An Overview of Foreign-Trade Zones

Transcription

1 An Overview of Foreign-Trade Zones Presented by: Cornelia Steinert Sr. Manager 2013 PointTrade Services, Inc. 1

2 A Foreign-Trade Zone is a restricted-access site, in or adjacent to a Customs port of entry, operated pursuant to public utility principles under the sponsorship of a corporation granted authority by the Board and under supervision of U.S. Customs & Border Protection (15 CFR Part Regulations of the Foreign-Trade Zones Board) 2013 PointTrade Services, Inc. 2

3 In Layman s terms. An area considered to be outside of the commerce of the United States Goods can be brought into the zone and be stored, manipulated, cleaned, repaired, destroyed, mixed, processed, relabeled, and tested while remaining in the foreign-trade zone in duty free status 2013 PointTrade Services, Inc. 3

4 CBP & FTZ Board Cooperation Foreign-Trade Zones are established under a grant of authority from the Foreign-Trade Zones Board Customs and Border Protection must provide concurrence Customs and Border Protection provides on-going oversight 2013 PointTrade Services, Inc. 4

5 Some Quick Statistics 2,800 firms used foreign-trade zones in the United States in FY 2011 Over 340,000 jobs in the United States are directly related to foreign-trade zones (in FY 2011) Source: 73rdAnnual Report of the Foreign-Trade Zones Board to Congress (2011) 2013 PointTrade Services, Inc. 5

6 Some Quick Statistics As of 2011, there were 171 FTZs active during the year and 269 active manufacturing/production operations in the U.S. (including Puerto Rico) As of 2011, receipts were valued at $641 billion dollars Exports from FTZ s amounted to over $54.3 billion dollars Source: 73rd Annual Report of the Foreign-Trade Zones Board to Congress (2011) 2013 PointTrade Services, Inc. 6

7 FTZ Savings in many areas: Significant duty deferral on average inventory first year; capital cost each year thereafter Significantly reduce customs broker fees and merchandise processing fees Duty elimination on exports, scrap Reduce/eliminate drawback process Duty reduction (inverted tariff relief) for manufacturing zones Enhanced Global Supply Chain efficiencies Increased Import/Export Compliance Local ad valorem tax exemption on inventory may be possible (KY, TX, AZ, OH) 2013 PointTrade Services, Inc. 7

8 Bonded Warehouse vs. FTZ Bonded Warehouse Five year limit Formal entry required No MPF savings Continuous shipping is cumbersome Foreign-Trade Zone No time limit Ideal for repetitive processing MPF savings No drawback needed Savings on waste items Easy documentation 2013 PointTrade Services, Inc. 8

9 FTZ Benefits Overview 1. Reduce Costs (Taxes, Fees, Administrative Costs, Fines, etc.) 2. Improve Supply Chain Efficiencies 3. Support Customs Compliance and Cargo Security Efforts Companies across many industries utilize the FTZ program 2013 PointTrade Services, Inc. 9

10 Duty Deferral Imported products admitted to the FTZ are not entered into the Customs territory until their withdrawal from the FTZ. Therefore, users obtain a cash flow savings by deferring Customs duties until the merchandise leaves the FTZ for consumption in the U.S PointTrade Services, Inc. 10

11 Duty Deferral Example 1 Zone to U.S. Commerce Spark plug Dutiable at 2.5% Admitted to FTZ Withdrawn from FTZ for entry into U.S. commerce 2.5% Duty Paid Stored in FTZ - Duty Deferral Zone-to-Zone Transfers: Duty deferral benefits may be further extended by transferring merchandise from zone to zone PointTrade Services, Inc. 11

12 Production Equipment Certain duty deferral and reduction benefits also apply on production equipment admitted to the FTZ for assembly and testing prior to use in production. Reduces importing costs, CHB fees, MPF, CBP delays on manifesting requirements for individual containers Examples: racking systems, conveyors, new lines of production including manufacturing 2013 PointTrade Services, Inc. 12

13 Zone-to-Zone Transfer If the company utilizes more than one FTZ, merchandise may be transferred from zone to zone in order to extend the deferral benefits further. This benefit can be implemented up and down the supply chain by incorporating the activities of suppliers and customers PointTrade Services, Inc. 13

14 Duty Elimination Goods 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 tax 2013 PointTrade Services, Inc. 14

15 Duty Elimination Zone to Foreign Market Spark plug Dutiable at 2.5% Admitted to FTZ Withdrawn from FTZ for export Stored in FTZ - Duty Deferral No duty payment - eliminates drawback process 2013 PointTrade Services, Inc. 15

16 Duty Elimination Destruction Spark plug Dutiable at 2.5% Admitted to FTZ Received at warehouse and determined to be damaged beyond repair Destroyed in the FTZ under permit no commercial value; no duty paid 2013 PointTrade Services, Inc. 16

17 Duty Reduction (Inverted Tariff Relief) With 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 the zone --depending upon which is lower Only applicable to zones conducting production activity 2013 PointTrade Services, Inc. 17

18 Inverted Tariff Example Windshield Dutiable at 4.9% Admitted to FTZ Withdrawn from FTZ for entry into U.S. commerce 2.5% Duty Paid Used in production in FTZ 2.4% Savings Finished Product (Automobile) Dutiable at 2.5% *Duty rates for example only 2013 PointTrade Services, Inc. 18

