Journal of Commerce

15th Annual TPM Conference

Building a Trade

Advantage –

Activation and

Operation of FTZ

An FTZ Operator Success Story

© 2015 Ricoh Electronics, Inc. 1

Ricoh Electronics, Inc.

Providing RICOH Manufacturing

Service in the USA

Ricoh Group Headquarters

© 2015 Ricoh Electronics, Inc. 2

• Company Name: Ricoh Company, Ltd.

• Established: February 6, 1936

• Head Office: Ginza, Tokyo, Japan

• Chairman: Shiro Kondo

• President & CEO: Zenji Miura

• Capital: $1,353 million

• Consol. Net Sales: $21.7 billion

• Affiliated Cos.: 234 companies

• Nbr of Employees: 109,000

• Our global network of production and sales facilities.

■ Sales and Services

● Manufacturing, R&D

Americas Headquarters

European Headquarters

China Headquarters

Ricoh Company, Ltd.

Ricoh Software Research Center (Beijing) Co., Ltd.

Ricoh Electronic Devices Korea Co., Ltd.

Ricoh China Co., Ltd.

Ricoh Electronic Technology Co., Ltd. (China)

Ricoh Imaging Technology (Shanghai) Co., Ltd.

Ricoh International (Shanghai) Co., Ltd.

Ricoh Hong Kong Ltd.

Shanghai Ricoh Digital Equipment Co., Ltd.

Ricoh Asia Industry Ltd.

Ricoh Components Asia (H.K.) Co., Ltd.

Ricoh Asia Industry (Shenzhen) Ltd.

Ricoh Asia Pacific Pte. Ltd.

Ricoh UK Ltd.

Ricoh Europe PLC

Ricoh UK Products Ltd.

Ricoh Thailand Ltd.

Ricoh India Limited.

Ricoh Thermal Media (Wuxi) Co., Ltd.

Ricoh Rus, Ltd.

Ricoh Deutschland GmbH

Ricoh Nederland B.V.

Ricoh Italia Srl

Ricoh España S.L.U.

Ricoh Americas Holdings, Inc.

Ricoh Latin America, Inc.

Ricoh Canada Inc.

IKON Office Solutions, Inc.

InfoPrint Solutions Company, LLC

Ricoh Innovations, Inc.

Ricoh Electronics, Inc.

Ricoh Electronic Devices Shanghai Co., Ltd.

Ricoh Australia Pty. Ltd.

Ricoh Manufacturing (Thailand) Ltd. Ricoh Asia Pacific Operations Ltd.

Ricoh Components Asia (Shenzhen) Co., Ltd.

Ricoh France S.A.S.

Ricoh Industrie France S.A.S.

Ricoh South Africa (Pty) Ltd.

Tustin Plant

Santa Ana Plant

Ricoh Electronics, Inc. Georgia Plant

Ricoh Austria GmbH

Ricoh Ireland Limited Ricoh Polska Sp.zo.o.

Ricoh Finland Oy

Ricoh Schweiz AG

Ricoh Portugal, Unipessoal, Lda

Ricoh Norge A.S.

GR Advanced Materials Ltd.

Ricoh (Singapore) Pte. Ltd.

Ricoh (Philippines), Inc.

Ricoh New Zealand Ltd. Ricoh (Malaysia) Sdn.Bhd.

Ricoh Hungary Kft.

Ricoh Americas Corporation

Ricoh Brasil, S.A.

Ricoh Argentina, S.A.

Ricoh Chile, S.A.

Ricoh Colombia, S.A.

Ricoh Panama, S.A.

Ricoh Costa Rica, S.A.

Ricoh El Salvador, S.A. de C.V.

Ricoh Guatemala, S.A.

Ricoh Mexicana, S.A. de C.V. Ricoh Dominicana, S.A.

Ricoh Puerto Rico, Inc.

Ricoh Taiwan Co., Ltd.

Ricoh Thermal Media (Beijing) Co., Ltd.

Ricoh Belgium N.V.

Ricoh Luxembourg PSF SARL

Ricoh Denmark A/S

Ricoh Sverige AB.

