Foreign Trade Zones Promote US Investment Manufacturing and Exports
-
Upload
virtual-uli -
Category
Documents
-
view
245 -
download
6
description
Transcript of Foreign Trade Zones Promote US Investment Manufacturing and Exports
![Page 1: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/1.jpg)
Foreign‐Trade Zones gPromote U.S. Investment,
Manufacturing and Exports
Wednesday,
October 13
10:45 a.m. ‐ 12:00 p.m.
![Page 2: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/2.jpg)
Foreign-Trade Zones Promote U.S. InvestmentManufacturing & Exports
Presented By:Presented By:
Brandi HanbackManaging Director
Rockefeller Group Foreign Trade Zone ServicesVice President of Trade & Logistics
Rockefeller Group Development Corporation
October 13, 2010www.rgftz.com
![Page 3: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/3.jpg)
Agenda
Background on FTZsBackground on FTZsFinancial Benefits & Savings AnalysisFederal DesignationFederal DesignationActivation & OperationKey Industries & UsesKey Industries & Uses
3
![Page 4: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/4.jpg)
Background on FTZs
![Page 5: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/5.jpg)
What is a Foreign-Trade Zone?
Physical location where U.S.-based companies import and exportA Secure Area Located in or near a Customs Port of EntryEntryLegally Outside the U.S. Customs Territory In a FTZ Merchandise may be: assembledIn a FTZ Merchandise may be: assembled, exhibited, cleaned, manipulated, manufactured, mixed, processed, relabeled, repackaged, repaired, salvaged, sampled, stored, tested, displayed,& destroyedRetail Sale is Prohibited
5
![Page 6: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/6.jpg)
Establishment of FTZs
Foreign-Trade Zones were created through federalForeign Trade Zones were created through federal legislation in 1934 to:
Encourage and expedite U S participation in international tradeEncourage and expedite U.S. participation in international tradeFoster dealing in foreign goods imported not only for domestic consumption but also for export after combining with domestic goodsgoodsDefer payment of duties only until goods are entered into the commerce of the U.S.FTZ Designation obtained through application by Grantee to g g pp ythe U.S. Foreign-Trade Zones BoardFTZ Activation is achieved through application to local Port Director of U.S. Customs & Border Protection
6
![Page 7: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/7.jpg)
FTZ – A Trade Program
Concept unsuccessfully introduced in the U S Senate inConcept unsuccessfully introduced in the U.S. Senate in 1894
Successfully reintroduced in 1934 as part of The New Deal
H.R. 9322: “to provide for the establishment, operation, and maintenance of FTZs in ports of entry of the United States to expedite and encourage foreign commerce ”States, to expedite and encourage foreign commerce.
7
![Page 8: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/8.jpg)
Types of FTZs
General Purpose ZoneGeneral Purpose Zone Often an industrial park setting or port complex Designed as multi-purpose or for use by multiple companies 1 GPZ b i d f lti l it1 GPZ may be comprised of multiple sitesServes as the sponsoring zone for the subzone
SubzoneNormally single or specific purpose sites Often isolated manufacturing locations or dedicated distribution centerscentersOperations cannot feasibly be moved to or accommodated in a general purpose zone
8
![Page 9: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/9.jpg)
Key Statistics
Approx $692 billion in merchandise is received atApprox. $692 billion in merchandise is received at US FTZs annually (foreign and domestic)Approx. 60% value received is domestic or foreign pp gduty paidApprox. $40 billion exportedApprox. 330,000 persons are employed by firms operating under FTZ proceduresThere are over 250 approved general purposeThere are over 250 approved general purpose zones and over 450 approved subzones
9
![Page 10: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/10.jpg)
The Public/Private Partnership: GranteeGrantee
A public or private entity (port authorities, city/county p p y (p , y yeconomic developers)Serves as the public representative of the zone
jproject May operate the zone or contract the responsibility to another partyto another partySubmits applications for zone modifications and subzones to the Foreign-Trade Zones Board, a sub o es to t e o e g ade o es oa d, afederal independent agency housed within the U.S. Department of Commerce
10
![Page 11: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/11.jpg)
