Foreign Trade Zones

Article Title: Foreign Trade Zones

Source: http://ia.ita.doc.gov/ftzpage/tic.html

In reading and going over chapter 17, I learned a lot but what most interesting is that the field that I work in which is a Logistic Company and we export and import shipments all day long. We do lots from holding goods and receiving and shipping out goods to the Georgia Port Authority and we do custom paperwork. So this was very enlightening to me and there was lots of information on the internet. I choose this article because of the homework assignment that was given to us and I think that it was great information to anyone learning about FTZs.

Foreign trade zones (FTZs) are designated sites where special customs procedures apply. Foreign trade zones in the United States are comparable to so-called free trade zones in many countries, though procedures vary widely from country to country. FTZs allow domestic activity involving foreign items to take place as if it were outside the customs territory of the United States for duty payment purposes, thus offsetting customs advantages available to overseas producers who export in competition with products made in the United States.

WHAT IS AN FTZ?

A foreign trade zone is a restricted access site authorized by the Foreign-Trade Zones Board, which consists of the treasury and commerce secretaries (the secretary of commerce chairs the board). FTZs, upon activation under regulations of the U.S. Customs Service, are secure areas under U.S. Customs supervision. These zones are at or near U.S. Customs ports of entry. Formal customs entry procedures donЃft apply in these zones, although FTZs are within the territory and jurisdiction of the United States.

WHY WERE SUCH ZONES ESTABLISHED?

Congress established the Foreign-Trade Zones Board in 1934 to license and regulates FTZs in the United States. FTZs were established for a number of reasons, the primary being to encourage and expedite U.S. participation in international trade. Foreign goods may be admitted to an FTZ without being subject to customs duties and certain excise taxes. FTZs allow deferred payment of duties until goods are entered into the commerce of the United States. Under zone procedures, the usual customs entry procedures and payment of duties are not required on foreign merchandise until it actually enters customs territory for domestic consumption. Foreign merchandise that is re-exported is not subject to U.S. customs duties. Domestic goods admitted into a zone, in zone-restricted status (for storage, destruction, or export), are considered exported when admitted to the zone for other government agency requirements, excise tax, and duty drawback. The FTZ BoardЃfs criteria require that zone activity be consistent with U.S. trade policy and result in a net positive economic effect, taking into account potential impact on U.S. plants that are not located in zones.

WHAT ARE THE TYPES OF FTZs?

There are two types of foreign trade zones: general-purpose zones and sub zones. General-purpose zones are usually located in industrial parks or in seaport and airport complexes with facilities available for use by the general public. Subzones are sites sponsored by a general-purpose zone grantee on behalf of an individual firm or firms. Sub zones are single-purpose sites for operations that cannot be feasibly moved to, or accommodated in, a general-purpose zone (for instance, oil refining and automobile manufacturing). The Foreign-Trade Zones Board grants zones to qualified public and private entities (for instance, port authorities and city/county economic developers). In a general-purpose zone, the grantee usually has an operator to run the zone. Operators can sublet o tenants, called users. In a sub zone environment, the user and operator are usually the same.

WHAT ARE SOME ADVANTAGES OF USING FTZs? Duty Deferral

Customs duty and federal excise tax, if applicable, are paid only when merchandise is transferred from an FTZ to the customs territory of the United

States, or transferred to Canada or Mexico.

Duty Elimination

Goods may be imported into, and then exported from, a zone without the payment of duties and excise taxes, except to certain countries subject to trade agreements, such as Canada and Mexico (in which case, any applicable duties and excise taxes are levied).Goods may also be imported into, and destroyed in, a zone without the payment of duty and excise taxes.

Tax Exemption Merchandise imported into the United States and held in a zone for

the purpose of storage, sale, exhibition, repackaging, assembly, distribution, sorting, grading, cleaning, mixing, display, manufacturing, or processing, as well as merchandise produced in the United States and held in a zone for exportation, either in its original form or altered by any of the above methods, is exempt from state and local and valorem taxes.

Storage Merchandise may remain in a zone indefinitely, whether or not it is subject to duty. Other customs procedures, such as bonded warehouses and temporary import bonds, are subject to time limits.

Exportation Merchandise brought into the United States on an entry for warehousing, temporary importation under bond or for transportation and exportation may be transferred to a foreign trade zone from customs territory to satisfy a legal requirement to export the merchandise. For instance,