How can using an FTZ help to defer or reduce duty and tax? Companies involved in international trade may benefit by using an FTZ as a component in their overall indirect tax strategy.
Most countries offer incentives to companies to defer or eliminate duty or taxes when activities are conducted in a zone. There are many types of zones including Foreign-Trade Zones (U.S. only), free trade zones, export processing zones, special economic zones, and bonded warehouses and maquiladoras. Each country has its own set of rules and regulations for use and operation. Analysis, research, and the use of country experts are often required to assess the cost, risk and benefits.
The US Foreign-Trade Zone (FTZ) Program is a federal program authorized by the Foreign-Trade Zone Act of 1934. The program was designed to increase the global competitiveness of U.S. companies engaged in international trade activities.
Merchandise held in an FTZ is considered to be in international commerce and some types of merchandise may be imported into a Zone without being subject to Customs duties or certain excise taxes. Importers authorized to operate under foreign-trade zone procedures may receive a number of economic and operational benefits. Some of the benefits are:
- Duty is paid upon removal from the zone and upon entry into the commerce of the U.S.
- Re-Export from the zone without entering the commerce of the U.S. is not subject to customs duties.
- Zone users who file multiple Customs entries each week and pay signifcant MPF fees each year may benefit from reduced merechandise processing fees.
MPF Reduction Process:
When considering operating in an FTZ, it is important to recognize that one size does not fit all. In order to determine the best FTZ model for your business, factor in these key elements:
Our network offers customers a variety of FTZ business models to reduce, defer, or eliminate duties dependent on the country specific rules and regulations. Expeditors offers FTZ services within our own key distribution centers, through FTZ partnerships, and in support of customer operated free trade zone facilities. Such facilities may include Free Trade Zones, Bonded Logistics Parks, Export Processing Zones, and U.S. Foreign-Trade Zones.
Expeditors’ FTZ services are complimented by an FTZ Distribution zone management system, called CustomZone™ (CZ). CZ is a proprietary FTZ system solution developed by Expeditors to manage, report and control U.S. FTZ activities and is designed for use in non-manufacturing FTZ environments. The CZ system integrates seamlessly with the Expeditors customs brokerage system for streamlined processing of admissions and entries. In creating this state-of-the art zone management distribution system, we’ve leveraged our extensive industry knowledge in customs compliance, brokerage, and distribution activities.
We offer specialized FTZ consulting services through Tradewin, a wholly-owned subsidiary of Expeditors. The services include feasibility studies, preparation and filing of Foreign-Trade Zone Board applications, and U.S. Customs and Border Protection activation applications, as well as providing supplemental US FTZ training.
- The weekly entry process allows one entry per week generally capping the MPF payment to $ 485 per week or $25,220 per year.
- Analyze import sourcing, manufacturing & distribution activities
- Does it make operational sense?
- Multiple ports add complexity, as the process varies by port
- Analyze duty and fee payment history
- Factor in Export activity
- Overlay Trade Mechanism Benefits
- Quantify Net Benefits