The Public/Private Partnership: OperatorOperator
May be a private corporation or the granteeMay be a private corporation or the granteeOperations can include warehousing, storage, transportation, distribution, and manufacturing Operators provide day-to-day oversight of zone activities that may include record keeping, marketing and providing technical expertisemarketing, and providing technical expertiseA company may choose to be the Operator of its own facility (Operator/User) orown facility (Operator/User) orContract out to a Third Party Logistics provider (3PL)FTZ Operator’s Bond holder
11
![Page 12: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/12.jpg)
The Public/Private Partnership: UserUser
Users (also known as tenants) are those persons orUsers (also known as tenants) are those persons or firms using a zone or subzone for storage, handling, or manufacturingUsers can also be operators Users include large distribution operations, manufacturers processing operations testing andmanufacturers, processing operations, testing and repair facilities, repackaging operations, etc.User is typically the Importer/ExporterUser is typically the Importer/Exporter
12
![Page 13: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/13.jpg)
FTZ Program Key Organizations
Foreign-Trade Zones Board (FTZB)g ( )Created by the FTZ Act of 1934Issues grants of authority to establish, operate, and maintain FTZsMembers consist of the Secretaries of Commerce and Treasury
Secretary of CommerceSecretary of CommerceChairman of the FTZ BoardAppoints the Executive Secretary of the BoardAndrew McGilvray is the Executive Secretary
Secretary of TreasuryCustoms carries out most duties of the Secretary of TreasuryPrepares and implements rules and regulationsAssigns necessary Customs officers to perform zone related workAssigns necessary Customs officers to perform zone related workThe Port Director oversees the zone as a representative of the BoardAs of March 1, 2003, the U.S. Customs Service became the Bureau of Customs & Border Protection under the U.S. Department of Homeland Security
13
![Page 14: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/14.jpg)
Duties of the FTZ Board
Issues grants to establish, expand, operate, and maintain Issues grants to establish, expand, operate, and maintain FTZsPrescribes rules and regulations to establish and operate zoneszonesRequires submission of reports regarding information related to zone operationsMakes an Annual Report to Congress on the operation and fiscal condition of each zoneInspects and examines the premises, operations, or p p , p ,accounts of zone grantees and operatorsRevokes the grant of any zone for willful and repeated violations of the FTZA after due notice and a hearingviolations of the FTZA after due notice and a hearing
14
![Page 15: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/15.jpg)
Executive Secretary
Chief operating official of the Boardp gRepresents the Board in all administrative, regulatory, and operational matters within its purviewInitiates recommendations to the Board for overallInitiates recommendations to the Board for overall administration of the FTZAConduct direct monitoring of zone activityMaintains custody of records files correspondence andMaintains custody of records, files, correspondence, and official seal of the BoardApproves boundary modifications with concurrence of the appropriate Port Directorappropriate Port DirectorAccepts rate schedules and determines their sufficiency under the regulations
15
![Page 16: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/16.jpg)
Role of Customs
Principal Interests and ConcernsPrincipal Interests and ConcernsControls merchandise moving to/from a zoneEnsures that all revenue is properly collectedEnsures adherence to the laws and regulations governing theEnsures adherence to the laws and regulations governing the merchandiseEnsures that merchandise has not been overtly or clandestinely removed from the zone without proper Customs permit
Port Director’s RoleOversees the zone as the Board representativeReviews port policy and comments on applicationsAssesses penalties and liquidated damagesInitiates suspension, if necessaryRecommends revocation to FTZ Board, if necessary
16
![Page 17: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/17.jpg)
Financial Benefits of FTZsFTZs
![Page 18: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/18.jpg)
FTZs: Reduce Costs/Move Trade
