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.