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Foreign-Trade Zones
A Foreign-Trade Zone (FTZ) is a site within
the United States, in or near a U.S. Customs Port of Entry, where foreign
and domestic merchandise is generally considered to be in international
commerce (i.e., outside of U.S. Customs territory).
Foreign or domestic merchandise may enter a
Foreign-Trade Zone without a formal Customs entryor the payment of Customs
duties or government excise taxes. Merchandise entering a Zone may be:
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Stored |
Displayed |
Manipulated |
Processed |
Mixed |
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Sampled |
Repaired |
Cleaned |
Assembled |
Tested |
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Salvaged |
Destroyed |
Relabeled |
Manufactured |
Repackaged |
If the final product is exported, no U.S.
Customs duties or excise taxes are levied. If the final product is imported
into the United States, Customs duties and excise taxes are due only at the
time of transfer from the FTZ. The duties paid are the lower of those
applicable to the final product itself orits component parts (inverted
tariff option).
Foreign-Trade Subzones may be established to extend FTZ benefits
to individual manufacturing firms at their existing plant locations.
The purpose of Foreign-Trade Zones and
Subzones is to stimulate international trade and create jobs and investment
in the United States rather than abroad.
Considerations for Using a Foreign-Trade Zone or Subzone
A Company should consider Foreign-Trade Zone
use if any of the following conditions exist:
1. Imported merchandise is subject to U.S.
Customs Duty.
2. Imported merchandise is to be stored for
an uncertain period of time.
3. Imported merchandise needs to be
inspected, repaired, destroyed, repackaged, marked, or relabeled before
entry into the domestic market or for re-export.
4. Imported merchandise is subject to U.S.
quota restrictions.
5. Products are assembled, manipulated,
processed, or manufactured using imported materials or a combination of
imported and domestic materials.
6. An inverted tariff situation exists for
the finished product (i.e., duty rates are higher for imported components
of the finished product than they would be for the finished product
itself).
7. All or part of the imported merchandise
will be re-exported.
8. Imported merchandise is commonly
displayed to potential buyers prior to purchase.
Grantee of FTZ #121
CAPITAL DISTRICT REGIONAL PLANNING COMMISSION
5 Computer Drive West, 2nd Floor, Albany, New York 12205
Phone 518/453-0850 Fax 518/453-0856 E-Mail cdrpc@cdrpc.org
Web Site at
http://www.cdrpc.org
Advantages of Using a Foreign-Trade Zone or Subzone
Foreign-Trade Zone Status may provide some or all of the
following benefits:
1. Cash flow and interest expense savings related to
postponement of Customs duty and excise tax payments.
2. Elimination of Customs duty on items which are
re-exported.
3. Avoidance of Customs drawback process (i.e., applying
for a rebate of previously paid Customs duty on foreign-sourced items
which are re-exported).
4. Inverted tariff option (i.e., selecting the lower of
the raw material or the finished product duty for foreign-sourced
components of goods sold domestically).
5. Made in U.S.A. marking.
6. Repair or destruction of defective foreign goods within
the Zone.
7. Expedited Customs clearance.
8. Better security.
9. Reduction in insurance, bond, and transportation costs.
10. Avoidance of quotas (in very limited cases).
11. Exhibition (Trade Mart).
Foreign-Trade Subzone Application Process
1. The Firm submits a petition to CDRPC with a $1,000
processing fee, which may be credited towards CDRPC charges for technical
assistance in the event the firm submits a FTZ application.
2. The Firm prepares an application with CDRPC assistance
or using consultants.
3. CDRPC submits the application to the Foreign-Trade
Zones Board on behalf of the Firm. FTZ Board application fees are $4,000
for non-manufacturing or manufacturing/ processing with fewer than 3
products, and $6,000 for manufacturing/processing with 3 or more products.
The normal time from application submission to Subzone activation is 12
months for manufacturing reviews.
4. The FTZ Board staff conducts a preliminary review of
the Subzone application.
5. The FTZ Board publishes a notice of the application in
the Federal Register and solicits public comments.
6. The FTZ Board approves the application if all
requirements are met and issues a grant of authority for the Subzone.
7. The Company and CDRPC execute a Grantee-Operator
Agreement, which includes an annual service fee payable to CDRPC to cover
expenses involved in maintaining the Foreign-Trade Zone.
8. The Company applies to the U.S. Customs Service Albany
District Office for Subzone activation after a review of inventory and
security systems.
9. Final approval by the Customs Service and activation of
Subzone operations.
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