Duty DeferralDuty Elimination on Exports & ScrapDuty Reduction (inverted tariff relief) for manufacturing zones onlymanufacturing zones onlyLocal Ad Valorem Tax Exemption on inventoryAdministrative savings and expedited flow due toAdministrative savings and expedited flow due to flexible Customs procedures, consolidatedreporting, reduced brokerage and government feep g g g
18
![Page 19: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/19.jpg)
Duty Deferral
Customs duty and federal excise tax paid only whenCustoms duty and federal excise tax paid only when merchandise is transferred from an FTZ to U.S. Customs territory for consumptiony p
Deferral savings can be significant particularly inDeferral savings can be significant particularly in First-In, First-Out inventory tracking environments and when implemented up and down the supply chain
19
![Page 20: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/20.jpg)
Duty Deferral—Example 1Zone to U.S. Commerce
Auto PartsDutiable at 2.5%Admitted to FTZAdmitted to FTZ
Stored in W h fWarehouse for Unlimited Time
Withdrawn from FTZ for Entry into U S CommerceEntry into U.S. Commerce2.5% Duty PaidDuty Deferral 20
![Page 21: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/21.jpg)
Duty Deferral—Example 2Zone-to-Zone Transfer
Auto PartsDutiable at 2.5% Admitted to Zone 1
Stored in Warehouse 1 forWarehouse 1 for
Unlimited Time
Transferred to Zone 2In-Bond and Stored in Warehouse Duty Paid Upon Removal from y pZone 2 - Entry into U.S. Commerce
21
![Page 22: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/22.jpg)
Duty Elimination
Goods may be exported from a zone free of dutyGoods may be exported from a zone free of duty and federal excise tax
Goods may be destroyed in a zone without payment of duty and federal excise taxof duty and federal excise tax
22
![Page 23: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/23.jpg)
Duty Elimination/Zone to Foreign MarketZone to Foreign Market
Auto PartsDutiable at 2.5% Admitted to FTZAdmitted to FTZ
Stored in W h fWarehouse for Unlimited Time
Withdrawn from FTZ for ExportNo Duty Payment
23
![Page 24: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/24.jpg)
Duty Elimination/Destruction
PensDutiable at 0.8¢ each + 5.4%Admitted to FTZ
Received at warehouse andwarehouse and
determined to have no commercial
valuevalueDestroyed in the FTZ; no entry into commerce/ No Duty Paid
24
![Page 25: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/25.jpg)
Duty Reduction (Inverted Tariff)
With approval from the Foreign-Trade Zones Board whenWith approval from the Foreign Trade Zones Board, when merchandise is admitted into the zone, the importer may elect a zone status that requires payment of the:
Duty rate applicable to either the materials as admitted,
OR
Duty rate applicable to the finished product as removed from theDuty rate applicable to the finished product as removed from the zone, depending upon which is lower
25
![Page 26: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/26.jpg)
Duty Reduction/Inverted Tariff Wind Turbine Parts valued at $10,000Average Duty at 5%Average Duty at 5% Without FTZ$10,000 * 5% = $500 duty owedowed
Manufactured intoManufactured into Finished Wind
TurbineDutiable at 2 5%Inverted Tariff: Value of Dutiable at 2.5%parts are multiplied by duty
rate of finished product to determine duty$10 000 * 2 5% $250 d t$10,000 * 2.5% = $250 duty owed
26
![Page 27: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/27.jpg)
B2B SEAMLESS TRANSACTIONS: Reducing Supply Chain Cycle Timesg pp y y
Direct DeliveryExpedites arrival of goodsEli i t /d lEliminates exams/delays
Weekly Entry Expedites departure of goods
FTZ Activated Area:Expedites departure of goodsReduces paperwork/recordkeepingReduces MPFReduces broker fees
Weekly ExportExpedites departure of goodsReduces paperwork/recordkeepingReduces broker fees
In Gate A:Out Gate B:
Reduces broker fees
= Lower Inventory Levels 27
![Page 28: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/28.jpg)
Hypothetical FTZ Hypothetical FTZ Savings AnalysisSavings AnalysisSavings AnalysisSavings Analysis
![Page 29: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/29.jpg)
Hypothetical FTZ Savings:
Annual Savings Include:Annual Savings Include:
Duty on Exports/Scrap One-Time Duty Deferral on Average Foreign Inventory On-HandI t t A F i I t O H dInterest on Average Foreign Inventory On-HandInverted Tariff SavingsAd i i t ti t d t li i ti fAdministrative costs due to elimination of drawback, fewer entries, reduced merchandise processing fees lower brokerage feesprocessing fees, lower brokerage fees
