Understanding Foreign-Trade Zones Wayne Coleman FTZ Networks President wcoleman@ftznetworks.com 901-857-5583

What is a Foreign Trade Zone? A FTZ is: A designated location in the U.S. that is legally outside of U.S. customs territory Where companies can use special procedures that help encourage U.S. manufacturing and other value added activities by allowing delayed or reduced duty payments on foreign merchandise, as well as other savings The usual Custom entry process and payments of duties are not required on the foreign merchandise unless and until it enters US Customs territory for domestic consumption

Where are the FTZs? All 50 States + Puerto Rico 259 General Purpose Zones 471 Subzones 2,700 Firms 320,000 US Workers

Permissible Activities in a FTZ Merchandise admitted to a zone may be: Assembled* Tested Sampled Relabeled Stored Salvaged Processed Manufactured* Repackaged Destroyed Mixed Manipulated Graded Distributed Broken up Exhibited Sorted *The user must receive prior approval from the FTZ Board for “production”

FTZ Benefits Duty Elimination Duty Deferral No duty is paid on foreign merchandise destroyed in the zone No duty is paid on foreign merchandise that is re-exported Duty Deferral Duties are not paid on foreign merchandise while in inventory until being withdrawn for U.S. domestic consumption. Duty Inversion/Relief from Inverted Tariff Through manufacture higher duty components can assume the identity of the finished product, for duty calculation purposes, thereby reducing the amount paid upon withdrawal for U.S. domestic consumption.

FTZ Benefits Expedited Procedures Weekly Entry No Time Limit Companies using Zone procedures may have access to streamlined customs procedures (e.g. “direct delivery”) Weekly Entry Unique ability to file a single Customs Entry for an entire week’s outbound shipments (MPF savings) Ex: 1,000 customs entries annually @ $485 max = $485,000 52 customs entries @ $485 max = 25,220 Minimum Annual Savings = $459,780 No Time Limit There is no time limit placed on goods stored in the FTZ (as compared to a Bonded Warehouse) and goods can be released immediately unlike bonded storage Other Benefits Foreign goods and domestic goods held for export are exempt from state/local inventory taxes. FTZ stats may also make a site eligible for state/local benefits which are unrelated to the FTZ Act.

FTZ Uses Receiving / Shipping Storage Processing & Assembly/Manufacturing

FTZ Uses Reverse Logistics / Returns Management Kitting & Assembly of Gift Sets Retail Display Pallet builds Crude Oil Importing and Refining Labeling / Relabeling Packing / Repacking Fuel Farms for International Flights

Role of Consultants and FTZs….. Foreign-Trade Zone (FTZ) Services:
 Zone Operator
Zone Project Applications
Minor Boundary Modifications
Major Boundary Modification / Zone Expansions
Manufacturing Permits
Subzones
FTZ Management
Activation
Alterations
Feasibility Analysis
Procedures Manual
Zone Schedules / Tariffs
Annual Reports

FTZ Site Application Coordination with FTZ Grantee Gathering all information for Application Receive Concurrence Letters from Grantee & CBP Draft FTZ Application

FTZ Site Activation Develop list of names of Key Individuals for CBP Background Investigations Pre-activation Meetings with Grantee & CBP Confirm Grantee’s requirements for approval of the facility Review the facility and determine any suspected Customs security concerns Request & schedule the “Preliminary Security Survey” visit by CBP

FTZ Site Activation Determine any/all Security Improvements and/or Signage required by CBP for Activation Approval Assist with ensuring all required Security Improvements are Completed Notify CBP of completed Security Improvements Hold "follow-up" Security Survey visit by CBP

FTZ ICRS Selection and Implementation Inventory Control & Recordkeeping System Determine Short List of Software Providers Schedule Demo's with Software Providers on Short List Meetings with Software Providers & Client Systems Staff Select Software Provider Execute license agreement for the FTZ Software Complete Configuration Questionnaire from Software Provider Selected

Operational Planning & Execution Tour the facility and understand the flows of the merchandise moving into &out of the facility, including its destination; Identify the roles and responsibilities specific to the FTZ Regulatory Operations Auditing processes & procedures to identify gaps in SOP's not meeting Customs rules & regulations for FTZ operations; Draft the required FTZ Procedures Manual for CBP; Map out inventory flows (physical product & data flows) for EDI configurations

Operational Planning & Execution Develop recordkeeping processes in compliance with CBP’s regulations; Determine process, including timing, of information flow to Customs Broker Holding FTZ Awareness training for all employees of Client Draft & Submit the Activation Application to CBP Run 30-Day Mock Operations

For Questions or More Information FTZ Networks Wayne Coleman – President, C.O.O. 901-857-5583 wcoleman@ftznetworks.com