The ABCs of FTZs

Manufacturers don't have to be an exporter or move to an established FTZ to see benefits.

Manufacturers familiar with foreign-trade zones know the obvious benefits, namely no duties on goods exported from the foreign-trade zone (FTZ) and the deferral of duties until goods are moved outside the FTZ. But, according to Greg Jones, corporate secretary and senior consultant with Foreign-Trade Zone Corp., there are other key points to consider:

  • For one, a manufacturer doesn't necessarily have to be an exporter to benefit from the program. As an example, if a manufacturer operating within an FTZ is importing components for a finished product that has a lower duty rate than the initial imported materials, the manufacturer can pay the lower rate. However, there must be a net positive effect for the U.S. economy to qualify.
  • Manufacturers don't necessarily have to move to an established FTZ. They can apply through their local FTZ grantee to have their existing facility designated as a foreign-trade subzone.

As for the application process, Jones says to expect an eight- to 12-month waiting period, or longer if sensitive trade issues are involved. In some instances, the timeframe can be shortened if the company can cite a recent precedent for their particular FTZ. There's also a fast-track process designed to make the FTZ application process more affordable for small- and medium-sized manufacturers in which they can obtain temporary or interim manufacturing (TIM) status if they're located within a pre-existing FTZ location. This process cuts the approval time by about six months, according to the National Association of Foreign Trade Zones. TIM status is effective for two years, providing smaller manufacturers with extra time to prepare and file their permanent manufacturing authority.

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