Foreign Trade Zones
One of our first priorities after the port is functioning is to establish a foreign trade zone in the region for immediate economic benefit to all the states. We will have a primary zone, and sub-zones in our area. These will provides tax benefits for warehousing and manufacturing.
Relief from inverted tariffs
In certain instances, there are duty fee relationships that penalize companies for making their product in the U. S. This occurs when a component item or raw material used in manufacture carries a higher duty rate than the finished product. In those instances, the importer of the finished product pays a lower duty rate than a manufacturer of the same product in the United States. This gives the importer an unfair and unintended advantage over the domestic manufacturer. The Foreign-Trade Zones removes this disincentive for our U.S. manufacturers. For example: A manufacturer in a Foreign Trade Zone imports a motor which carries a 4% duty rate and uses it as a component in manufacturing a vacuum cleaner. When the vacuum cleaner leaves the FTZ and crosses the boundary of the U.S., the duty rate drops to the zero tariff rate for vacuum cleaners.
Duty exemption on re-exports
Without a FTZ a manufacturer or processor who imports a component or raw material into the United States, is required to pay the duty at the time the component or raw material enters the U.S. at the point-of-entry. However, since a Foreign-Trade Zone is considered to be outside the boundary of the U.S. for customs, no Customs duty is owed until the merchandise leaves the zone and crosses the boundary. If the imported merchandise is exported back out of the country from the FTZ, no Customs duty is ever paid.
Duty elimination on waste, scrap, and yield loss
Without a FTZ, an importer pays the Customs duty owed as material is brought into the United States. This is because the material is considered imported at this point. If the processor or manufacturer is within a zone environment, the merchandise is not considered imported, and therefore no duty is owed until it leaves the zone for shipment into the United States. Also, the material lost due to waste, scrap, and yield loss will never incur a Customs duty. While at first glance it might look like the Zones program is simply benefiting an importer, it is important to remember that its competitors making the same product overseas already have the benefit of not having to pay on the yield loss in the production of their compound.
Weekly Entry benefit.
There is a 0.21 percent merchandise processing fee based on value for each and every formal entry with $25 minimum, $485 maximum charged. Prior to 2000 if you had five shipments per week with a value that would rate the maximum charge (that is, over $230,953 each), the cost for processing the ten shipments would be $2,425 per week. Under rules passed in 2000, shipments received during one week are now processed as a single shipment with a maximum of $485 charged per week. For five shipments per week at the maximum charge per shipment, this means an annual savings of $100,880 per year would be realized. Savings increase with the number of shipments received.
FTZ sub zones, not co-located with the general purpose FTZ are also available. The sub-zone can only contain a single manufacturer. Until the Mid-America FTZ is operating, sub-zones in the region will be administered through FTZ-114, out of Peoria, Illinois.
See the presentation for more discussion of FTZ issues.