Asia Pacific Headquarters

Ricoh Japan Corporation

Ricoh Group Headquarters

Lanier (Australia) Pty. Ltd.

Shanghai Ricoh Office Equipment Co., Ltd.

Ricoh Production Print Solutions, LLC

© 2015 Ricoh Electronics, Inc. 3

Ricoh Global Network

Ricoh Electronics, Inc.

© 2015 Ricoh Electronics, Inc. 4

• Ricoh Electronics, Inc. (REI) was established in 1973 as the U.S.

manufacturing subsidiary of Ricoh Company Ltd. for the production of

multifunction printers, peripherals, printed circuit boards, parts, continuous

form production printing systems, thermal media, toner, and recycled toner

cartridges.

Ricoh Electronics, Inc.

© 2015 Ricoh Electronics, Inc. 5

Main Operations

California

Multi-Function Printer (MFP), printers, machine accessories, and related supplies, printed circuit boards, & machine parts (press, mold)

Established:

President & CEO:

FY 2015 Forecast sales:

Headquarters:

Employees:

January 30, 1973

Jeffrey Briwick

$1.9B

Tustin, CA

1,088 (includes 220 contingent workers)

© 2015 Ricoh Electronics, Inc. 6

Orange County, CA

Grantee POLB

Subzone 50J

Lawrenceville, GA

Grantee GAFTZ

Subzone 26H

REI Locations

© 2015 Ricoh Electronics, Inc. 7

California Facilities

• Toner cartridge recycling

• Metal stamping/machine parts

• Copier cabinets

• Power coating/painting

Tustin #1 Headquarters

• Digital MFPs

• Printed circuit boards

• Plastic injection molding

Tustin #2

• US Super Configuration

Distribution Center

Tustin #3

Santa Ana #1 • Thermal media

Santa Ana #2 • Continuous Form Production

Printing Systems • Facilities maintenance

• Warehouse

Santa Ana #3

• Multifunction Copier-Based Printer Systems

• Peripherals

• Large Capacity Trays

• New & Recycled Toner & Cartridges

• Printed Circuit Boards

• Printer Parts

• Injection Molding

• Powder Coating

• Metal Stamping

• Tool and Die

© 2015 Ricoh Electronics, Inc. 8

Digital Imaging Products

© 2015 Ricoh Electronics, Inc. 9

Thermal Media Products

Since 1985, these direct thermal paper products have

been manufactured in REI’s foreign-trade zone.

• Shipping labels

• Postal labels

• Assembly tags

• Barcode labels

• Specimen labels

• Pharmacy labels

• Wristband labels

• Shelf labels and tags

• Supermarket food labels

• Airline baggage tags

• Transportation tracking labels

© 2015 Ricoh Electronics, Inc. 10

Thermal Media Products

RECO-View® Re-Writable Media

• Loyalty cards

• Commuter pass

• ID cards

© 2015 Ricoh Electronics, Inc.. 11

Environmental Sustainability

REI has been a zero waste to landfill manufacturer since 2001

2011: Nearly 1,000 solar panels installed at Tustin HQ building

2013 Solar Energy Generation: Plan vs. Actual

0

10,000

20,000

30,000

40,000

50,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Kw

h

Plan

Actual

© 2015 Ricoh Electronics, Inc.. 12

REI’s Foreign-Trade Subzone

The goal of the Foreign-Trade Zone program is to encourage commercial and industrial operations in the United States

that would otherwise have been conducted abroad for Customs reasons, including export activity.

© 2015 Ricoh Electronics, Inc. 13

REI’s Foreign-Trade Subzone

• What is a foreign-trade zone from the operator’s point of view?

A foreign-trade zone (FTZ or Zone) is a defined secure area within

the United States that, for Customs purposes, is treated as if it is

outside U.S. borders to provide various incentives.

• What can be done to merchandise in a zone?

Merchandise admitted into a zone may be stored, exhibited,

repacked, assembled, distributed, sorted, graded, cleaned,

processed, tested, labeled, repaired, mixed with other foreign or

domestic merchandise, manipulated, destroyed or, after granted

specific approval by the U.S. FTZ board, manufactured.

