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
Over 197 Projects Completed Nationwide
Rated #1 in Customer Service
for over 30+ years