29
![Page 30: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/30.jpg)
Hypothetical FTZ Savings
ASSUMPTIONS:ASSUMPTIONS:
Value of Foreign Dutiable Purchases = $25,000,000V l S bj t t I t d T iff $15 000 000Value Subject to Inverted Tariff = $15,000,000Value Not Subject to Inverted Tariff = $10,000,000
Inventory Turnover = 4 per yearInventory Turnover = 4 per yearValueless Scrap = 2%Average Duty Rate of Imported Parts = 4%Average Duty Rate of Imported Parts 4%Average Duty Rate of Finished Prod. = 2%Foreign Inventory Re-exported = 10%Foreign Inventory Re exported 10%
30
![Page 31: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/31.jpg)
Hypothetical FTZ Savings Exports/Scrapp p
Duty Owed Without FTZ Benefits:Duty Owed Without FTZ Benefits: $25,000,000 x 4% = $1,000,000
Duty Saved With FTZ Benefits:$25,000,000 x 4% x 2% (scrap) = $20,000
$25,000,000 x 4% x 10% (re-export) = $100,000
31
![Page 32: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/32.jpg)
Hypothetical FTZ SavingsOne-Time Duty Deferraly
Average Inventory On-Hand:Average Inventory On Hand:$25,000,000 ÷ 4 = $6,250,000
$$6,250,000 x 4% = $250,000
**No Duty Collected on Average On-Hand Inventory in FTZ; y g y ;$250,000 applies to first year FTZ savings only
Y l I t t S iYearly Interest Savings:$250,000 x 6% = $15,000
32
![Page 33: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/33.jpg)
Inverted Tariff Savings
$15 000 000 x 4% = $600 000$15,000,000 x 4% = $600,000Duty owed without inverted tariff
$15,000,000 x 2% = $300,000Duty owed with inverted tariffDuty owed with inverted tariff
$600 000 - $300 000 = $300,000$600,000 $300,000 $300,000
33
![Page 34: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/34.jpg)
Weekly Entry Savings Estimate
Estimated # Entries Filed Per Year: 300Estimated Amt. of Annual Broker Fees Paid: $30,000($100 per entry x 300 entries)Estimated Amt. of Annual MPF Fees Paid: $52,200( 21% f th l f t d h di f $485 t )(.21% of the value of entered merchandise or cap of $485 per entry)
Savings Analysis:Weekly entry allows for 52 entries per year/facilityWeekly entry allows for 52 entries per year/facility
52 entries x $100 per entry: $ 5,200Amount of MPF under weekly entry: $25,220Amount of MPF under weekly entry: $25,220
Potential Savings Annually Per Facility: $51,780
34
![Page 35: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/35.jpg)
Total Estimated Savings
Exports $ 100,000pScrap $ 20,000Duty Deferral/Avg Foreign Inventory On-Hand $ 250,000Interest on Avg Foreign Inventory On-Hand $ 15,000g g y $ ,Inverted Tariff Savings $ 300,000Weekly Entry Savings $ 51,780
HYPOTHETICAL FIRST YEAR SAVINGS: $721,780*HYPOTHETICAL FUTURE YEAR SAVINGS: $486,780*,
*Savings does not account for growth or zone-to-zone transfers*Savings for brokerage fees and MPF based on one facility only*Savings does not account for property tax savingsSavings does not account for property tax savings
35
![Page 36: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/36.jpg)
Other Benefits
Production equipment may be admitted, assembled, stored, q p y , , ,and tested without duty payment until use in production beginsCommingling of foreign and domestic merchandiseLower Administrative Costs Lower Security and Insurance CostsNo Time Constraints on StorageNo Time Constraints on StorageImproved Inventory Control through use of FIFO – Record Keeping Identity vs. Specific Identity (Fungibility)Improved SecurityImproved SecurityImproved ComplianceImproved Business Processes
36
![Page 37: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/37.jpg)
State and Local Ad Valorem Tax Exemptionp
Generally, tangible personal property (inventory) in FTZs is Generally, tangible personal property (inventory) in FTZs is exempt from state and local ad valorem taxesSpecifics of the exemption vary from state to stateFTZ Act (19 USC 81a as amended)FTZ Act (19 USC 81a, as amended)
Sec. 81o(e) Exemption from state and local ad valorem taxation of tangible personalproperty. Tangible personal property imported from outside the United States and heldin a zone for the purpose of storage, sale, exhibition, repackaging, assembly,distribution sorting grading cleaning mixing display manufacturing or processingdistribution, sorting, grading, cleaning, mixing, display, manufacturing, or processing,and tangible personal property produced in the United States and held in a zone forexportation, either in its original form or as altered by any of the above processes, shallbe exempt from State and local ad valorem taxation.