• What is a Subzone?

Subzones are sponsored by General Purpose Zones – like the

Port of Long Beach – and are generally single-company sites for

operations that cannot feasibly be moved to or accommodated

in a General Purpose Zone.

© 2015 Ricoh Electronics, Inc. 14

Benefits to REI of FTZ

• Cash Flow on Duty Deferral: Customs duties and merchandise

processing fees (MPF) are paid only when foreign merchandise is

shipped into U.S. territory. Therefore, inventory is held in the FTZ

without duty payment.

• Inventory Control: The FTZ program requires accurate reporting to

follow foreign merchandise from receipt, through processing (WIP),

and shipment from the zone for entry into U.S. Customs territory or

for export. The high quality of inventory control systems benefits

production systems.

• Production Equipment: Not subject to duty until assembled,

installed, tested, and used in production.

• Storage: No time constraints on storage.

What are Some of the Advantages (Cost Savings) to REI from

Manufacturing in a Foreign-Trade Zone?

© 2015 Ricoh Electronics, Inc. 15

Benefits to REI of FTZ

• Exports: Foreign merchandise in the zone may be re-exported free

of duty.

• Duty Drawback: Unnecessary, as products that remain on site can

be re-exported free of duty.

• Zone-to-Zone Transfer: Duty deferral benefits are available when

transferring product “in bond” from one zone to another.

• Scrap/Waste/Yield Loss/Obsolescence: No duties are paid on most

scrapped product or materials.

• Value-Added: Value added to merchandise in an FTZ is not

dutiable. Customs duties are not owed on labor, overhead and

profit attributed to production operations in the FTZ.

© 2015 Ricoh Electronics, Inc. 16

Calculating the Savings

Duty Avoidance on Exports -

HYPOTHETICAL: REI exports approximately 15% of products

from the zone.

Est. Total Annual Foreign Value ($100,000,000) X

Percentage Exported (15%) X

Average Duty Rate of Imported Product (2.5%) =

Total Annual Duties Saved ($375,000)

Example

$100,000,000 X 15% =

$15,000,000 X 2.5% =

$375,000

© 2015 Ricoh Electronics, Inc. 17

Calculating the Savings

EXAMPLE: REI imports dry toner (which carries a 6.5% duty

rate) from Japan and uses it in the manufacture of a toner

cartridge (which is free of duty) for a multi-function printer. When

the cartridge leaves the FTZ and enters the commerce of the

U.S., the duty rate on the toner drops from the 6.5% toner rate to

the duty free cartridge rate.

By participating in the FTZ program, REI has eliminated duty on

this component and, therefore, reduced the component cost by

6.5%.

An Inverted Tariff Savings Benefit Exists When the Duty Rate for the

Overall Finished Good is Lower than the Duty Rate of the

Component Parts.

© 2015 Ricoh Electronics, Inc. 18

Administrative Savings – Weekly Entry Procedure

Calculating the Savings

• EXAMPLE: Estimating 10 shipments per week, each with a value of

over $140,000, the merchandise processing fees would amount to

$4,850 ($485 x 10) per week. If this figure is annualized, the

amount is $252,200 (52 x $4,850) per year.

• Based on this example, utilizing the Weekly Entry Procedure would

permit the zone user to make just one entry for the week. The MPF

paid by the zone user is just $485 total for the week’s shipments,

which is the single entry maximum amount. If this figure is

annualized, the zone user pays only $25,220 yearly.

• What are the savings?

Using the Weekly Entry procedures, the zone user saves

$226,980 per year.

© 2015 Ricoh Electronics, Inc. 19

Foreign-Trade Zones also benefit the public -

• Help facilitate and expedite international trade.

• Provide special Customs procedures as a public service

to help companies conduct international trade related operations

in competition with foreign plants.

• Encourage and facilitate exports.

• Help attract offshore activity and encourage retention

of domestic activity.

• Assist state/local economic development efforts.

• Help create employment opportunities.

Benefit to the Public

Questions?

© 2015 Ricoh Electronics, Inc. 20

21 © 2015 Ricoh Electronics, Inc.