In many cases, importers and exporters can save significant amounts of money by utilizing the Foreign Trade Zone (FTZ) program. Originally created in the 1930s, the purpose of the FTZ is to help improve the competitiveness of United States businesses on the global market by reducing costs from taxes and tariffs and customs duties and decreasing burdensome regulations.

But many business owners and logistics professionals aren’t aware of just how much money they could save by utilizing an FTZ. When deciding whether the FTZ program is a smart move for your business, there are a number of important cost-saving benefits to mull over. Here are a few to consider.

Duty Deferral, Reduction, or Elimination

Of all customs programs, FTZs allow the most duty deferral. Businesses can ship and store imported goods in the FTZ without paying duties or inventory tax while they are stored in them. Customs fees are assessed only when goods enter United States customs territory upon consumption clearance and exit from the FTZ, and exports leaving the United States are not subject to import duties or taxes at all. Goods and products transferred from one FTZ to another are also not taxed.

For example, a company can bring a product to an FTZ in the United States, make adjustments or be stored, and ship the product back out without being taxed, as the products never actually enter U.S. commerce.

Savings on Inverted Tariffs

If tariffs on raw materials or the component parts of an unfinished product are higher than on the finished product as a whole, a manufacturer in the United States who imports materials or unassembled goods may be at a disadvantage regarding cost savings.

Among the benefits of utilizing an FTZ is the ability to pay the lower duty, whether that is on the materials or the finished product. Frequently there may be no tariff on a completed manufactured product, which gets rid of associated costs when importing materials or parts. Utilizing an FTZ is the only way to benefit from inverted tariffs.

If tariffs on raw materials or the component parts of an unfinished product are higher than on the finished product as a whole, a manufacturer in the United States who imports materials or unassembled goods may be at a disadvantage regarding cost savings.

Weekly Customs Entries

Ordinarily, a business importing goods is required to file a customs entry each time a shipment enters the United States, but an importer taking advantage of an FTZ has the option to only file one entry per week. This generates savings on merchandising processing fees and allows for quicker filling. Additionally, it is worth noting that harbor maintenance fees are paid quarterly on goods that enter an FTZ as opposed to upon entry into U.S. customs.

This benefit also allows companies to conduct their business around the clock. One place where Aries excels above and beyond the competition is customer service and availability, and this holds true with our warehousing and logistics solutions as well. In some cases, a customer may require immediate service, and we are available 24/7 – especially since we know customs is not one to wait.  

Indefinite Storage Capability

While other solutions like bonded warehouses only allow storage of goods for up to five years, a business can leave goods of unlimited size or capacity in an FTZ indefinitely, even if the goods are subject to quota restrictions. The items can then enter U.S. customs territory when the quota opens up. This can generate important benefits for companies in the area of cash flow management on imports.

For example, if a U.S. business does not utilize an FTZ and has customers purchasing the goods to ship to Mexico, they will still do consumption entries on almost everything, and pay duties, taxes, and equity into the U.S. commerce. By correctly utilizing an FTZ, businesses can avoid paying duties and taxes on direct exports.

Security Considerations and Insurance Costs

An FTZ includes customs supervision and additional standard security protocols, which save businesses utilizing an FTZ from incurring additional costs on security and insurance – and because the insurable value of goods and products in an FTZ does not include customs duty, insurance costs, in general, are often lower.

Additionally, because FTZs necessitate careful tracking on receipt, processing, and shipment of goods and products, companies utilizing an FTZ often see fewer errors in data, decreased waste and scrap, and increased accountability.

It is also worth noting that the U.S. Department of Homeland Security, through Customs and Border Protection, has designated the use of FTZ inbound admission procedures a secure supply chain best practice.

Making Tough Logistics Challenges Easy

Aries Worldwide Logistics is a strategic partner committed to helping you engineer your end-to-end supply chain strategy and achieve maximum performance. Aries has built a reputation based on proven expertise in logistics and product flow management and a demonstrated ability to execute reliably in many supply chains, logistics, and information technology models, despite today’s challenging and complex business environment.

To learn more about FTZ warehouses and discover whether this logistics solution is the right fit for your business, contact Aries today.

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