Other Local Amenities
For more information call REI at 1-800-658-2823