Overview of Ftzs

2013 PointTrade Services, Inc. 1

Presented by:

Cornelia Steinert

Sr. Manager

An Overview of

Foreign-Trade Zones


is a restricted-access site, in or adjacent to a

Customs port of entry, operated pursuant to

public utility principles under the

sponsorship of a corporation granted

authority by the Board and under

supervision of U.S. Customs & Border

Protection (15 CFR Part 400 - Regulations of the Foreign-Trade Zones

Board)

A Foreign-Trade Zone


In Laymans terms.

An area considered to be outside of the commerce of the United States

Goods can be brought into the zone and be stored, manipulated, cleaned,

repaired, destroyed, mixed, processed,

relabeled, and tested while remaining in

the foreign-trade zone in duty free status


CBP & FTZ Board Cooperation

Foreign-Trade Zones are established under a grant of authority from the

Foreign-Trade Zones Board

Customs and Border Protection must provide concurrence

Customs and Border Protection provides on-going oversight


Some Quick Statistics

2,800 firms used foreign-trade zones in the United States in FY 2011

Over 340,000 jobs in the United States are directly related to foreign-trade zones

(in FY 2011)

Source: 73rdAnnual Report of the Foreign-Trade Zones Board to

Congress (2011)


Some Quick Statistics

As of 2011, there were 171 FTZs active during the year and 269 active

manufacturing/production operations in

the U.S. (including Puerto Rico)

As of 2011, receipts were valued at $641 billion dollars

Exports from FTZs amounted to over $54.3 billion dollars

Source: 73rd Annual Report of the Foreign-Trade Zones Board to

Congress (2011)


FTZ Savings in many areas:

Significant duty deferral on average inventory first year; capital cost each year thereafter

Significantly reduce customs broker fees and merchandise processing fees

Duty elimination on exports, scrap Reduce/eliminate drawback process Duty reduction (inverted tariff relief) for manufacturing zones Enhanced Global Supply Chain efficiencies Increased Import/Export Compliance Local ad valorem tax exemption on inventory may be possible

(KY, TX, AZ, OH)


Bonded Warehouse

Five year limit

Formal entry required

No MPF savings

Continuous shipping is

cumbersome

Foreign-Trade Zone

No time limit

Ideal for repetitive processing

MPF savings

No drawback needed

Savings on waste items

Easy documentation

Bonded Warehouse vs. FTZ


FTZ Benefits Overview

1. Reduce Costs

(Taxes, Fees, Administrative Costs, Fines, etc.)

2. Improve Supply Chain Efficiencies

3. Support Customs Compliance and Cargo

Security Efforts

Companies across many industries utilize the FTZ program


Duty Deferral

Imported products admitted to the FTZ are

not entered into the Customs territory until

their withdrawal from the FTZ.

Therefore, users obtain a cash flow savings

by deferring Customs duties until the

merchandise leaves the FTZ for

consumption in the U.S.


Spark plug Dutiable at 2.5%

Admitted to FTZ

Withdrawn from FTZ for entry into

U.S. commerce

2.5% Duty Paid

Duty Deferral Example 1

Zone to U.S. Commerce

Zone-to-Zone Transfers:

Duty deferral benefits may be

further extended by transferring

merchandise from zone to zone.

Stored in FTZ - Duty Deferral


Certain duty deferral and reduction benefits

also apply on production equipment

admitted to the FTZ for assembly and

testing prior to use in production.

Reduces importing costs, CHB fees, MPF, CBP delays on manifesting

requirements for individual containers

Examples: racking systems, conveyors, new lines of production

including manufacturing

Production Equipment


Zone-to-Zone Transfer

If the company utilizes more than one FTZ,

merchandise may be transferred from zone

to zone in order to extend the deferral

benefits further.

This benefit can be implemented up and

down the supply chain by incorporating the

activities of suppliers and customers.


Duty Elimination

Goods may be exported from a zone free

of duty and federal excise tax

Goods may be destroyed in a zone

without payment of duty and federal

excise tax


Stored in FTZ - Duty Deferral

Withdrawn from FTZ for export

No duty payment -

eliminates drawback process

Duty Elimination

Zone to Foreign Market Spark plug

Dutiable at 2.5%

Admitted to FTZ


Received at warehouse and determined

to be damaged beyond repair

Destroyed in the FTZ under permit

no commercial value; no duty paid

Duty Elimination

Destruction Spark plug

Dutiable at 2.5%

Admitted to FTZ


Duty Reduction

(Inverted Tariff Relief)

With approval from the Foreign-Trade Zones Board, when merchandise is admitted into the zone, the importer may elect a zone status that requires payment of the:

Duty rate applicable to either the materials as admitted,

-- Or --

Duty rate applicable to the finished product as removed from the zone

--depending upon which is lower

Only applicable to zones conducting production activity


Inverted Tariff Example

Windshield Dutiable at 4.9% Admitted to FTZ

Withdrawn from FTZ for entry into U.S. commerce 2.5% Duty Paid

Used in production in FTZ

Finished Product (Automobile) Dutiable at 2.5%

2.4% Savings

*Duty rates for example only


Direct Delivery &

Weekly Entry/Export

From a just-in-time inventory perspective, the FTZ

program offers significant benefits. Goods move in

and out of the facility on an expedited basis

allowing for a seamless supply chain from vendor to

customer without maintaining unnecessarily high

levels of inventory.

