Foreign Trade Zones have been in existence in Europe since the 1800's. However, they
only have been in existence in the United States since 1934 after the the Foreign
Trade Act was passed. It was the U.S. government's attempt to mitigate the effects
of protective tariffs imposed during the Great Depression.
Foreign Trade Zones are operated by the Foreign Trade Zones Board on a charge basis
for importers to use them. The Foreign Trade Zone Board reviews and approves applicants
who want to operate within a Foreign Trade Zone. A Foreign Trade Zone is typically
near a Customs Port of Entry within a 60 mile distance or a 90 minute drive from
a Customs Supervising Office.
Foreign Trade Zones are enclosed areas outside of U.S. Customs which are supervised
by Customs supervisors. The Foreign Trade Zones also known as Free Trade Zones provide
the opportunity for the Importers to improve cash flow by deferring or reducing the
amount of tariffs or duties to be paid.
While goods are in a Foreign Trade Zone, no duties are payable. This could go on
indefinitely. The goods can be manipulated or be used in actual manufacturing during
its stay in a Foreign Trade Zone. If the finished goods are exported out of the
U.S., then no duties need to be paid at all. If the finished goods are for U.S.
consumption, tariffs are paid only when the goods leave the Foreign Trade Zone.
The concept of a Foreign Trade Zone encourages operations and employment to occur
within the United States. Without it, jobs and manufacturing may have gone abroad.
Foreign Trade Zone Benefits
There can be significant benefits to the importer if Foreign Trade Zones are utilized.
Here are a number of the reasons why you should definitely consider Foreign Trade
Convert Imported Products
You can reduce the tariff rate by converting the imported
product into another product that has a lower tariff rate. This occurs often in
manufacturing where the tariffs for the finished goods are lower than those for the
raw materials. Tariffs are paid only when goods leave the Foreign Trade Zone.
No Time Limit
There is no time limit regarding how long imported goods may remain
in a Foreign Trade Zone. You can control the release of your products according
to market conditions. This will prevent you from having to pay for your tariffs
all at once.
Import quotas do not apply for goods stored in a Foreign Trade Zone.
If the imported goods category has exceeded the import quota for the year, you can
store your imported goods in a Foreign Trade Zone until the next quota period.
Subzones are auxiliary zones approved by the Foreign Trade Board for companies
not able to operate or function properly within a public Foreign Trade Zone. Company
must demonstrate that by operating within a subzone, it will generate benefit to
the general public. Subzones are typically manufacturing facilities of companies.
Goods shipped in bulk can be dried while in a Foreign Trade Zone. If
the goods are normally shipped in a pre-evaporation state, they are heavier and bulkier.
Lower tariffs may apply if the goods are classified by weight. It will also save
you shipping charges when you are ready to move the goods out of the Foreign Trade
Save Shipping Costs
You can send your goods to the Foreign Trade Zone to save on subsequent
shipping costs. Goods can be unpacked and allocated in quantities to give you the
flexibility of shipping separate shipments.
Goods brought into the Foreign Trade Zone may be sold and the tariffs
transferred to the purchaser.
Reduce Duties from Goods to be Returned
You can sort your imported goods in a Foreign
Trade Zone to identify damaged, defective, or nonstandard goods. You will not need
to pay tariffs on imported goods that you end up returning.
Foreign Trade Zones do offer financial benefits to the Importer. To determine whether
it is right for your operations, you need to carefully take into account the time,
money and effort required to apply and maintain an operation within a Foreign Trade
Zone. Whether you import from China or from any other country, Foreign Trade Zones
can be an advantage for you.