There can be no question that fostering international commerce has led to a greater prosperity for countries across the globe. Limits on that trade place a chokehold on that prosperity, whereas free trade helps to encourage it. Agreements that protect free trade help to open up new markets, create better jobs, increase investment globally, spread goods and services and encourage open discussion of ideas. Here are a few of the advantages you will see between countries with Free Trade Agreements.

Increases in Production

Free trade encourages companies and regions to focus on creating the goods or services that they are best at producing, which in turn increases their ability to produce. It also creates more demand for the products and services produced, which encourages companies to increase the size of their production space, the number of workers and their overall output.

Economic Development

Free trade helps economies to grow by giving an increase in market share and sales to companies and regions that are willing to take the risks associated. Larger countries like the United States see significant economic improvement when they participate in free trade, and that growth inevitably improves the economies of smaller countries that are open to trade.

International Cooperation

Free trade agreements force countries and companies to comply with all terms and laws that have been agreed upon. Should a country choose to operate contrary to those agreements, they will ultimately lose business and investors because they will be seen as a larger risk than those which do comply with agreement terms.

Improved Global Resource Allocation

Resources are not evenly distributed even within a single country, much less across the globe. Free trade agreements help to encourage the distribution and allocation of global resources through trade. Countries are able to export their excess products and import the resources they need. Imports typically will suppress inflation because each product will inevitably come from the very best source.

Strong Business Incentives

Free trade agreements open up the market and provide businesses with strong incentives as well as protections. The agreements typically will include commitments to protect intellectual property rights, open regions to free competition and protect labor rights. They help to maintain or improve environmental standards and facilitate the speed and accuracy of customs procedures. Exporters in a free trade agreement typically improve their technologies and create better jobs in order to compete better within the market.

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.

What Is a Foreign Trade Zone?

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.

What Merchandise Can Be Included in an FTZ?

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.

Is a Foreign Trade Zone Right for Your Business?

Read more: Town of Islip| FTZ Authority

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.

Admission

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.

Direct Delivery

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.

Duty Drawback

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.

Foreign Trade Zones Board

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.

Grantee

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.