foreign trade zone benefits edison, new jersey what benefits do zones offer? increased flexibility...
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Foreign Trade Zone BenefitsForeign Trade Zone Benefits
Edison, New JerseyEdison, New Jersey
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.
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
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?
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?
Is an FTZ right for You?
IF YOU ANSWER “YES” TO ANY OF THE FOLLOWING THEN LOCATING IN AN FTZ CAN HELP.
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)
Duty Elimination
Receiving Process
Inbound Goods
Inbound Goods
Quality Control
Scrapped – Duty FreeMay be blanket or single transaction
Assembled NewProduct “B”
Exported Duty Free
Imported
Product “A”Potentially
Dutiable
EXPORT
Duty Elimination
ImportDuty Free
Imported
Product “A”Potentially
Dutiable
EXPORT Duty FreeImport
Duty Free
Duty Elimination
Inverted Duty Rate
Component A10% Duty
Component B 12% Duty
Component C 5% Duty
Component B 5% Duty
Component C 8% Duty
Component A5% Duty
Merchandise Process FeesCompanies 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
Deferred Duty
Product “A” Duty Owed
Product “A” Duty Paid
One-Time Benefit & Duty Deferral Explanation
UR Warehouse, Inc.
Uncleared Merchandise
Cleared Merchandise
Distribution Center/Warehouse
Duty paid on merchandise at time of clearance at Customs port of entry BEFORE FTZ
OPERATIONS
Shipping
One-Time Benefit & Duty Deferral Explanation
UR Warehouse, Inc.
Uncleared Merchandise
Cleared Merchandise
Distribution Center/Warehouse
Foreign merchandise admitted into FTZ; noduties paid at Customsport of entry. Shipping duty-paid merchandise using FIFO inventory record-keeping; no duties paid at point of shipment either.
Formerly duty-paid merchandise being shipped from facility
DURING FIRST INVENTORY TURN
OF ACTIVE FTZ OPERATIONS
One-Time Benefit & Duty Deferral Explanation
UR Warehouse, Inc.
Uncleared Merchandise
Cleared Merchandise
Distribution Center/Warehouse
Distribution center full of uncleared merchandise now.
Customs entry now made on merchandise which was admitted into the Zone. Duty paid at this point.
AFTER FIRST INVENTORY TURN
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
FTZ Cost/Benefit Analysis Warehousing & Distribution
• Benefits – What you saveMerchandise 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
FTZ Cost/Benefit AnalysisManufacturing & Distribution
• Benefits – What you saveDuty 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