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FOREIGN TRADE ZONES
What is a Foreign Trade Zone?
A Foreign Trade Zone (FTZ) is a site within the United States, in or near a U.S. Customs port of entry, where foreign and domestic merchandise is generally considered to be international commerce. Foreign or domestic merchandise may enter this enclave without a formal Customs entry or the payment of Customs duties or government excise taxes. Merchandise entering a Zone may be:
• Stored • Displayed • Assembled • Tested • Repaired • Manufactured • Sampled • Manipulated • Salvaged • Re-labeled • Mixed • Destroyed • Re-packaged • Cleaned • Processed
If the final product is exported from the United States, no U.S. Customs duty or excise tax is levied. If, however, the final product is imported into the United States, Customs duty and excise taxes are due only at the time of transfer from the FTZ and formal entry into the United States. The duty paid is the lower of that applicable to the product itself or its component parts. Thus, Zones present opportunities to realize Customs duty savings by Zone users.
In addition, Zone procedures provide one of the most flexible methods of handling domestic and imported merchandise.
Entrepreneurs are using FTZs with a creativity that portends a new beginning of real benefits for global orientation. Companies both large and small are taking advantage of the direct savings.
Companies that trade in such goods as auto parts, appliances, farm equipment, forklifts, motorcycles, jet skis, engines, electrical components, chemicals, computers, typewriters, printers, storage, parts, food products, HVAC equipment, pharmaceuticals, medical equipment, copiers, cameras, photogenic supplies, tools, oil refining, consumer goods, apparel, ship building, oil refineries, etc. all have found profitable homes in FTZs, and the list is growing.Back to Top
Advantages and Benefits of U.S. Foreign Trade Zones:
- Imports may be landed and stored quickly without full U.S. Customs formalities. U.S. quota restrictions, duty and bonding requirements do not apply in Zones.
- Cash flow can be improved because duty is not paid until goods leave the Zone to enter U.S. markets. If goods are exported, no U.S. duties are paid. Merchandise may be withdrawn from the Zone to enter U.S. Customs territory in partial amounts, in less-than-case lots, or in a single unit or sample.
- Goods may be insured while in storage for their value plus freight only, rather than for their value plus freight plus duty plus taxes paid.
- Buyers can inspect merchandise suitably displayed in showrooms within the Zone, and may sample goods before purchasing them wholesale and paying duty.
- Orders for goods may be accepted in the Zone before payment of duty or excise tax, if such tax is applicable.
- Goods may be processed or manipulated to qualify for lower duty and/or lower freight charges.
- Customs duty may be saved by not paying on materials that have suffered, have impurities, or that are found to be substandard or totally unusable. In the last case, they may be destroyed under Customs supervision inside the Zone, without any payments of duties. Any materials shown to be totally consumed in the course of manipulation inside a Zone are not subject to payment of duties or taxes.
- Goods can be altered to meet the requirements of various federal or state agencies prior to U.S. entry.
- All foreign merchandise brought into a Zone and any domestic merchandise held in a Zone for export, whether manufactured or not, is exempt from any state or local personal property tax (inventory tax).
- Re-labeling or re-marking merchandise in the Zone may be done to avoid fines assessed upon improperly marked goods reaching U.S. Customs territory (e.g. U.S. markets). Samples may be withdrawn to determine the exact duty classification, without endangering the duty liability upon the entire shipment or lot.
- Products manufactured in a Zone and destined for U.S. markets are dutiable only on the amount of the finished product that is of foreign origin. All value-added functions leading to the final product are not dutiable.
- Imported merchandise may be subject to classification as "privileged" or "non-privileged." The "privileged" classification permits advance determination of the rate of duty to be applied and, in effect, "freezes" the determined rate regardless of when the product is withdrawn from, or used within, the Zone, even if the rate of duty were to be subsequently increased by government action.
- When privileged foreign material is used in a manufacturing process, the finished product entering the U.S. market carries duty on the precise foreign content of dutiable raw material or other starting-point material contained in the finished product. No duty is paid on destroyed or scrapped products.
- If "non-privileged foreign" is the classification sought, then the raw materials given this classification may be manufactured into a lower duty-rate finished product. What is then entered into the Customs territory (imported) is dutied at the finished product rate with the value calculated on the cost of all the foreign components. This is the methodology employed by all of the major U.S. and foreign auto makers who have established more than 50 FTZ Subzones in the United States.
- Goods in excess of quotas may be held in the Zone until the next quota period, whereupon their subsequent entry into the United States will be dated from their date of admittance into the Zone.
- Salvage or repair to damaged goods may be carried out to maximum advantage, duty and quota-free, while finding the best market.
- Certain bonded merchandise may be transferred to the Zone for export, canceling the bond or time limit applicable to bonded warehouses, and under certain conditions, Temporary Importation Bonds (TIBs) may also be canceled.
