Duty Exemption on Re-Exports

Another advantage to using the Foreign Trade Zone, is the elimination of duty on items / product that is re-exported back out of the United States.  If you purchase items from China, import them into the US – typically you would pay the duty on those items the minute they pass through Customs.  When your items are sent directly to a FTZ, no duty is paid until they leave the FTZ. 

Let me give you an example of how Exemption on RE-Exports might save your company money:

If an Automotive Aftermarket Distributor imports a part from China at a 5% duty rate, and this product is put into the FTZ after clearing Customs, no duty has been paid on these items.  If the product is shipped to a US, Canadian or Mexican company then duty will be paid – but, if the product is RE-EXPORTED outside of North America then NO DUTY will be paid.  This provides the Distributor with an automatic 5% increase in profit on that item.

Duty Elimination on Waste, Scrap & Yield Loss

Many Manufactures are unaware that by using a Foreign Trade Zone, they can save the duty costs on all imported materials that become waste, scrap or yield loss, during their manufacturing process.  This can mean Hundreds of Thousands of dollars over the life of an imported product.

An example might be, a US Manufacture imports leather for automotive seats.  The duty rate on the leather is at 6.5%.  No matter how well they space and plan-out to cut the material, 1/10 will always be waste or scrap (un-usable).  If this company imports $1,000,000 worth of leather per month @ 6.5%, it is a total of $65,000 per month in duties paid to the US Government.  If there is NO DUTY on 1/10 of the leather, it is a savings / increase in profit of $6,500 per month ($78,000 per year).  *All manufacturing work must be done within the FTZ. 

As you can see, the FTZ can provide significant savings for manufactures who use imported products within their manufacturing process.  This is just one way – there are many more that I will discuss in up-coming blogs.

Imported Goods – What Customs Agents are looking for…

Have you ever wondered what the Customs Officials are looking for when they examine your shipment of Imported Goods?  Listed below are a few tips, to help you understand and get your goods cleared through the Customs process much faster.

Here are a few things that the Customs Agents are looking for:

• The value of the goods for customs purposes and to check whether duties apply.
• Whether the goods need to be marked with country of origin or require special marking.  If this is lacking, they are then marked to meet regulations.
• Whether the shipment contains prohibited articles.
• Whether the goods are correctly invoiced.
• Whether the goods are in excess of the invoiced quantities or a shortage exists.
• Whether the shipment contains illegal narcotics.

Here are a few things to do, to make sure you shipment will clear Customs much faster:

• Invoices are clear and contain the information you would expect to see on a packing slip.
• Each package is marked and numbered so it can easily be identified against the invoice.
• A detailed description of the merchandise, in each package, listed on the invoice.
• The country of origin is clearly marked.
• Any special laws are complied with.  (Any merchandise such as food, drugs, cosmetics, alcohol and so on will usually fall into this category).
• Your supplier maintains good security, reducing the risk that narcotics smugglers are able to introduce narcotics into your shipment.  

Top 5 Reasons to use a Foreign Trade Zone

Listed below are only a few of the benefits that the U.S. Foreign Trade Zone program offers.  But, these are the most beneficial for Importers and manufacturers.

1. Duty Elimination or Reduction - In certain instances, there are tariff (import duties) that actually penalize companies for making their product in the United States.  This happens when a component item or raw material carries a higher duty rate than the finished product.  The importer of the finished product pays a lower duty rate than a manufacturer of the same product in the United States.  This give the importer an unfair and unintended advantage over the domestic manufacture.  The Foreign-Trade Zone program levels the playing field in these circumstances.

2. Duty Exemption on Re-Exports – Without a zone, if a manufacturer or processor imports a component or raw material into the United States, it is required to pay the import tax (duty) at the time the component enters the country.  However, a Foreign Trade Zone is concidedred to be outside the commerce of the United Staes and the U.S. Customs territory.  So, when foreign merchandise is brought into a Foreign Trade Zone, no Customs duty is owed until the merchadise leaves the zone and enters the commerce of the United States.  ONly then is the merchandise considered imported and the duty paid.  If the imported merchandise is exported back out of the country, no Customs duty is ever due.

3. Duty Elimination on Waste, Scrap and Yield Loss – Again, without a zone, an importer pays the Customs duty owed as material is brought into the United States.  This is because the material is considered imported at this point.  If the processor or manufacture is conducting its operations within a zone environment, the merchasdise is not considered imported, and therefore no duty is owed until it leaves the zone for shipment into the United States. So, the manufacturer does not pay for the part of the product that is waste, scrap or yeild loss during the manufaturing process.

4. Weekly Entry Savings – The Trade and Development Act of 2000; This Act had a provision in it that allowed the use of weekly entry procedures for all manufacuting and distribution to Foreign Trade Zones.  Weekly entries can save hundreds of thousands of dollars during the year or over the lifetime of a product.

5. Duty Deferral / Cash Flow – Since Foreign Trade Zones are outside the Customs territory of the United States, goods are not imported until they leave the zone.  So, instead of companies having substaintal monies tied up in Customs duties on their inventory, they have used of that money for other purposes.

There are many other substantial benefits that the Zones program has to offer manufacturers and distributors in the United States, but the benefits listed are the key benefits that attract most companies to the Zones program.