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Why Use It?
Firms use trade zones to maintain the cost
competitiveness of their U.S.-based operations compared with their foreign-based
competitors. Zone status provides a firms the opportunity to reduce certain
operating costs associated with a U.S. location that are avoided when operating from a
foreign site. Cash flow savings are achieved by:
- Deferring the payment of Customs duties and excise taxes
until merchandise is shipped from the zone into the U.S. market, or
- Allowing the manufacture, manipulation or assembly of
articles using imported components and paying a lower duty rate for the finished article
than a firm would have paid on the individual components.
This allows firms to warehouse goods in the U.S. at
locations near their markets or distribution centers, while keeping down their inventory
costs. If goods are exported from the zone, no duties or taxes are owed.
Ninety percent of firms using trade zones are U.S.-based
and 75 percent of all merchandise received in trade zones is domestic. Over 2,600
firms use FTZs. In addition, local governments and economic development agencies
have found that establishing a trade zone contributes to an area's commercial
attractiveness.
ADVANTAGES
Exerpts from U.S. Customs
Procedures and Requirements brochure, U.S. Customs:
- Customs duty and internal revenue tax, if
applicable, are paid when merchandise is transferred for consumption
- While in a zone, merchandise is not
subject to U.S. duty or excise tax. Certain tangible personal property is generally
exempt from state and local ad valorem taxes
- Goods may be exported from a zone free of
duty and tax
- Customs procedural requirements are
minimal
- Customs security requirements provide
protection against theft
- Merchandise may remain in a zone
indefinitely, whether or not subject to duty
- The zone user who plans to enter
merchandise for consumption in customs territory may elect to pay either the duty and
taxes on the foreign material placed in the zone or on the article transferred from the
zone. The rate of duty and tax and the value of the merchandise may change as a
result of manipulation or manufacture in the zone. Therefore, the importer may pay
the lowest duty possible on the imported merchandise
- Merchandise under bond may be transferred
to a foreign trade zone from the customs territory for the purpose of satisfying a legal
requirement to export or destroy the merchandise. For instance, merchandise may be
taken into a zone in order to satisfy and exportation requirement of the Tariff Act of
1930, or an exportation requirement of any other Federal law insofar as the agency charged
with its enforcement deems it advisable. Exportation or destruction may also fulfill
requirements of certain state laws
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