Understanding
Foreign-Trade Zones
Wayne Coleman
FTZ Networks
President
wcoleman@ftznetworks.com
901-857-5583
Copyright FTZ Networks, Inc. 2013
What is a Foreign Trade Zone?
A FTZ is:
• A designated location in the U.S. that is legally outside of
U.S. customs territory
• Where companies can use special procedures that help
encourage U.S. manufacturing and other value added
activities by allowing delayed or reduced duty payments
on foreign merchandise, as well as other savings
• The usual Custom entry process and payments of duties
are not required on the foreign merchandise unless and
until it enters US Customs territory for domestic
consumption
Where are the FTZs?
• All 50 States + Puerto Rico
• 259 General Purpose Zones
• 471 Subzones
• 2,700 Firms
• 320,000 US
Workers
Permissible Activities in a FTZ
Merchandise admitted to a zone may be:
Assembled*
Processed
Graded
Tested
Manufactured*
Distributed
Sampled
Repackaged
Relabeled
Broken up
Destroyed
Stored
Mixed
Salvaged
Manipulated
*The user must receive prior approval from the FTZ Board for “production”
Exhibited
Sorted
FTZ Benefits
Duty Elimination
 No duty is paid on foreign merchandise destroyed in the zone
 No duty is paid on foreign merchandise that is re-exported
Duty Deferral
 Duties are not paid on foreign merchandise while in inventory until
being withdrawn for U.S. domestic consumption.
Duty Inversion/Relief from Inverted Tariff
 Through manufacture higher duty components can assume the
identity of the finished product, for duty calculation purposes, thereby
reducing the amount paid upon withdrawal for U.S. domestic
consumption.
FTZ Benefits
Expedited Procedures
 Companies using Zone procedures may have access to streamlined customs
procedures (e.g. “direct delivery”)
Weekly Entry
 Unique ability to file a single Customs Entry for an entire week’s outbound
shipments (MPF savings)
Ex: 1,000 customs entries annually @ $485 max = $485,000
52 customs entries @ $485 max = 25,220
Minimum Annual Savings = $459,780
No Time Limit
 There is no time limit placed on goods stored in the FTZ (as compared to a
Bonded Warehouse) and goods can be released immediately unlike bonded
storage
Other Benefits
 Foreign goods and domestic goods held for export are exempt from
state/local inventory taxes. FTZ stats may also make a site eligible for
state/local benefits which are unrelated to the FTZ Act.
FTZ Uses
• Receiving / Shipping
• Storage
• Processing & Assembly/Manufacturing
80%
20%
FTZ Uses
• Reverse Logistics / Returns Management
• Kitting & Assembly of Gift Sets
• Retail Display Pallet builds
• Crude Oil Importing and Refining
• Labeling / Relabeling80%
• Packing / Repacking
• Fuel Farms for International Flights
20%
Role of Consultants and FTZs…..
Foreign-Trade Zone (FTZ) Services:
Zone Operator Zone Project
Applications Minor Boundary
Modifications Major Boundary Modification /
Zone Expansions Manufacturing
Permits Subzones FTZ
Management Activation Alterations Feasibil
ity Analysis Procedures Manual Zone
Schedules / Tariffs Annual Reports
FTZ Site Application
• Coordination with FTZ Grantee
• Gathering all information for Application
• Receive Concurrence Letters from Grantee & CBP
• Draft FTZ Application
FTZ Site Activation
• Develop list of names of Key Individuals for
CBP Background Investigations
• Pre-activation Meetings with Grantee & CBP
• Confirm Grantee’s requirements for approval
of the facility
• Review the facility and determine any
suspected Customs security concerns
• Request & schedule the “Preliminary Security
Survey” visit by CBP
FTZ Site Activation
• Determine any/all Security Improvements
and/or Signage required by CBP for Activation
Approval
• Assist with ensuring all required Security
Improvements are Completed
• Notify CBP of completed Security
Improvements
• Hold "follow-up" Security Survey visit by CBP
FTZ ICRS Selection and Implementation
• Inventory Control & Recordkeeping System
• Determine Short List of Software Providers
• Schedule Demo's with Software Providers on Short List
• Meetings with Software Providers & Client Systems Staff
• Select Software Provider
• Execute license agreement for the FTZ Software
• Complete Configuration Questionnaire from Software
Provider Selected
Operational Planning & Execution
• Tour the facility and understand the flows of the
merchandise moving into &out of the facility, including
its destination;
• Identify the roles and responsibilities specific to the FTZ
Regulatory Operations
• Auditing processes & procedures to identify gaps in
SOP's not meeting Customs rules & regulations for FTZ
operations;
• Draft the required FTZ Procedures Manual for CBP;
• Map out inventory flows (physical product & data flows)
for EDI configurations
Operational Planning & Execution
• Develop recordkeeping processes in
compliance with CBP’s regulations;
• Determine process, including timing, of
information flow to Customs Broker
• Holding FTZ Awareness training for all
employees of Client
• Draft & Submit the Activation Application to
CBP
• Run 30-Day Mock Operations
For Questions or More Information
FTZ Networks
Wayne Coleman – President, C.O.O.
901-857-5583
wcoleman@ftznetworks.com