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Foreign Trade Zone Benefits: How It Helps Businesses


import shipment containers in foreign trade zone

Importing and exporting goods are now standard practices in globalization. But as with any other business operations, importing and exporting goods can also present nuances in your business.


Depending on the volume or frequency of your imports, paying duties can become a large expense in your business. It can also disrupt supply chains, given how most custom duty procedures are painstakingly slow.


The solution? Foreign Trade Zones (FTZ) that are designated and set across the whole country. 


Foreign Trade Zones, according to the International Trade Administration, are locations that use special customs to facilitate trade and retain business activities in the country.  

But how does FTZ help businesses in their supply chains, customs, and logistics? Let’s talk more about its benefits in this article.  


stacks of import boxes

Special Custom Duties

Foreign Trade Zones are designated areas that are closely associated with special custom procedures. Since legally, FTZs are outside of the US Customs Territory, formal custom duties don’t apply inside these secured sites.


This means that one of the Foreign Trade Zone benefits available for businesses is they get more relaxed custom duty policies inside.


Businesses that operate inside FTZ can legally avoid paying custom duties on their imports. As long as these imported goods remain inside the zone, the US Customs won’t require them to pay duties for it.


Aside from duty exemption, businesses can also enjoy duty and tax deferrals should they choose to put the products in the US domestic market. When they do, they also enjoy duty reduction on the manufactured products that came from the imported materials.


Some of the business operations that companies can do in these areas are:


  • Use the imported items to produce finished goods 

  • Store the imported goods within the warehouse facilities inside the premise 

  • Manipulate or modify the goods in any shape or form 

  • Conduct tests and innovative procedures on the product 

  • Inspect the products for quality assurance 

  • Repackage and re-label the products to be re-exported back to international borders


truck carrying a shipment container

Streamlined Custom Procedures

Another Foreign Trade Zone benefit for businesses is a more streamlined custom procedure inside the area.


Since typical custom duties don’t apply to imported goods in the FTZ, some of the paperwork from it is also omitted, if not removed. Of course, that is, if the imported goods in question are still inside the premises of FTZ.

 

Instead of additional import duty or excise tax, Companies only need to pay the reduced Merchandise Processing Fees of their goods.


Further, they can also file for a single entry to account for all the goods shipped within the consecutive seven-day period. This custom process is easier and more convenient than filing an entry for every shipment that will arrive.


robotic hands assembling cars


Efficiency in Logistics

There’s an increase in efficiency in business logistics and companies can easily capitalize on this FTZ benefit.


Most Foreign Trade Zones are already within an existing logistic facility like ports, airports, or railways.


The short distance to these logistic facilities helps streamline production in manufacturing and reduces overall transit to move shipments. Because FTZs have warehousing facilities on the site, companies can also use them to store goods before any transportation process. 


 inventory manager inside a warehouse facility


Better Inventory Control

FTZ users have full control of their inventory—imported goods or domestic materials—inside the zone. They can decide on what goods go in or out in the zone, and how many.


Often, Foreign Trade Zones serve as supply chain hubs where businesses can consolidate and store all their materials. This makes them a great distribution center when all materials are converted into finished goods or are ready for delivery.

  

Even better, FTZ also reduces the risk of inventory loss. You can be assured that your inventory damage is minimized, from FTZ’s strict security policies to the decrease in shrinkage-causing transits.


Ready to Make Use of the Foreign Trade Zone Benefits?

Most of the foreign trade zone benefits center around minimizing the customs duties to pay and streamlining operations.


In essence, all these benefits improve the businesses’ cashflows and save a portion of their working capital. That’s why if your business isn’t utilizing an FTZ yet, you may be missing a lot of opportunities to optimize your operations better.


Are you ready to incorporate all FTZ benefits into your business? Request a quote from us and we’ll guide you with all the details about using Foreign Trade Zones!



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