How to Save
Manufacturing and Processing Companies
A manufacturer can take special advantage of an FTZ to reduce tariff exposure.
When components are imported and admitted into a Foreign-Trade Zone, they can be manufactured into a new product for re-export or sale in the U.S. In these cases, the importer may elect to apply the finished-product duty rate, or the imported-component duty rate -- whichever is lower. When the finished-product rate is lower than the imported-component rate, the importer can save the difference between the two rates. Example of manufacture/processing model...
If a distribution facility is importing in large quantities, holding inventory for long periods of time, or is facing high duty rates, using a zone can improve cash-flow and money management.
Merchandise Processing Fee
Customs assesses a "merchandise processing fee" (MPF) per entry which is calculated as 0.21% (.0021) of the full declared value of the merchandise, up to a maximum of $485. Foreign-Trade Zones are required to submit only one entry per week for all shipments from the zone, instead of filing multiple entries and paying for each individually. Example of distribution model...
Reject, Scrap, and "Consumed" Merchandise
Imported merchandise which is admitted into a zone and then rejected, scrapped, or consumed in the zone, is not assessed any customs duties. Also, duties are reduced significantly for all merchandise which is scrapped through a manufacturing operation in a Foreign-Trade Zone, and then sold from the zone as commercial scrap.
While duties are eventually assessed on imported merchandise shipped to U.S. locations from Foreign-Trade Zones, these duties are deferred while the merchandise remains in the zone. The time that duty is paid is moved from the date of importation to the date of shipment from the zone. By deferring payment to nearer the time of actual sale, savings can be significant.
Imported merchandise which is admitted into a zone and then shipped to another U.S. Foreign-Trade Zone can be shipped duty-free with the receiving zone's concurrence. As duty-free transfers, zone-to-zone shipments allow both the shipping zone and the receiving zone to reduce their duty exposure. Duties are eliminated completely on imported components which are trans-shipped through several zones and eventually re-exported.