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A.OF THE FOREIGN TRADE ZONE PROGRAM <br />DEITY DEFERRAL <br />Customs duties are paid only when imported merchandise <br />is shipped -into US Customs territory. Merchandise may <br />be held in inventory in the FTZ without Customs, duty, <br />indetrnite9v. ' <br />EXPQRTS <br />Customs duties are not paid on merchandise exported from <br />the FTZ to a foreign country. <br />DEFECTS DAMAGE, QRSOLESCENCE WASTE SCRAP <br />Customs duties are-significantly reduced or eliminated on <br />merchandise subject to defect, damage, obsolescence, <br />waste and scrap in the FTZ. In addition, merchandise <br />consumed in processing in the FTZ is generally not subject <br />to Customs duties. <br />NONDUTIABILITYOF LABOR OVERHEAD AND PROFIT <br />Customs duties are not owed on labor, overhead and profit <br />attributed to production operations in the FTZ. <br />INVERTED CUSTOMS DUTY SAVINGS <br />FTZ users may elect to pay the duty rate applicable to <br />component materials or merchandise produced from <br />component materials - whichever is the lower rate. <br />INTERNATIONAL - RETURNS <br />Merchandise exported and subsequently returned to the <br />FTZ is not subject to Customs duties upon return. It can be <br />repaired and re- exported without duty. <br />EXHIBITION <br />Merchandise -may be held for exhibition- without Customs <br />duty payments. Many companies use FTZ's as display areas <br />for merchandise and machinery. <br />US QUOTAS <br />Most merchandise may be held in the FTZ, even if it's <br />subject to US quotas. When the quota opens, the product <br />may be immediately shipped into the US Customs territory. <br />SIMPLIFIED IMPORTJE_XPORT PROCEDURES <br />Delays in Customs clearances and duty drawback <br />procedures are eliminated. Delivery times are reduced. by <br />direct shipments and the ability to do "weekly- entries" into <br />US commerce via Customs and Border Protection. <br />QUALITY CONTROL <br />The FTZ may be used for quality control inspections to <br />ensure that only products that meet specifications are <br />imported. Substandard goods can be destroyed before <br />duty is paid. <br />Sources: National Association of Foreign -Trade Zones http: / /www.naftz.org/ <br />Miller& Company P.C. http.11www.millerco.com <br />Si CURITY & G RGO INSURANCE <br />Some FTZ users have negotiated up to 40% reduction in <br />cargo insurance rates because imported merchandise is <br />shipped directly to the FTZ, thus avoiding potential pilferage <br />at deep -water ports and major international airports. The <br />FTZ Operator is subject to Customs supervision and security <br />procedures, saving the FTZ users expenses for security and <br />insurance. <br />INVENTORY CONTROL <br />FTZ operations require careful accounting on receipt, <br />processing and shipment of merchandise. Firms find that <br />the increased accountability cuts down on problems with <br />inaccurate receiving and shipping as well as waste and <br />scrap. However, the specific identification of merchandise <br />is unnecessary in the FTZ, thereby saving on accounting <br />systems. <br />SPARE PARTS <br />Unneeded spare parts may either be returned to the foreign <br />vendor or destroyed, duty free. <br />TAX ADVANTAGES <br />By federal statute, tangible personal property imported <br />from outside the US or produced in the US and held in a <br />zone for export is not subject to state and local ad valorem <br />taxes. NC currently has no inventory tax but most states <br />exempt all FTZ merchandise from this tax. <br />ZONE- T0-ZONE TRANSFER <br />An increasing number of firms are transferring merchandise <br />from one zone to another. If the transfer is in -bond, <br />customs duty is not owed until the product is finally shipped <br />into the US. <br />TRANSFER OF TITLE <br />Title to merchandise may be transferred in the FTZ, as long <br />as there is no "retail" sale. The global supplier can own it <br />until it is shipped just -in -time to local manufacturers. <br />+CHANGING CIRCUMSTANCES <br />As US -laws and especially US Customs laws change, <br />location in an FTZ allows operators and users greater <br />flexibility in addressing these changing circumstances. <br />OTHER SAVING <br />Broker and merchandise processing fees may be reduced <br />by using the "weekly entry provision" of the FTZ program. <br />Certain duty deferral and reduction benefits also apply on <br />equipment admitted to the FTZ for assembly and testing <br />prior to use in production (e.g. racking systems, conveyors, <br />etc.) <br />0 <br />