What is a Foreign Trade Zone?
A United States Foreign Trade Zone (FTZ) is a geographic location within the United States but is considered to be outside of Customs territory. Similar to a Bonded Warehouse, (inside Customs territory) many prerequisites for entry such as quotas are not to be adhered to. Additionally, goods may be transferred to a foreign trade zone with less formality than the bonded warehouse.
What are its advantages?
1. Both Domestic as well as foreign goods may be stored in a foreign trade zone for an UNLIMITED amount of time (for a bonded warehouse only 5 years).
2. Good may be stored, manipulated, processed, and manufactured.
3. Domestic merchandise can be taken from the FTZ duty free. Customs duties are only due on foreign goods when removed from the FTZ and entered into the domestic market (unlike if exported – no duty requirements).
4. Ability to get “PRIVILEGED” status for goods – Dutiabilility based on the condition of the goods and the duty rate when the goods entered the FTZ even though they may have been changed by the time they are withdrawn from the FTZ. Meaning that you can alter the goods in the FTZ whereby they would have been subject to a higher duty rate. However, because they were placed in an FTZ, you the importer only pays the duty rate for the goods when entered in the FTZ.
5. Ability to get “NON-PRIVILEGED” status for goods – Dutiable based upon when the goods were withdrawn from the FTZ. An importer can manufacture goods within the FTZ whereby foreign materials are used to lower the duty rate.