Principle Use of FTZ for Bona Fide Customs ReasonsPrinciple Use of FTZ for Bona Fide Customs ReasonsOverlay of Public Interest Principles
37
![Page 38: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/38.jpg)
Benefits Summary
Duty DeferralDuty Deferral
Cost SavingsCost Savingsll
Duty ReductionDuty Reduction
Duty EliminationDuty EliminationConsolidated Reporting Consolidated Reporting
(Broker Fee & MPF Savings)(Broker Fee & MPF Savings)Production Equipment SavingsProduction Equipment Savings
Direct Delivery/Weekly Entry & ExportDirect Delivery/Weekly Entry & Export
Time SavingsTime SavingsTime SavingsTime SavingsFlexible Inventory TrackingFlexible Inventory Tracking 38
![Page 39: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/39.jpg)
Federal Designation
![Page 40: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/40.jpg)
Type of Applications
New General Purpose Zone (multi-purpose)New General Purpose Zone (multi-purpose)Expansion of existing GPZ (major change)Boundary modification of existing GPZ (minorBoundary modification of existing GPZ (minor change)Subzone (specific purpose)Subzone (specific purpose)TIM/PAM – existing zones/pre-approved activityAlternative Site FrameworkAlternative Site Framework –Reorganizations/Expansion of Existing GPZDepending on type of application involvedDepending on type of application involved timeframe may be 1 month – 1 year for approval
![Page 41: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/41.jpg)
Activation and OperationActivation and Operation
![Page 42: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/42.jpg)
Activation Overview
Procedure for Activation (19 CFR 146.6)Procedure for Activation (19 CFR 146.6)Operator’s BondBackground CheckBackground CheckProcedures ManualSecuritySecurityBlueprint
![Page 43: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/43.jpg)
Activation Process
Activation requirements and procedures:Written application to Port Director of CBPppBlueprint of area to be activatedZone procedures manual (inventory control)Written concurrence from the GranteeWritten concurrence from the GranteeGrantee/Operator Agreement & FeesBackground investigationsS it i tiSecurity inspectionFTZ Operator’s BondFTZ signageg gOther agency reporting
![Page 44: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/44.jpg)
Activation Application
Zone Operator or Grantee makes written application toZone Operator or Grantee makes written application to the Customs Port Director where zone is located
The area to be activated may be all or any portion of the zone boundaries approved by the FTZB
![Page 45: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/45.jpg)
Activation Application RequirementsRequirements
The application must include:The application must include:
A description of all the Zone sites covered by the p yapplicationAny operation to be conducted thereinA statement of the general character of the merchandise to be admitted
![Page 46: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/46.jpg)
Supporting Documents
The application must be accompanied by the following:pp p y g
A blueprint of the area approved by the Board to be activated Procedures manual describing the inventory control
d d k i t ( )and record keeping system(s)The written concurrence of the Grantee
Grantee/Operator AgreementGrantee/Operator AgreementZone ScheduleAnnual Fee
![Page 47: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/47.jpg)
Meeting with Customs
Purposes of the meeting:
IntroductionsFamiliarize Customs with the zone projectAllows Customs to explain their role and any local
li i d dpolicies and proceduresMay include a preliminary security checkMay initiate background checksMay initiate background checksMay involve preliminary discussions relating to establishing the Operator’s Bond amountg p
![Page 48: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/48.jpg)
Additional Activation Procedures
The Port Director shall promptly notify the applicant inThe Port Director shall promptly notify the applicant in writing of the decision to approve or deny the applicationPrior to any manufacture, manipulation or destruction, the operator must file an application on Customs Form 216 with the Port DirectorThe Grantee and/or Operator shall make writtenThe Grantee and/or Operator shall make written application to the Port Director for deactivation of the zone site
![Page 49: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/49.jpg)
Activation Approval
Upon receipt of U S Customs & Border ProtectionUpon receipt of U.S. Customs & Border Protection Port Director’s written approval of the application and acceptance of the executed bond, the zone p ,will be activated and merchandise may be admitted to the zone non duty paidMust also obtain signed permit for activity – C.F. 216 prior to initiating operationsEstablish inventory starting balances
![Page 50: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/50.jpg)
FTZ Operator’s Bond
Assurance provided by a Surety Company that assessments against the bond will be paid to Customs (liquidated damages)Minimum bond amount is $50 000Minimum bond amount is $50,000Bond amount is set by Customs based on nature of merchandise, value, volume, duty ratemerchandise, value, volume, duty rateThis bond is in addition to the importer’s bond for operator/users
![Page 51: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/51.jpg)
Background Investigations
Key employeesy p yMay take several months to completeBegin as early as possible
