Foreign Trade Zones Offer Cost Advantages

Foreign Trade Zones Offer Cost Advantages

Companies such as textile, footware and big pharma that have located in FTZ # 138 in Columbus, Ohio are enjoying advantages that make them more competitive in the global marketplace.

FTZ No. 138, the foreign trade zone in Columbus, Ohio serving 25 countries, has been spreading the word that locating in a FTZ has its benefits. 

It seems the message is getting out. Businesses located in FTZ #138 saved money in customs duties and other fees as they moved $6.3 billion in merchandise through the zone in 2013.

This resulted in FTZ #138 being ranked 7th out of 177 operating FTZs in the United States. It’s the first time the region has made the top ten list. In fact in 2012 they were ranked 25.

How did this happen?

“We operate at the speed of business,” explains Angie Atwood, FTZ Administrator. “Our process is streamlined which lets us move an application through the system within 30 days. In the past that wold have taken up to a year.”

Foreign-Trade Zone #138 is a part of the Rickenbacker Inland Port, a high-speed international multi-modal logistics hub. The inland port has a base of air, road and rail transport companies supported by a mix of premier freight forwarders, consolidators, customs brokers and third-party logistics providers.

Companies that have located in this zone, such as textile, footware and big pharma are accessing advantages that make them more competitive in the global marketplace. But it’s not for everyone. “We actually turn away more people than we take,” Atwood says. “I insist that companies, especially smaller ones,  do a detailed cost benefit analysis as there is an investment a company would have to make to take advantage of the benefits.  The investment could include acquiring a warehouse management system or bringing on additional people to comply with requirements of the location.”

Once in the zone there are three ways to save money with regard to customs:

Reduce

In many cases duties are higher for parts than for finished products. Therefore, many companies enter a Foreign-Trade Zone in order to import parts duty-free, assemble a product and then be required to only pay the duty on the final product.

Eliminate

Customs duties are never paid on goods that are brought into a zone and then re-exported or scrapped. No formal entry with Customs is filed and the goods never enter the U.S. stream of commerce.

Defer

Since FTZs are outside the Customs territory of the United States, goods are not considered to be imported until they leave the zone and enter the U.S. stream of commerce. This allows a company to defer Customs duties until merchandise leaves the zone instead of having substantial monies tied up in inventory Customs duties.

Other benefits include:

Weekly Entry

The Trade and Development Act of 2000 contains a provision permitting FTZ "Weekly Entry" procedures that can help zone users save time and money. Under Weekly Entry procedures, the zone user files only one Customs Entry per week rather than filing one Customs Entry per shipment. Customs no longer has to process an entry for each and every shipment being imported into the zone and the zone user no longer has to pay for the processing of each and every entry.

Logistical Flexibility

Goods may be transferred from U.S. ports of arrival directly to a Foreign-Trade Zone or between zones duty free. Products made overseas may be brought into a zone for storage or consolidation with other products, allowing distribution of complete shipments to customers. This not only provides flexibility but can improve supply chain velocity.

Supply Chain Security

FTZs can help a company achieve “best practices” when it comes to supply chain security.

Lower Taxes

Goods in a Foreign-Trade Zone avoid or defer federal excise taxes.

One interesting twist is that a company does not always have to be physically located in specific area. FTZ #138  has the authority to put an FTZ designation on a company as its current location. This has been helpful given the growth in the Greater Columbus area which sometimes results in the absence of a facility that suits the need of a particular company within the industrial FTZ zone.  

And that’s an advantage for this region given its future outlook.  “ From where I sit, I see continued growth in our zone in 2015,” says Atwood. 

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