- Internal Revenue, Federal Excise or State Taxes on whiskey, wines or other liquors held for export are not applicable while such merchandise is in a Zone.
- The posting of a bond for missing documents can be avoided. Merchandise can be held in the Zone until the documents are either found or rewritten to satisfaction.
- No bonding fees or time limits apply within a Zone for storage of merchandise. Although a bond is required for all Zone operators, it is not required for Zone users.
- If the U.S. market is not receptive to goods brought into a Zone at any time, they may be shipped out to other destinations, duty-free as far as U.S. duty is concerned.
- Overhead expenses can be minimized by tenants of a Zone, by arranging with the staff of the Zone Operator to interface with U.S. Customs and handle all required Customs documentation or possible conflicts in regulations, instances of non-compliance with same, etc., for a much lower cost than each tenant would have to bear individually.
- If raw materials or components are brought into a U.S. FTZ for manufacture into finished products that are to be sent to non-U.S. destinations, such goods brought in may have title thereto retained by the foreign source and, if the final value of the finished product contains at least 55 percent of goods from such foreign source, the finished product may be labeled "Made in ______" (the foreign source) even though the actual manufacture took place inside the Zone. This often permits the finished product to enter the non-U.S. destination at lower duty rates (e.g. into the Common-Market-type trading bloc countries).
- Any goods stored inside a U.S. FTZ are under federal supervision, and theft from a Zone is a federal offense, a fact that keeps pilferage to an absolute minimum. No goods entering a Zone are considered imports, whereas all goods leaving a Zone for non-U.S. destinations are counted as exports in the U.S. International Balance-of-Trade Accounts. Thus, every instance of manufacture for total export from foreign material benefits not only the tenant but also the U.S. International Balance of Payments.
Maryland has four Foreign Trade Zones:
Grantee: City of Baltimore Development Corporation,
36 S. Charles St., Ste. 1600,
Baltimore, MD 21201
BWI Airport #73
Grantee: Maryland Department of Transportation, Maryland Aviation Administration,
P.O. Box 8766
BWI Airport, MD 21240-0766
Prince George's County #63
Grantee: Prince George's County Government, Economic Development Corporation
1100 Mercantile Ln., Ste. 115A
Largo, MD 20774
Washington County #255
Grantee: Board County Commissioners of Washingon County
18434 Showalter Rd.
Hagerstown, MD 21742
City of Baltimore FTZ #74 — History
The City of Baltimore's Foreign Trade Zone, FTZ #74, was established in 1982. Since that time, FTZ #74 has been continually expanded and modified due to various requests for additional space. This growth, in turn, has created jobs, added cargo tonnage for the Port and increased the tax base of the community.
Zone space, originally 60,000 square feet in 1982, currently contains more than 1,700 acres at 19 sites within the City of Baltimore, Harford and Anne Arundel counties.
As documented in the 2009 Annual Report, FTZ #74 provided more than 996 jobs and served 82 business firms during the fiscal year, and handled more than 18,000 different commodities from 24 different countries of origin. More than $1.7 billion worth of goods were stored in the Baltimore FTZ at the end of the 2009 fiscal year. There has also been a 400% increase in exports.
General Purpose Sites
|Number||Site||Area (in acres)|
|01.||Holabird Business Park||20|
|02.||Point Breeze Business Center||127|
|03.||Seagirt Marine Terminal||157|
|04.||Dundalk Marine Terminal||312|
|05.||Chesapeake Terminal & American Ports Service Center||97|
|06.||Atlantic & Fairfield Terminals||274|
|07.||North and South Locust Point||196|
|08.||Rukert & Clinton Street Terminals||153|
|09.||Belt's Business Center||15|
|10.||Pulaski Business Center||81|
|11.||Obrecht Business Center||12|
|12.||Canton Trade Center||32|
|13.||Marley Neck Industrial Park||100|
|14.||Enterprise Business Park||91|
|15.||5107 North Point Blvd.||8|
|16.||Chesapeake Commerce Center||4|
|17.||Baltimore Business Park||5|
|18.||Fischer Road Industrial Park||10|
|19.||4501 Curtis Ave.||12|
Facts on Foreign Trade Zones
- 90% of firms using FTZs are U.S.-based.
- 75% of merchandise received in FTZs is domestic.
- More than 2,820 firms use FTZs.
- Exports from FTZs exceed $17 billion and are growing fast.
- 340,000+ persons are employed at facilities operating under FTZ status.
- In all the years prior to 1970, 12 zones were approved; today there are 434 single company Subzones in 236 Zone projects.
- Ratio of exports to foreign receipts is 2:1, dramatically different from the 8:1 ratio 20 years ago.
- Entrepreneurs are using FTZs with a creativity that portends a new beginning of real benefits for global orientation.
- Companies both large and small are taking advantage of the direct savings.