If your business is already benefiting from some type of customs tariff-reduction program, you may want to look into moving your operations to a Foreign Trade Zone (FTZ). Doing so will likely save you money, streamline your operations, reduce your paperwork and improve your overall market competitiveness and flexibility.
Below are answers to a few basic questions about FTZs and how they can benefit your business.
An FTZ is a designated site (usually near a customs port of entry) where foreign or domestic items are allowed to enter the United States without the payment of normal customs duties or government taxes. This helps global firms with US-based operations become more competitive on the world economic stage. FTZ tax breaks and other benefits offset the higher cost of doing business in the United States versus a foreign country, which usually has more affordable labor rates and cheaper real estate.
Only items that can be lawfully imported in the United States are allowed to enter Foreign Trade Zones in the country. Illegal merchandise (such as drugs and some types of weapons) that is banned from entering any of the country’s ports is not allowed in an FTZ.
Some FTZs are not licensed or equipped to handle dangerous or specialty items such as explosives. In this case, such materials will not be allowed into FTZs that are not designated to receive said items. The Foreign Trade Zone Board, which oversees FTZs, may also block the entry of any merchandise that it deems potentially harmful or detrimental to public health and interest.
Foreign Trade Zones can be highly beneficial to companies and parties involved in international trade. Here are essential FTZ terms you may find useful in order to help you understand and maximize the benefits of operating in an FTZ.
This refers to the physical arrival of approved items in a zone. The use of the word ‘admission’ is preferred over ‘entry’ to prevent confusion with Customs entry processes.
Some merchandise can be delivered to a zone without prior approval from Customs. These are generally low-risk goods deemed appropriate for quick and efficient delivery by the Port Director.
When imported materials that enter an FTZ are used in the manufacture of items which are later exported, the government compensates the company by repaying its import duties. These are called drawback taxes. It is one type of a tariff-reduction tool used by the Customs Department to encourage businesses to use FTZs.
This is the government body that reviews and approves applications for the establishment and operation of FTZs according to the terms and provisos of the Foreign Trade Zones Act of 1934.
A grantee is an entity that has been given the right and privilege to create and maintain an FTZ by the Foreign Trade Zones Board. Grantee corporations must be public corporations and may include municipalities, public agencies or parties organized for the expressed purpose of setting up a zone project.
In addition to fostering international commerce, Foreign Trade Zones can be highly beneficial to a number of companies and public interest groups involved in the import-export business. At Islip FTZ 52, we can assist your company with commercial property leases, finding Long Island warehouse space, duty-free trade and several other domestic or international trade issues. We have more than three decades of experience in the field; let us help you achieve the success you desire for your company.