![Page 52: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/52.jpg)
Procedures Manual
Document detailing operational procedures and systems related to the handling of zone status merchandise within the zoneIncludes receipt storage handling and withdrawalIncludes receipt, storage, handling and withdrawal procedures including reporting requirementsServes as an audit guideServes as an audit guide
![Page 53: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/53.jpg)
Security Standards
Security measures may include:Physical measures (i e walls doors locks signage)Physical measures (i.e. walls, doors, locks, signage)Electronic surveillance and monitoring systems (cameras and alarms)(cameras and alarms)Guards and/or access control systems(key card, visitors log)( y g)C-TPAT (Customs-Trade Partnership Against Terrorism) FTZ procedures will complement C-TPAT programFTZs have been recognized by CBP as C-TPAT best practicepractice
![Page 54: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/54.jpg)
Sample Signage
WARNING
THIS IS A U.S. FOREIGN TRADE ZONE. WHOEVER MALICIOUSLY ENTERSWITH INTENT TO REMOVE THEREFROM ANY MERCHANDISE ORWITH INTENT TO REMOVE THEREFROM ANY MERCHANDISE, ORUNLAWFULLY REMOVES MERCHANDISE FROM THE CUSTOMS & BORDERPROTECTION CUSTODY OR CONTROL SHALL BE GUILTY OF A FEDERALCRIME AND FINED UP TO $250,000, IMPRISONED NOT MORE THAN 10YEARS, OR BOTH. (18 U.S.C. 549, 3571, 659).
![Page 55: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/55.jpg)
Inventory Control Requirements
Accounts for all merchandiseAccounts for all merchandiseProduces accurate and timely reportsIdentifies overages and shortagesIdentifies overages and shortagesProvides entry informationProvides audit trailProvides audit trail
![Page 56: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/56.jpg)
Inventory Methods
Most commonly used method:Unique Identifier Number (UIN)
First-In, First-Out (FIFO)
Alternative methodsAlternative methodsForeign First (FOFI)Lot systemLot system
![Page 57: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/57.jpg)
Inventory Methods
Unique Identifier Number (UIN) q ( )Controls zone merchandise by tracking through record identity rather than physical identityInventory layers are created and decremented using FIFO, FOFI, or other approved methodologyMerchandise need not be physically segregatedMerchandise need not be physically segregated
![Page 58: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/58.jpg)
First-In First-Out (FIFO)
Merchandise withdrawn from oldest inventory layerMerchandise withdrawn from oldest inventory layer firstEach UIN receipt is a layerEach UIN receipt is a layerOperator is responsible for ensuring that FIFO principles are followedprinciples are followedHistory file shall be maintained to provide necessary details for spot checks and auditspPickers are not restricted to particular lot/shipment
![Page 59: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/59.jpg)
Inventory Methods
Lot NumberNumber must be assigned to shipments upon admissionNumber must be marked on packages so that merchandise can be traced to a particular admission/shipmentLots are physically segregated to distinguish oneLots are physically segregated to distinguish one shipment from anotherPickers must draw from specified lot
![Page 60: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/60.jpg)
Foreign First (FOFI)
Zone withdrawals from mixed foreign and domesticZone withdrawals from mixed foreign and domestic inventory are relieved from the foreign inventory layers until the foreign layers are exhaustedOnce foreign layers are exhausted, zone withdrawals are relieved from domestic inventory layerslayersTypically used by high percentage exporters
![Page 61: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/61.jpg)
Record Retention Requirements
Records must be retained for 5 years after removalRecords must be retained for 5 years after removal of merchandise from the zoneReadily accessibleReadily accessible
![Page 62: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/62.jpg)
Zone Reports
CBPF 214 AdmissionCBPF 216 ManipulationCBPF 3461/7501 Entry (Withdrawal)CBPF 7512 for IT, T&E and Zone to ZoneCensus ReportingQuarterly Harbor Maintenance Fee ReportingForeign-Trade Zones Board Annual ReportC t A l R ili ti R tCustoms Annual Reconciliation ReportOther Agency Reporting
![Page 63: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/63.jpg)
Public Policy Objectives
Creation and maintenance of employment through theCreation and maintenance of employment through the encouragement of operations in the United States, which for Customs reasons, might otherwise have been carried on abroadabroadThe objective is furthered particularly when zones assist exporters and reexporters, and usually when goods arrive p p , y gfrom abroad in an unfinished condition for processing here rather than overseas
Source: Preamble to FTZB Regulations, 1991
63
![Page 64: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/64.jpg)
Key Industries and Usesy
![Page 65: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/65.jpg)
Key Industries
Top industries that utilize zones:p
Consumer goods distribution: footwear, leather, gcosmetics, housewares, appliances, electronics, office supplies, watches, bicycles, textiles and apparel
Manufacturing: petroleum, electronics, machinery, chemicals, pharmaceuticals, appliances, automotive, p , pp ,
Parts distribution: automotive, electronics, machinery, etc.
