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Foreign-Trade Zone

A 760-acre parcel of land in Auburn, Maine is designated a General Purpose Foreign-Trade Zone, allowing qualifying companies to save money conducting international trade by either eliminating or deferring the payment of tariffs.

Currently, two warehouse operations in Auburn — Savage Safe Handling and NEPW Logistics — offer dedicated space reserved for General Purpose Foreign-Trade Zone use for clients of any size.

What is a Foreign-Trade Zone?

Created by the Federal Government in the 1930s, a Foreign-Trade Zone facilitates trade and increases the global competitiveness of U.S.-based companies.

Legally, a Foreign-Trade Zone (FTZ) is an area within the United States that the Government considers outside the country, or at least, outside of the U.S. Customs territory. Certain types of merchandise can be imported into a Zone without going through formal Customs entry procedures or paying import duties.

Some of the benefits of operating within an FTZ are obvious. At the very least an FTZ can help you defer paying duties. More often, the company pays lower costs, not only to U.S. Customs, but to its bank, insurance company, and other vendors.

For example, each imported item has a unique tariff rate. However, tariff rates on finished and/or value-added goods (i.e. assembled or manufactured products) are often lower than the rates on raw materials or components used in making the finished products. FTZ users often pay a lower rate when the finished product is sold domestically.

FTZ Advantages

  • Improve cash flow
  • Lower inventory costs
  • Defer, reduce and/or eliminate U.S. Customs duties
  • Distribution savings
  • Elect preferential duty rates

Activities Permitted in a Foreign-Trade Zone*

Merchandise entering a Zone may be:

*The user must receive special approval from the FTZ Board for manufacturingTen Ways Your Company Can Benefit From Using a Foreign-Trade Zone

  1. Imports may be admitted and held in a foreign-trade zone without paying U.S. Customs duties.
  2. FTZ users can pay the duty rate on component material or merchandise produced from component material, whichever is lower.
  3. Customs duties are never paid on merchandise exported from a zone.
  4. Duties are reduced or eliminated on materials subject to defect, damage, obsolescence, waste or scrap.
  5. Merchandise may be exported and returned to an FTZ without duty payment.
  6. Spare parts may be stored, returned, or destroyed without duty payment.
  7. Delays in Customs clearances and duty drawback are eliminated.
  8. Duties are not owed on labor, overhead, or profit attributed to FTZ production operations.
  9. Quality control inspections can identify sub-standard goods to be destroyed or returned without duty payment.
  10. 10.  No duty is owed on in-bond, zone-to-zone transfer of FTZ merchandise.

Some Companies That Use Foreign-Trade Zones:

ATOFINA Petrochemicals, Inc.
BMW Manufacturing Corp.
Caterpillar Inc.
Conair Corporation
Conoco Phillips
Eastman Kodak
JVC America, Inc.
Kawasaki Motors Manufacturing Corp.
Motiva Enterprises LLC
Northrop Grumman
The Premcor Refining Group
Wyeth Nutritionals, Inc.

For more information contact gmdycio@economicgrowth.org

SOURCE: The National Association of Foreign Trade Zones