{"id":10825,"date":"2021-11-03T12:04:40","date_gmt":"2021-11-03T19:04:40","guid":{"rendered":"https:\/\/www.qad.com\/blog\/?p=10825"},"modified":"2023-01-18T12:06:18","modified_gmt":"2023-01-18T20:06:18","slug":"what-is-a-foreign-trade-zone","status":"publish","type":"post","link":"https:\/\/www.qad.com\/blog\/2021\/11\/what-is-a-foreign-trade-zone","title":{"rendered":"What is a Foreign-Trade Zone (FTZ)?"},"content":{"rendered":"<p>[vc_row][vc_column][vc_single_image image=&#8221;10826&#8243; img_size=&#8221;full&#8221;][vc_column_text]<span style=\"font-weight: 400;\">The United States Foreign-Trade Zones program was established in 1934 when Congress passed the US Foreign Trade Zones Act. The act allowed for the creation of \u201cForeign-Trade Zones\u201d \u2014 that is, specifically designated, secure areas under the oversight of US Customs and Border Protection (CBP) but outside US commerce. In essence, it allows domestic activity involving foreign items to occur prior to formal customs entry. Duty-free treatment applies to items that are re-exported and duty deferred payments apply to items sold in the U.S. market. This neutralizes any customs advantages available to overseas producers in competition with US-based producers. FTZs are located in, or near, US Customs Ports of Entry and they are in all 50 states and Puerto Rico.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">By using an FTZ, a company can realize significant cost savings that include the following:<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Eliminating and Reducing Duties with FTZs<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Eliminating and reducing duties is a major advantage of the Foreign-Trade Zone program and can be achieved in a number of ways.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">RELIEF FROM INVERTED TARIFFS<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Inverted tariffs occur when a component or raw material is subject to a higher duty rate than the end product. The Foreign-Trade Zone program grants companies relief from inverted tariffs.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">DUTY DEFERRAL<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">In an FTZ operation, companies can defer duty payments on merchandise brought into a zone. Duties are only paid when goods enter into US commerce.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">DUTY ELIMINATION<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Companies can use an FTZ to eliminate duties on waste, scrap, and yield loss. Without a zone, all material imported into the United States is dutiable. In a zone, an importer pays the customs duty only on the merchandise that subsequently enters the domestic market. Importers pay no duty on irrecoverable yield loss or merchandise that is scrapped or destroyed in the zone. Duty is only paid on the finished product.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">DUTY EXEMPTION ON RE-EXPORTS<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Foreign-Trade Zones are legally outside of US commerce. Therefore, companies owe no customs duty on foreign imports unless and until these leave the zone for the domestic market. If the FTZ user exports the foreign goods from the zone, no duty is ever paid.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">ZONE-TO-ZONE TRANSFERS<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">A vendor located in one FTZ may transfer merchandise to a company located in another zone. The vendor can transfer those goods to the purchasing company\u2019s FTZ with no duty paid on the goods.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Reducing Import Fees with Weekly Entries<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">A significant benefit that is sometimes overlooked, is that importers using an FTZ can use Weekly Entries as their goods enter the United States. Under Weekly Entry procedures, the zone user files only one Customs entry per week, rather than filing one per shipment. As a result, the zone user pays for only one entry per week.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Companies must pay a Merchandise Processing Fee (MPF) for every Customs entry. The cost of the MPF is a percentage of the value of the imported goods. The cost is set at a minimum $27.23 and a maximum $528.33.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Zone users can group all imports in a given week into a single Customs entry and pay a single MPF for that week. The reduction of MPF under FTZ weekly entry procedures is where many importers can yield substantial savings from the FTZ Program. For some importers, these savings can be as high as those achieved through duty elimination and reduction.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">How QAD Foreign-Trade Zone (FTZ) Can Help\u00a0<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">QAD FTZ is uniquely qualified to ensure your company receives zone status from the US Foreign-Trade Zones Board.\u00a0 Our FTZ experts have years of hands-on experience combined with an exceptional success rate for applications to the FTZ Board.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">We can help you with a cost-benefit analysis. This analysis calculates the cost savings manufacturers and distributors can obtain by leveraging the FTZ program. This includes eliminating duties, duty deferral and other cost saving opportunities such as relief from inverted tariffs and reduced merchandise processing fees and brokerage fees.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In addition, QAD FTZ offers technologically advanced Inventory Control Recordkeeping (ICRS) software. Designed by\u00a0 FTZ practitioners, our software ensures that your company remains compliant. <\/span><span style=\"font-weight: 400;\">T<\/span><span style=\"font-weight: 400;\">he solution accurately tracks and records FTZ activities, and includes reporting for regulatory and financial purposes.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">What actions are you taking today to take advantage of FTZs? For more information, learn how <\/span><a target=\"_blank\" href=\"https:\/\/www.qad.com\/solutions\/foreign-trade-zone\" rel=\"noopener\"><span style=\"font-weight: 400;\">QAD FTZ<\/span><\/a><span style=\"font-weight: 400;\"> can help your organization gain significant duty savings. <\/span>[\/vc_column_text][\/vc_column][\/vc_row]<\/p>\n","protected":false},"excerpt":{"rendered":"<p>[vc_row][vc_column][vc_single_image image=&#8221;10826&#8243; img_size=&#8221;full&#8221;][vc_column_text]The United States Foreign-Trade Zones program was established in 1934 when Congress passed the US Foreign Trade Zones Act. The act allowed for the creation of \u201cForeign-Trade Zones\u201d \u2014 that is, specifically designated, secure areas under the oversight of US Customs and Border Protection (CBP) but outside US commerce. In essence, it allows [&hellip;]<\/p>\n","protected":false},"author":53,"featured_media":10826,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2045],"tags":[2575,2576,516,1830],"class_list":["post-10825","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-supply-chain-trends","tag-foreign-trade-zone","tag-ftz","tag-global-trade-management","tag-trade-optimization"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What is a Foreign-Trade Zone (FTZ)? | QAD Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.qad.com\/blog\/2021\/11\/what-is-a-foreign-trade-zone\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What is a Foreign-Trade Zone (FTZ)? | QAD Blog\" \/>\n<meta property=\"og:description\" content=\"[vc_row][vc_column][vc_single_image image=&#8221;10826&#8243; img_size=&#8221;full&#8221;][vc_column_text]The United States Foreign-Trade Zones program was established in 1934 when Congress passed the US Foreign Trade Zones Act. The act allowed for the creation of \u201cForeign-Trade Zones\u201d \u2014 that is, specifically designated, secure areas under the oversight of US Customs and Border Protection (CBP) but outside US commerce. 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