Foreign Trade Zones
Foreign Trade Zones
In recent years, foreign trade zones (FTZs) have become more popular as an intermediate step in the process between import and final use. Oftentimes,
tne nnai use 1S Ior export; however, the zones are also good for making use of foreign sourcing.
FTZs, established by federal grants [in the United States] primarily to state and local government agencies, provide areas where domestic and imported merchandise can be stored, inspected, and manufactured free from formal customs procedures until the goods leave the zones. The intended purpose of the zones is to encourage the domestic location of firms by affording them opportunities to defer duties, pay less duties, or to avoid certain duties completely.15
FTZs have been used in the United States primarily as a means of providing greater flexibility as to when and how customs duties are to be paid. However, their use in export business has been climbing. In the United States, FTZs used for exports are in one of the following categories:
■ Foreign goods transshipped through U.S. zones to third countries.
■ Foreign goods processed in zones, then transshipped abroad.
■ Foreign goods processed or assembled in U.S. zones with some domestic materials and parts, then reexported.
■ Goods produced in zones wholly of foreign content and exported.
■ Goods produced in zones from a combination of domestic and foreign materials and components then exported.
■ Domestic goods moved into a zone to achieve export status prior to their actual exportation.16
In 1975 there were only 27 general-purpose zones and subzones for individual plants. By 1991 the number of zones had increased to 176. Imports flowing through zones increased significantly during that same time period.17
An example of how a foreign trade zone can be used is a Coastal Corp. subsidiary that refines imported oil in Texas at a foreign trade subzone. If the subsidiary exports refined oil products, it pays no duty at all. If it sells the products domestically, it saves over $250,000 a year in interest on duties postponed until the products leave the zone.18 Smith Corona used an FTZ facility to import parts into the United States for its typewriter-manufacturing facilities. After the parts were manufactured into typewriters in the zone, they would be imported officially into the United States at a zero duty due to a ruling in the customs code that applied to the unassembled parts but not to the parts in the final product.19
In recent years, foreign trade zones (FTZs) have become more popular as an intermediate step in the process between import and final use. Oftentimes,
tne nnai use 1S Ior export; however, the zones are also good for making use of foreign sourcing.
FTZs, established by federal grants [in the United States] primarily to state and local government agencies, provide areas where domestic and imported merchandise can be stored, inspected, and manufactured free from formal customs procedures until the goods leave the zones. The intended purpose of the zones is to encourage the domestic location of firms by affording them opportunities to defer duties, pay less duties, or to avoid certain duties completely.15
FTZs have been used in the United States primarily as a means of providing greater flexibility as to when and how customs duties are to be paid. However, their use in export business has been climbing. In the United States, FTZs used for exports are in one of the following categories:
■ Foreign goods transshipped through U.S. zones to third countries.
■ Foreign goods processed in zones, then transshipped abroad.
■ Foreign goods processed or assembled in U.S. zones with some domestic materials and parts, then reexported.
■ Goods produced in zones wholly of foreign content and exported.
■ Goods produced in zones from a combination of domestic and foreign materials and components then exported.
■ Domestic goods moved into a zone to achieve export status prior to their actual exportation.16
In 1975 there were only 27 general-purpose zones and subzones for individual plants. By 1991 the number of zones had increased to 176. Imports flowing through zones increased significantly during that same time period.17
An example of how a foreign trade zone can be used is a Coastal Corp. subsidiary that refines imported oil in Texas at a foreign trade subzone. If the subsidiary exports refined oil products, it pays no duty at all. If it sells the products domestically, it saves over $250,000 a year in interest on duties postponed until the products leave the zone.18 Smith Corona used an FTZ facility to import parts into the United States for its typewriter-manufacturing facilities. After the parts were manufactured into typewriters in the zone, they would be imported officially into the United States at a zero duty due to a ruling in the customs code that applied to the unassembled parts but not to the parts in the final product.19
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