19 Direct Delivery & Weekly Entry/Export From a just-in-time inventory perspective, the FTZ program offers significant benefits. Goods move in and out of the facility on an expedited basis allowing for a seamless supply chain from vendor to customer without maintaining unnecessarily high levels of inventory. Users may obtain permission from Customs to move merchandise directly from the port of arrival to the FTZ without undergoing commercial selectivity exams PointTrade Services, Inc. 19

20 Other Benefits Commingling of foreign and domestic merchandise Lower Administrative Costs Lower Security and Insurance Costs No Time Constraints on Storage Improved Inventory Control through use of FIFO Recordkeeping Identity vs. Specific Identity (Fungibility) 2013 PointTrade Services, Inc. 20

21 Lean Supply Chain and Import/Export Compliance Direct Delivery Benefits Reduces CBP inspections and delays at the border/docks 24/7 cross-dock, receiving e-movements to FTZ (paperless and automated; e-214) Weekly Entry Benefits Cross-dock/shipping out of the FTZ 24/7 One Estimated CBPF 3461 in advance of withdrawals / One CBPF 7501 Entry Summary five days after close of the seven-day period Reduces MPF/Customs Broker fees Weekly Export Benefits 24/7 Cross-dock / export to foreign markets e-process, Denied Party review 2013 PointTrade Services, Inc. 21

22 Start up costs to consider: Security modifications FTZ Bond Annual FTZ grantee fee Application preparation charges (designation, production authority, activation) Software 2013 PointTrade Services, Inc. 22

23 FTZ Summary Foreign-trade zones offer incentives for U.S. distributors and manufacturers. Many U.S. manufacturing plants face competitive situations which can quickly change or evolve. Foreign-trade zones are advantageous and offer a good return on investment as well as a level playing field on which to compete against foreign sources PointTrade Services, Inc. 23

24 SIGNIFICANCE OF THE ALTERNATIVE SITE FRAMEWORK (ASF) 2013 PointTrade Services, Inc. 24

25 Alternative Site Designation & Management Framework The FTZ Board implemented an alternative framework for participating grantees to designate and manage their general-purpose FTZ sites The Alternative Site Framework (ASF) offers greater flexibility and predictability for a participating grantee to use administrative minor boundary modifications to modify FTZ sites Greater flexibility is made possible by participating grantees increased focus on the FTZ sites needed for current or near-term zone activity, with a resulting improvement in the efficiency of FTZ oversight by government agencies 2013 PointTrade Services, Inc. 25

26 Traditional vs. Alternative Framework Traditional FTZ Framework Designation via: Submission of application for FTZ Board action Generally 10 month process Greater documentation requirements Submission of request for administrative minor boundary modification for FTZ Board action Generally 30 day process Involves swapping like properties from existing sites Alternative Site Designation & Management Framework Designation via: Once approved for ASF, generally 30 day process Simplified and rapid minor boundary modification actions Enhanced ability to respond quickly to evolving FTZ-related needs of community Magnet sites Usage-driven sites Subzones Eliminates need to swap like amounts of acreage from existing sites 2013 PointTrade Services, Inc. 26

27 Service Area Geographic area for which Grantee intends to be able to propose FTZ sites Must be consistent with state enabling legislation and grantee organization s charter Must comply with the FTZ Board s adjacency requirements (within 60 miles/90 minutes drive from CBP port of entry boundaries) 2013 PointTrade Services, Inc. 27

28 Magnet Sites Selected by Grantee for ability and readiness to attract multiple FTZ users Generally, six or fewer simultaneously existing magnet sites; more if justified One site designated as anchor/permanent site Designated through application for FTZ Board action (reorganization application) Subject to sunset time limits (five years), which would self-remove FTZ designation from a site not activated before the site s sunset date 2013 PointTrade Services, Inc. 28

29 Usage-Driven Sites Serves companies not located in a magnet site For companies ready to pursue activity under FTZ procedures Limited to areas required by companies specifically identified as ready to pursue zone activity No specific limit on number of usage-driven sites Designated through minor boundary modification process Subject to sunset time limits (three years), which would self-remove FTZ designation from a site not used for FTZ purposes before the site s sunset date 2013 PointTrade Services, Inc. 29

30 ASF Reorganization Application The standard processing time is 8 to 10 months. Expedited processing is possible based on publicinterest and/or on the relative simplicity of the analysis generally required. Expedited processing within 6 to 8 months is possible for ASF reorganization applications that do not involve the addition of new Magnet sites PointTrade Services, Inc. 30

31 FTZ # 93 Status ASF approved 12/11/2012 Counties covered: Chatham, Durham, Franklin, Granville, Harnett, Johnston, Lee, Moore, Orange, Peron, Vance, Wake and Warren Counties 2013 PointTrade Services, Inc. 31

32 Usage-Driven MBM Applications Complete requests for minor boundary modifications (MBM) generally processed within 30 to 45 days Does not entail a property swap (as was required under the traditional site framework) A separate production notification will need to be filed for production activity 2013 PointTrade Services, Inc. 32

33 Production Notification A Production Notification will need to be filed with the FTZ Board if manufacturing, or processing will take place in the FTZ Under newly published FTZ regulations, non-controversial applications may be approved within 120 days by FTZ Board PointTrade Services, Inc. 33

34 Contact Us 4807 Colley Avenue Suite 9 Norfolk, VA Cornelia Steinert Sr. Manager Tel: (757) csteinert@pointtradeservices.com PointTrade Services, Inc. 34