With today’s rapidly growing global economy, international companies are constantly investigating how to streamline their operations, reduce costs, and gain a competitive advantage among other businesses in the industry.
One of the many tools available for businesses in this industry is the knowledge and use of Foreign-Trade Zones (FTZs) in the United States.
Understanding the basics of Foreign-Trade Zones and the value they provide is a must for any business looking to excel in international trade and looking to enhance its processes by optimizing costs, time and resources.
What is a Foreign-Trade Zone?
A Foreign-Trade Zone (FTZ) is a designated area within the United States considered outside of normal customs territory. This allows companies to defer or avoid paying certain custom duties and taxes on imported goods.
FTZs are established and operated under the supervision of U.S. Customs and Border Protection, with oversight from the Foreign-Trade Zones Board.
The primary aim of Foreign-Trade Zones (FTZs) is to support U.S. businesses by lowering tariffs and operational costs associated with international trade, thereby creating more opportunities for global commerce.
The FTZ Board reviews and approves applications to establish, operate, and maintain Foreign Trade Zones and one of the factors it considers is whether the zone or subzone seems necessary to serve adequately and make commerce convenient. There are two types of Foreign-Trade Zones:
1. General Purpose Zones
They function as public utilities, offering a range of services and are typically warehouses, industrial parks, or ports.
Within these zones, goods, equipment, and parts can be stored without the immediate payment of U.S. Customs duties.
General Purpose Zones are particularly beneficial for companies that import or export finished products, as they provide shared spaces and often offer additional services such as packaging, inventory control, and logistics support.
2. Special Purpose Subzones
These are Single-use facilities dedicated to a specific company for a particular activity. As their name indicates, they are established when operations cannot be accommodated within the existing Zones.
They are mostly used for large companies that have very specific needs, such as manufacturing plants or distribution facilities that are not close to industrial spaces.
Companies using Special Purpose Subzones are responsible for all financials, maintaining, securing, and operating the building that will be used as an FTZ.
It is important to note that companies operating in Special Purpose Subzones need to apply for permission first, and this can take several months for approval.
The Advantages of Using Foreign-Trade Zones
Some advantages of using a Foreign-Trade Zone include:
Duty Exemption
Goods may be exported from the zone free of duty, without duties or quota charges needed to be paid on re-exports.
Duty Deferral
Customs duties and federal excise tax are deferred on imports until they leave the zone and enter the U.S. customs territory. There is no limit on how long the merchandise can remain in the zone and is not defined even with or without duty owed on the goods.
Duty Reduction (Inverted Tariff)
If manufacturing results in a finished product that has a lower duty rate than the foreign one, the finished product can be entered at a lower rate. Duty is also not owed on labor or profit from the production zone.
Merchandise Processing Fee (MPF) Reduction
The MPF is only paid on goods entering the U.S. customs territory that are not within the Foreign Trade Zone (FTZ). Foreign-Trade Zone users can file all goods shipped from a zone in 7 days as a single entry for reducing fees.
Streamlined Logistics
Imports may be directly delivered to the zone, and a 7-day single entry can be filed as well, saving time and making the import and export process more efficient. This can also reduce transportation expenses and improve inventory control.
Quota Avoidance
For the most part, goods admitted to a zone are not subject to quotas until they enter the U.S., Foreign-Trade Zones allow companies to reduce costs, enhance supply chain efficiency, and become more competitive in the global market.
Where are foreign trade zones?
Foreign-Trade Zones are located near major U.S. ports of entry across the U.S. and for the most part they are located within a 60-mile radius of the U.S. port. FTZs are regulated by the US FTZ Board and the U.S. Customs and Border Protection (CBP).
This way they can be considered outside the customs territory of the United States, allowing companies to delay or reduce duty payments on foreign merchandise brought in. There are over 230 foreign-trade zone projects and almost 400 subzones in the United States.
Foreign Trade Zone in El Paso, Texas
The Foreign Trade Zone (FTZ) in El Paso, Texas, also known as the FTZ 68, is an important area overseen by the City of El Paso. It operates as a General Purpose Zone and manages the Foreign Trade Zone, ensuring compliance with U.S. Customs and Border Protection (CBP) regulations.
FTZ 68 includes the airport zone site, Butterfield Trail Industrial Park, the Air Cargo Complex, and the Global Reach Science & Technology Park. Additionally, there are privately owned properties in different parts of El Paso totaling 2,376 acres that are part of FTZ 68.
EP has an FTZ in El Paso, where clients can maximize the advantages and effective commerce flow, with one of our customs warehouses. Wherever your goods are, being the United States or Mexico, EP Logistics protects them from both U.S. and Mexican customs taxes and duties.
Using a Foreign Trade Zone (FTZ) in El Paso, specifically the FTZ 68, can significantly impact the timeline for importing and exporting goods and streamline the whole customs process, making it easier to manage international trade, saving time by filing U.S. Customs documents weekly rather than daily, and overall simplifying the import and export process of your business.
For Logistic Service Providers (LSPs) operating an FTZ, there are detailed custody, access, shipment release, and record-keeping requirements in place. These standards are clearly defined and can be easily adopted and implemented.
Since most LSPs that operate an FTZ also offer other logistics services and services for their customer base including e-commerce fulfillment, shipment management, customs clearance, or warehousing, among others, companies need to count on the technology that can automate the tasks required to be successful.
Following FTZ Board and U.S. Customs and Border Protection (CBP) guidelines together, your businesses can reduce their compliance burden and minimize potential delays and possible penalties associated with the import/export process.
That is why when thinking about the movement of your goods across borders, there’s no better option than EP Logistics, give us a call and find out how simple your operation can be in the hands of a recognized expert in the area, with over 20 years of experience, numerous certifications, and a strong reputation in international trade across both the U.S. and Mexico.