Users may obtain permission from Customs to

move merchandise directly from the port of arrival

to the FTZ without undergoing commercial

selectivity exams.


Other Benefits

Commingling of foreign and domestic merchandise

Lower Administrative Costs

Lower Security and Insurance Costs

No Time Constraints on Storage

Improved Inventory Control through use of FIFO

Recordkeeping Identity vs. Specific Identity (Fungibility)


Direct Delivery Benefits

Reduces CBP inspections and delays at the border/docks 24/7 cross-dock, receiving e-movements to FTZ (paperless and automated; e-214)

Weekly Entry Benefits

Cross-dock/shipping out of the FTZ 24/7 One Estimated CBPF 3461 in advance of withdrawals / One CBPF 7501

Entry Summary five days after close of the seven-day period

Reduces MPF/Customs Broker fees

Weekly Export Benefits

24/7 Cross-dock / export to foreign markets e-process, Denied Party review

Lean Supply Chain and

Import/Export Compliance


Start up costs to consider:

Security modifications

FTZ Bond

Annual FTZ grantee fee

Application preparation charges (designation, production authority,

activation)

Software


FTZ Summary

Foreign-trade zones offer incentives for

U.S. distributors and manufacturers.

Many U.S. manufacturing plants face

competitive situations which can quickly

change or evolve.

Foreign-trade zones are advantageous and

offer a good return on investment as well as

a level playing field on which to compete

against foreign sources.


SIGNIFICANCE OF THE

ALTERNATIVE SITE FRAMEWORK

(ASF)


Alternative Site Designation &

Management Framework

The FTZ Board implemented an alternative framework for participating grantees to designate

and manage their general-purpose FTZ sites

The Alternative Site Framework (ASF) offers greater flexibility and predictability for a

participating grantee to use administrative minor

boundary modifications to modify FTZ sites

Greater flexibility is made possible by participating grantees increased focus on the FTZ sites needed

for current or near-term zone activity, with a

resulting improvement in the efficiency of FTZ

oversight by government agencies


Traditional vs. Alternative

Framework Traditional FTZ Framework

Designation via:

Submission of application for FTZ Board action

Generally 10 month process

Greater documentation requirements

Submission of request for administrative minor boundary

modification for FTZ Board

action

Generally 30 day process

Involves swapping like properties from existing sites

Alternative Site Designation

& Management Framework

Designation via: Once approved for ASF,

generally 30 day process

Simplified and rapid minor boundary modification actions

Enhanced ability to respond quickly to evolving FTZ-related

needs of community

Magnet sites

Usage-driven sites

Subzones

Eliminates need to swap like amounts of acreage from

existing sites


Service Area

Geographic area for which Grantee intends to be able to propose FTZ sites

Must be consistent with state enabling legislation and grantee organizations charter

Must comply with the FTZ Boards adjacency requirements (within 60 miles/90 minutes drive

from CBP port of entry boundaries)


Magnet Sites

Selected by Grantee for ability and readiness to attract multiple FTZ users

Generally, six or fewer simultaneously existing magnet sites; more if justified

One site designated as anchor/permanent site

Designated through application for FTZ Board action (reorganization application)

Subject to sunset time limits (five years), which would self-remove FTZ designation from a site not

activated before the sites sunset date


Usage-Driven Sites

Serves companies not located in a magnet site

For companies ready to pursue activity under FTZ procedures

Limited to areas required by companies specifically identified as ready to pursue zone activity

No specific limit on number of usage-driven sites

Designated through minor boundary modification process

Subject to sunset time limits (three years), which would self-remove FTZ designation from a site not

used for FTZ purposes before the sites sunset date


ASF Reorganization

Application

The standard processing time is 8 to 10 months.

Expedited processing is possible based on public- interest and/or on the relative simplicity of the

analysis generally required.

Expedited processing within 6 to 8 months is possible for ASF reorganization applications that do

not involve the addition of new Magnet sites.


FTZ # 93 Status

ASF approved 12/11/2012

Counties covered: Chatham, Durham, Franklin, Granville, Harnett, Johnston,

Lee, Moore, Orange, Peron, Vance, Wake

and Warren Counties


Usage-Driven MBM

Applications

Complete requests for minor boundary modifications (MBM) generally processed within

30 to 45 days

Does not entail a property swap (as was required under the traditional site framework)

A separate production notification will need to be filed

for production activity


Production Notification

A Production Notification will need to be filed with the FTZ Board if

manufacturing, or processing will take

place in the FTZ

Under newly published FTZ regulations, non-controversial applications may be

approved within 120 days by FTZ Board.


Contact Us

4807 Colley Avenue

Suite 9

Norfolk, VA 23508

Cornelia Steinert

Sr. Manager

Tel: (757) 489-0475

[email protected]

www.pointtradeservices.com

Documents

Overview of Ftzs