Understanding the Benefits of a Foreign Trade Zone

Monday, March 7, 2011

ftzJPGThe Lincoln Economic Development Association recently hosted a Lunch and Learn to educate local industries on the benefits of Foreign Trade Zones. Commonly referred to as a “FTZ,” the program is a catalyst for companies involved with international trade to improve their competitiveness and profitability. Special guests, Laura Foor, Administer for FTZ #57 based in Charlotte, and Wayne Cooper, a longtime Board Member of FTZ #57 and Honorary Consul of Mexico, led the discussion. Because Lincoln County falls within the geographic area of FTZ #57 (60 mile radius), local industries have access to the benefits of the FTZ. Easily explained, goods entered into the United States via a FTZ are considered to be part of international commerce and are legally outside of US Customs territory. This allows a firm to warehouse goods in the US, at or near their facilities, while keeping down their inventory costs and operating as if the goods were still outside the US border. Although there are many rewards to using a FTZ, there are primary benefits to mention. By bringing product into the US through a FTZ, duties on the goods are deferred until they are actually released and entered into US Customs territory. Duties are eliminated completely when an imported good is then exported from the zone. Goods may also be destroyed in the zone and be duty free. An additional benefit is in reduction of tariffs. An importer may choose to pay duties on raw materials entered into the zone, or to pay duties on the finished products as they are entered into US commerce. Further benefits to companies include: elimination of drawbacks, zone to zone transfer and exclusion of quota restrictions (quotas to do not apply to FTZ admitted merchandise). A FTZ must be located at or near a Customs Port of Entry. In the case of FTZ #57, it is located at the Charlotte Douglas International Airport. Access to FTZ #57 is not limited to transporting goods from Charlotte to a Lincoln County industry. The FTZ program allows for sub-zones and general purpose zones to be established within the governing area of FTZ #57. This authorizes a local industry to establish a location on their premises to be considered a FTZ sub-zone, or a general purpose zone can be established for use by multiple industries. The design of the program is to allow flexibility to industries and meet the specific and individual needs of each user. Lincoln Economic Development Association plans to take the opportunities of the program to industries within Lincoln County and provide each potential user with the financial benefits available to them through use of the FTZ program. Over the next few months, a LEDA representative will be reaching out to industries within the county and examining the potential gain from establishing at least a general purpose FTZ for multiple users in Lincoln County. In specific cases, a subzone will be the consideration where exclusive use by one specific industry is required. “It is an education process. If you don’t understand a FTZ, the benefits and how it operates, I encourage an industry to at least research the possibilities. Using a FTZ could have a huge impact on cash flow and profitability,” states Kara Brown, LEDA Existing Business Manager.