Foreign Trade Zones allow companies to bring items onto US soil without paying a duty tax, allow them to store these goods free of tariff charges, and to use parts to manufacture a finished product that can then be re-exported without US import/export surcharges.
Foreign-Trade Zones, (FTZ), are secured, designated locations in the United States in or near a US Customs Port of Entry, where foreign and domestic merchandise is considered to be located internationally and outside the territorial jurisidction of US Customs. In other words, a place inside the United States where commercial merchandiser receives the same Customs treatment it would if it were outside located outside the commerce of the United States. Businesses in an FTZ can reduce or eliminate duty on imports and take advantage of other benefits to encourage foreign commerce within the United States.
Merchandise can be imported into an FTZ without first going through formal US Customs entry procedures or paying import duties. Customs duties and excise taxes are due only at the time the merchandise is transfered from the FTZ to the US for sale or consumption. If the merchandise never enters the US, and is instead re-exported, no duties or taxes are due on those items.
Whether you are a large manufacturer, or just an individual sole properitor, any size importer or exporter can take advantage of the financial advantages of locating in a foreign-trade zone. Locating in a FTZ can reduce costs from custom duties, taxes and tariffs, improve global market competitiveness, and minimize bureaucratic headaches.
Benefits of utilizing an FTZ:
- Duty exemption/relief from inverted tariffs – When a component item is subject to a higher duty rate than a finished product
- Duty exemption on re-exports – Exemption on products that enter a zone and are then re-exported
- Duty elimination on waste, scrap, damaged and yield loss – Only merchandise that leaves the zone and enters into the US commercial system is dutiable
- Duty deferral – No duty payment is required on merchandise brought into a zone until the goods leave and enters the US for commerce
- Zone to Zone Transfers – A vendor located in one FTZ can sell goods to another company in another zone and transfer those goods without payment of duty
- Direct delivery of goods from Port of Entry – Ability to receive goods faster thru Direct Delivery to FTZ
- Ad Valorem Tax Relief – The FTZ program allows companies to obtain exemptions from inventory taxes while merchandise is located inside the FTZ
- Weekly Entry Savings on Merchandise Processing Fee – Every formal customs entry has a processing fee of $25 to $485 depending on the value of the merchandise. An FTZ can utilize the Weekly Entry Procedure where all entries are combined on a single form for single weekly payment (this can add up to millions in cost savings).
Galveston County has three foreign trade zones. For more information on property located in these zones please contact the Galveston County Economic Development Department at 409-766-2541 or firstname.lastname@example.org
- FTZ No. 36 City of Galveston
- FTZ No. 199 City of Texas City
- FTZ No. 84 City of Hitchock (Port Houston’s FTZ expanded)
Foreign trade zones were created by Congress in 1934 in the Foreign-Trade Zones Act of 1934, and continues to be a vital resource for trade in the United States. In 1980, Congress again amended the act so that products manufactured in the zones would not be assessed on US value-added. This ensured that the only tariffs a producer inside the zone selling to U.S. customers would pay, would be on the raw materials imported into the zone.
Outside of the United States, other countries have followed America’s lead and created their own versions of FTZs. These are called free, foreign or export processing zones.