Foreign Trade Zone Benefits
- 1. Foreign Trade Zone Benefits Edison, New Jersey
- 2. What Benefits do Zones Offer? Increased flexibility with just-in-time delivery, quotas and reduced Customs delays. Duty elimination on: manufacturing in the U.S. and selling domestically. utilizing pick-and-pack operations where the "set" has a lower duty rate than the individual pieces. Duty-deferral until merchandise is shipped from the Zone into Customs territory. Merchandise may be held in a Zone indefinitely. Ability to hold most merchandise subject to quotas until the quota opens and/or the ability to bring such goods into the Zone and subsequently re-export them.
- 3. What can you do in an FTZ? A facility where goods may be: received stored manipulated manufactured exhibited examined tested calibrated destroyed exported repacked assembled mixed with domestic goods title transferred
- 4. Is an FTZ right for You? IF YOU ANSWER YES TO ANY OF THE FOLLOWING THEN LOCATING IN AN FTZ CAN HELP. Do you manufacture, assemble or process with imports? Do you regularly pay more than $485 per week in merchandise processing fees? Do you scrap, reject, destroy, waste, or return some of your imports? Do you export previously imported materials?
- 5. Is an FTZ right for You? IF YOU ANSWER YES TO ANY OF THE FOLLOWING THEN LOCATING IN AN FTZ CAN HELP. Do you have to wait long periods of time for your orders to get through border customs? Do you sell your imported products to companies that reside in Foreign Trade Zones? Are you selling to the military? Are you currently utilizing a Customs tariff- reduction program?
- 6. FTZ Savings Derived exclusively from a tax management approach to U.S. Customs Duties and Fees. Realized in Four Ways: - Customs Duty Elimination - Scrapping, Exports - Customs Duty Reduction - Inverted Tariffs - Customs Fee Reductions - Merchandise Processing Fees (MPF) - Deferral of Customs Duty Payment Inventory (a one time benefit usually the least profitable of the 3)
- 7. Duty Elimination Inbound Inbound Goods Goods Quality Control Receiving Process May be blanket or single transaction Scrapped Duty Free
- 8. Duty Elimination Assembled New Product B Imported Exported Product A Duty Free Potentially Dutiable EXPORT Import Duty Free
- 9. Duty Elimination Imported Product A Potentially Dutiable EXPORT Import Duty Free Duty Free
- 10. Inverted Duty Rate Component B Component C 12% Duty 8% Duty Component C 5% Duty Component A Component B 10% Duty 5% Duty Component A 5% Duty
- 11. Merchandise Process Fees Companies outside an FTZ pay a .21% merchandise fee per shipment. The minimum fee is $25.00 with the maximum being $485.00. The maximum is reached with a shipment valued at $230,952.00. In an FTZ the company lumps all shipments for a week into one filing resulting in a $485.00/week maximum fee. 15 shipments/week $485 x 15 = MPF $7275 Shipments into commerce 15 shipments/week 1 entry filed at end of week. MPF $485 Shipments into commerce with weekly entry
- 12. Deferred Duty Product A Duty Owed Product A Duty Paid
- 13. One-Time Benefit & Duty Deferral Explanation Uncleared Cleared Merchandise Merchandise Distribution Center/Warehouse Shipping Duty paid on merchandise at time of clearance at Customs port of entry BEFORE FTZ OPERATIONS UR Warehouse, Inc.
- 14. One-Time Benefit & Duty Deferral Explanation Uncleared Cleared Merchandise Merchandise Distribution Center/Warehouse Formerly duty-paid merchandise being shipped from facility Foreign merchandise admitted into FTZ; no duties paid at Customs port of entry. Shipping duty- paid merchandise using FIFO DURING FIRST inventory record-keeping; no INVENTORY TURN duties paid at point of OF ACTIVE FTZ shipment either. OPERATIONS UR Warehouse, Inc.
- 15. One-Time Benefit & Duty Deferral Explanation Uncleared Cleared Merchandise Merchandise Customs entry now Distribution Center/Warehouse made on merchandise which was admitted into the Zone. Duty paid at this point. Distribution center full of uncleared AFTER FIRST INVENTORY TURN merchandise now. UR Warehouse, Inc.
- 16. Other Benefits Lower administrative costs. Lower security and insurance costs. No time constraints on storage. Shorter transit time direct delivery. Improved inventory control. Informed customs officer
- 17. FTZ Cost/Benefit Analysis Warehousing & Distribution Benefits What you save Merchandise Processing Fee Avoidance (10 shipments/wk at max.) .21% of value vs. $485/wk max. $ 226,980 (EST) Deferred Duty Payment @ 7.5% $ 19,000 ____________________________________Total___ $ 245,980 COSTS Brokers Fees Zone Operation v. Standard Clearance Process $ 0 Operating Costs Change $ 0 Security Administration $ 10,000 Data Processing $ 5,000 Duty Payments on Unexpected Up Adjustments $ 5,000 U.S. Customs Assurance Bond $ 1,000 ____________________________________Total___ $ 21,000 Net Benefit $224,980
- 18. FTZ Cost/Benefit Analysis Manufacturing & Distribution Benefits What you save Duty Rate Reduction (Inverted Duty) $ 400,000 (EST) Merchandise Processing Fee Avoidance .21% of value vs. $485/wk max. $ 18,000 Deferred Duty Payment @ 7.5% $ 19,000 ____________________________________Total___ $ 437,000 COSTS Brokers Fees Zone Operation vs. Standard Clearance Process $ 0 Operating Costs Change $ 0 Security Administration $ 10,000 Data Processing $ 5,000 Duty Payments on Unexpected Up Adjustments $ 5,000 U.S. Customs Assurance Bond $ 1,000 ____________________________________Total___ $ 21,000 Net Benefit $416,000