Global Logistics and the Foreign-Trade Zone Program Steve Schellenberg IMS Worldwide

Hong Kong, China Singapore Prince Rupert, Canada Charleston Norfolk New York Los Angeles Colima, Mexico Ensenada, Mexico Global Trade Routes

Source: Individual Port Websites Port of Entry 2012 TEU Volume 2012 TEU Growth over 2011 LA/LB14,123, % NY/NJ5,529,211.30% Savannah2,966,2210.7% Oakland2,344,4240.1% Houston1,922,4793.0% Hampton Roads2,105, % Seattle1,869, % Tacoma1,711, % Charleston1,514,5859.6% Port TEU Volumes

Seattle/ Tacoma Los Angeles / Long Beach Lazaro Cardenas Oakland Houston Savannah / Charleston Norfolk Columbus Prince Rupert Mexico City Intermodal Routes to Major Inland Ports Dallas/ FW Atlanta Memphis Chicago Kansas City NY/NJ Cent. PA Jacksonville Vancouver

What Is an FTZ?  An area inside the United States that is designated as being outside Customs Territory.  Where items are brought into the Zone duty free.  Where Customs duty is determined when the merchandise leaves the Zone.

What is a Zone Site?  An Industrial Park  An Industrial Development Inside a Port or Airport  A Company’s Facility

What Can I Do in an FTZ?  Distribute  Store  Test and Inspect  Repack  Assemble  Repair  Manufacture

Duty Deferral  Duty is not paid when an item enters the Zone  An item enters the Zone in January  Duty is paid when the item leaves the Zone  The item leaves the Zone in April  Four months of duty deferral

Duty Elimination  Testing and inspection is conducted in the Zone duty free  All rejected and destroyed items are duty free  Exports are duty free  All items exported from the Zone are duty free

Duty Reduction  For manufacturing Zones  The Zone allows a company to choose the lowest duty rate associated with its components and finished product(s)  A company imports 3 components  A has a duty rate of 10%  B has a duty rate of 9%  C has a duty rate of 8%

Duty Reduction  The company’s finished product has a 5% duty rate  The company will pay for the value of the components at the finished product rate  A from 10% to 5%  B from 9% to 5%  C from 8% to 5%  This reduction means a savings of 5% to 3%

Merchandise Processing Fee Savings  Each entry into the United States is assessed a Merchandise Processing Fee (MPF)(valorem fee of percent)  Foreign-Trade Zones are allowed one entry per week  The MPF is collected on that one entry

How to Become an FTZ?  Application  For manufacturing  For land associated with the site  Activation  Approval by Customs

FTZ Activation Package  Background Investigation  Concurrence Letter from Grantee  Procedures Manual  Security Survey  Blue Print Drawing of Activated Area  Operator’s Bond

FTZ Operations  SOP Development  Operational Training  Audit Program  Zone Administrative Training  Inventory Control and Record Keeping System