Benefits Foreign Trade Zone

The following is a listing of benefits offered by a FTZ.

Deferral of Duties: Customs duties are paid only when and if merchandise is transferred into U.S. Customs territory and thereby benefits the cash flow operation of the business.

Reduction of Duties:  If the rate on the items admitted to the zone is higher than the rate applied to the finished product, the company can choose to pay the lower duty rate.

Elimination of Duties:  No customs duties are paid on merchandise exported from a FTZ.  Generally, customs duties are also eliminated for merchandise that is scrapped, wasted, destroyed or consumed in a zone.

Elimination of Drawback: Through the use of a FTZ, the need for drawback – refund of duties previously paid on exported merchandise - may be eliminated, allowing these funds to remain in the operating capital of the company. 

Labor, Overhead and Profit:  Customs duties are not owed on labor, overhead and profit attributed to production in a FTZ.

Taxes:  By federal statute, tangible personal property imported from outside the United States and held in a zone, as well as that produced in the United States and held in a zone for exportation, are not subject to state and local ad valorem taxes.  In Ohio, companies that are located within a General Purpose Zone and are “activated” within the Foreign-Trade Zone Program, are exempt from state inventory taxes.

Quotas:  U.S. quota restrictions do not apply to merchandise admitted to zones, although quotas will apply if and when the merchandise is subsequently entered into U.S. commerce. 

Zone-to-Zone Transfer:  An increasing number of firms are making use of the ability to transfer merchandise from one zone to another.  Because the merchandise is transported in-bond, Customs duty may be deferred until the product is removed from the final zone for entry into the U.S. Customs territory.