65
![Page 66: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/66.jpg)
Textiles and Apparel in FTZs
Textile and apparel quota phase-out expanded the possibility of ffeffective distribution through FTZs
Without quota restrictions, textile and apparel products can be distributed from FTZs under weekly entry procedures and no longer require “live” Customs entriesrequire live Customs entriesSome safeguard measures still exist but expansion of benefits to this industry is significantRecent apparel activity in the FTZ program:pp y p g
adidas Sales, Inc. Wolverine World Wide, Inc. Abercrombie & FitchAbercrombie & FitchVF Corporation
![Page 67: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/67.jpg)
National Export Initiative
March 11, 2010 President Obama signed Executive Order ti NEIcreating NEI
To enhance and coordinate federal efforts to facilitate job creation through export promotiong p pA critical component of stimulating economic growth is ensuring US businesses can actively participate in international markets by increasing their exportsinternational markets by increasing their exportsImproved export performance is designed to create “good high-paying jobs”D bl t t 5Double exports over next 5 years
![Page 68: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/68.jpg)
Trade & Economic Development
C i t t d th i k t b• Companies export to expand their market base
Companies that export tend to be multinationals and payCompanies that export tend to be multinationals and pay on average 7% higher wages than companies that do not export
Exports Support American Jobs and accounted for 12.7% of GDP in 2008
![Page 69: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/69.jpg)
Trade & Economic Development
Companies that export must often import to be priceCompanies that export must often import to be price competitive in the global market
I ti l id f i t th t t bImporting can also provide a source of inputs that may not be available in the U.S. or is only available in limited supply
Companies that use FTZs tend to import and export
E ports from FTZs ha e do bled o er 5 earsExports from FTZs have doubled over 5 years
![Page 70: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/70.jpg)
Percentage Growth Trend in Exports(2004 – 2008)
During the period from 2004 - 2008:FTZ exports grew from 19.2 billion to 40.5 billion dollars.
General exports grew from 814.9 billion to 1287.4 billion dollars. 70
![Page 71: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/71.jpg)
U.S.-Based Companies Get In the Zone: Savings=CompetitivenessZone: Savings=Competitiveness
CBP Report “Import Trade Trends”CBP Report, Import Trade TrendsFiscal Year 2009 Year End Report published March
20102010“The value of shipments leaving FTZs have
increased in value over the last few years, competing with imports via truck.”
![Page 72: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/72.jpg)
Sample FTZs Users
Shell
VOLVO CONSTRUCTION EQUIPMENT.
![Page 73: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/73.jpg)
COMMUNITY BENEFITS
Retain existing jobs and attract new jobsCompany investment in the local communityLocal improvements to infrastructureIncreased local purchases of goods and services
73
![Page 74: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/74.jpg)
NATIONAL BENEFITS
Improved balance of trade resulting from increased exportsincreased exportsStronger economy through lower unemployment rates, higher use of U.S. products, andrates, higher use of U.S. products, and reinvestment in the United StatesEnhanced development and retention of technology due to production in the United States
74
![Page 75: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/75.jpg)
The FTZ Program Represents A Public/Private Partnership to Maintain & Attract U.S.-basedMaintain & Attract U.S. based International Trade Activity
75
![Page 76: Foreign Trade Zones Promote US Investment Manufacturing and Exports](https://reader033.fdocuments.in/reader033/viewer/2022052621/5589830bd8b42a324a8b4657/html5/thumbnails/76.jpg)
Questions & AnswersQuestions & Answers