At Evans Distribution Systems in Melvindale, Michigan, our facilities include a Foreign Trade Zone—also known as an FTZ. An FTZ can benefit your business in a number of ways, and is gaining popularity in a time where tariffs are changing, and as new foreign trade policies are being implemented.
Goods inside of an FTZ are considered outside of the US market (whether brought into the FTZ nationally or globally) and therefore have the same type of treatment as if they were outside of the US market. This can bring about a number of benefits, not limited to weekly entry savings, cash flow, duty deferral, no cap on time limits, and a variety of other permitted functions.
Here are just some of the ways that the establishment of an FTZ can benefit your business:
- Weekly Entry Savings: Customs costs can be decreased significantly with an FTZ, where it is necessary to only file one customs entry per week, rather than a customs entry per shipment. For any shipments with a value over $230,952, the maximum cost is reached. The minimum processing fee as applicable to an FTZ is $25, and the maximum is $485 per entry.
How Much Can You Save?
For example, a number of shipments can be combined to make for a maximum fee of $485 per week. If 10 imports are received per week at the maximum amount of $230,952, each shipment would be received at a value of $485 each, or $4850 per week (and a total of $252,000 per year). With importation into an FTZ, these 10 imports could be combined for a maximum fee of $485 per week ($25,220 per year). This would make for a total savings on customs costs of $226,780 per year. When the flat maximum rate is applied, this can contribute to a substantial savings.
Savings also apply to the merchant processing fee, which has a flat maximum rate of $497.99 when importing into an FTZ. For example, for containers valued at $10,000 apiece (let’s say there are 3), the non-FTZ warehouse would accept these containers at a typical rate of 2.67% the value of the good—in this case, the 3 containers would be at a value of $267.70 apiece, a total merchant processing fee of $803.10. As for importation into an FTZ, these containers would require a flat maximum merchant processing fee of $467.99.
- Cash Flow: FTZs permit duty deferral and duty reduction. This means that rather than paying for each specific item in one good (for example—a good might be assembled with parts from other countries or multiple areas), the duties can be applied to the finished product. In addition, value-added services (such as packaging together multiple goods into one finished product) can be applied before the duties.
- No Time Limit: Merchandise can be stored in an FTZ for as long as possible.
A Variety of Functions:
There’s plenty that you can do in a foreign trade zone, such as:
- Assemble product
- Co-packing (such as with other foreign or domestic product)
- Destruction of products
Companies can decrease their customs cost by hundreds of thousands per year by utilizing the fees inherent to an FTZ.
Curious about how your company can benefit from an FTZ? Get in touch with us today and we can discuss your options.