A U.S. Foreign-Trade Zone (FTZ) is a designated area that is considered to be outside of U.S. customs territory for the purpose of customs duty payments. Merchandise may enter the zone without the payment of customs duties or excise taxes. Customs duties and excise taxes are due only at the time of transfer from the Foreign Trade Zone for U.S. consumption. Companies can have the option of paying the duty at the rate of the finished product or the rate of the individual parts or components of the product, an option that can reduce or eliminate the duty.
If the final product is exported from the U.S., then no U.S. customs duty or taxes are paid on those items. This allows American companies to remain competitive with their foreign-based competitors. There is a Foreign Trade Sub Zone in Tulare County located on 251 acres in the Midstate 99 Distribution Center in Visalia Ca.
If you import goods worth $1 million or more, or if you purchase foreign goods from a domestic supplier valued at $1 million or more, you'd do well to examine the benefits that an FTZ offers.
Merchandise imported into an FTZ and later re-exported from the zone is never assessed any customs duties.
Imported merchandise admitted into a zone and then rejected, scrapped or returned to vendor -- and the waste products of a manufacturing process -- are considered to be duty free. Some materials can be consumed in the zone and receive duty free status as well.
When imported merchandise is shipped to U.S. locations from a zone, duties are deferred until the merchandise leaves the zone.
When components are imported into an FTZ and manufactured into a new product for re-export or sale in the U.S., the importer may choose between the finished-product duty rate and the imported-component duty rate, whichever is lower.
Importers located in an FTZ are required to submit only one customs entry per week, instead of an entry on each and every shipment. Firms using an FTZ are the only ones in the U.S. that currently enjoy this type of efficiency.
Merchandising processing fees (MPF), based upon the value of the goods, are typically paid on a per-entry basis with a maximum dollar cap. Weekly entry for FTZ allows users and operators to file what would be multiple payments of the MPF only once, with the dollar cap still applying. This can constitute a tremendous savings in MPF, reducing costs to importers who otherwise would file multiple entries.