what is an ftz? trey w. boring, sr. vice president ims worldwide, inc. consultant to the city of...

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

IMS Worldwide, IncForeign-Trade Zone Consultants

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