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Foreign Trade Zone Frequently Asked Questions

by Mary Rooney | Dec 04, 2018

What is a Foreign-Trade Zone (FTZ)?
Foreign-Trade Zones (FTZ) are secured, designated locations around the U.S. in or near a U.S. Customs Port of Entry where foreign and domestic merchandise is considered to be in international commerce and outside of U.S. Customs territory. Activated companies in an FTZ do not pay import duties until and unless the goods enter the commerce of the U.S. As a result, these companies can reduce or eliminate duty on imports and take advantage of other benefits that encourage firms to maintain and expand their business in the U.S.

What can a company do in an FTZ?
In an FTZ, merchandise may be assembled, exhibited, cleaned, manipulated, manufactured, mixed, processed, relabeled, repackaged, repaired, salvaged, sampled, stored, tested, displayed and destroyed. Retail trade is prohibited.

Are there different types of FTZs?
Yes, General Purpose Zone and Subzone.

  • General Purpose is often an industrial park or port complex which offers facilities for use by the general public. It must be located within 60 miles or 90 minutes from a U.S. Customs office.
  • Subzones are normally single-purpose sites when the operations cannot feasibly be moved to/or accommodated in a General-Purpose Zone. Subzones can be located outside of the 60-mile/90-minute limit. Frequently, this is an established manufacturing or large distribution operation. 3PLs with a physical presence can also be Subzones.

What are the benefits of an FTZ?
Benefits of an FTZ include:

  • Duty deferral - Imported merchandise admitted to an FTZ pays no US Customs Duties until it enters the Commerce of the United States.
  • Duty elimination - Goods may be exported from a zone free of duty and federal excise tax, and goods may be destroyed in a zone without payment of duty and federal excise tax.
  • Duty reduction (inverted tariff relief) - When merchandise is admitted into the zone, the importer may elect a zone status which requires payment of the: 1) Duty rate applicable to either the materials as admitted, OR 2) Duty rate applicable to the finished product as removed from the zone = Whichever is lower.
  • Improved inventory and security processes – There are no duties applicable until goods leave the FTZ and enter the commerce of the U.S.; additional security in FTZ’s reduce theft and insurance premiums; no time limit on length of time merchandise can reside in the FTZ.
  • Reduced Customs and Brokerage Fees - Lower Merchandise Processing Fees (MPF) with “Weekly Entry," quarterly payment of Harbor Maintenance Fees, elimination of “duty drawback” costs.

What is the FTZ territory in Kansas City and who manages it?
The Greater Kansas City Foreign Trade Zone (GKCFTZ) is a regional grantee of the national FTZ program, serving the Kansas City area. GKCFTZ sponsors both Foreign-Trade Zone No. 15, which includes 22 contiguous counties in the western side of Missouri, and Zone No. 17, which includes 9 counties in the eastern side of Kansas.

Quick facts:

  • 531,231,901-sq.-ft. Approved Foreign Trade Zone Space for GKCFTZ
    • Activated FTZ space changes frequently year to year. As of August 2018, it stands at 5,792,832-sq.-ft
    • One of the largest Inland FTZ in the Nation
  • Over 2,800 total full-time employees in GKCFTZ active sites
  • 25 designated FTZ sites, 9 are currently active
  • $1.38B of economic value added to merchandise in GKCFTZ Zones in the form of payroll, overhead, and profit

What industry sectors are typically a good fit for an FTZ?
Companies utilizing an FTZ are typically either a warehouse/distributor or a producer/manufacturer.  Companies in the following industries are the top FTZ operators:

  • Vehicles / vehicle parts
  • Oil/Petroleum
  • Electronics
  • Machinery/Equipment
  • Textiles/Footwear
  • Pharmaceuticals
  • Consumer Products
  • Chemicals

How does a company know what the potential savings will be if they implement an FTZ?
There is an initial analysis that the GKCFTZ produces to identify potential savings based on the company’s current import volumes and value, customs and MPF fees, export volumes, scrap losses, potential for inverted duty and other elements. Included in the analysis, GKCFTZ will also estimate the costs to participate in the FTZ program, which differ based on the size and nature of the FTZ operation. Costs include first year application and activation, personnel training costs, grantee fees and U.S. Customs Bond. If the company decides to move forward with an FTZ, there is an application and activation process that the GKCFTZ would support.

How do I engage the GKCFTZ if I have questions?
Contact Al Figuly, with questions on the FTZ program at any time.

Learn more at www.gkcftz.com.

 

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