A U.S. Foreign-Trade Zone (FTZ or zone) is a site within the United States that is legally considered outside of Customs territory for the purpose of duties, so goods may be brought into the site duty-free and without formal customs entry.
The Midcoast Regional Redevelopment Authority is the Grantee of Foreign Trade Zone #282. It is comprised of a 394-acre parcel at Brunswick Landing in Brunswick, Maine.
Did you know that Portland, Maine is the 26th busiest port in the U.S. in terms of cargo tonnage and the second largest oil port on the East Coast? We’re conveniently located only 30 minutes north via freight train or Interstate highway!
An FTZ is a tool that companies use to increase their global competitiveness and play an important role in providing a level playing field when investment and production decisions are made. They have been proven to be a successful trade program by consistently creating and retaining jobs and capital investment in the United States.
FTZs provide users with the opportunity to lower costs and boost profits through the following three duty savings benefits:
- Reduce: In many cases duties are higher for parts than for finished products. Therefore, many companies enter a Foreign-Trade Zone in order to import parts duty-free, assemble a product and then be required to only pay the duty on the final product.
- Eliminate: Customs duties are never paid on goods that are brought into a zone and then re-exported or scrapped. No formal entry with Customs is filed and the goods never enter the U.S. stream of commerce.
- Defer: Since FTZs are outside the Customs territory of the United States, goods are not considered to be imported until they leave the zone and enter the U.S. stream of commerce. This allows a company to defer Customs duties until merchandise leaves the zone instead of having substantial monies tied up in inventory Customs duties.
Other benefits that can be realized by using a Foreign-Trade Zone include the following:
- Weekly Entry: The Trade and Development Act of 2000 contains a provision permitting FTZ “Weekly Entry” procedures that can help zone users save time and money. Under Weekly Entry procedures, the zone user files only one Customs Entry per week rather than filing one Customs Entry per shipment. Customs no longer has to process an entry for each and every shipment being imported into the zone and the zone user no longer has to pay for the processing of each and every entry.
- Logistical Flexibility: Goods may be transferred from U.S. ports of arrival directly to a Foreign-Trade Zone or between zones duty free. Products made overseas may be brought into a zone for storage or consolidation with other products, allowing distribution of complete shipments to customers. This not only provides flexibility but can improve supply chain velocity.
Supply Chain Security: FTZs can help a company achieve “best practices” when it comes to supply chain security.
Lower Taxes: Goods in a Foreign-Trade Zone avoid or defer federal excise taxes.
Download presentation on Foreign-Trade Zones and Global Logistics by Steve Schellenberg of IMS Worldwide, Inc.
Buildings currently in the Brunswick Landing Foreign-Trade Zone include:
- 1 Mölnlycke Health Care Building 79,600 s.f.
- 4/250 Hangar/Office 92,200 s.f.
- 5 Hangar 163,454 s.f.
- 6 Hangar 173,842 s.f.
- 9 Administrative 8,888 s.f.
- 200 General Aviation Terminal/Tower 11,491 s.f.
- 252 Automotive Repair Shop 5,100 s.f.
- 86 Ground Maintenance Shop 31,980 s.f.
- 294 Supply Building 64,530 s.f.
- 590 Public Works Shops 8,000 s.f.
- 55 Public Safety Building 11,000 s.f.
- 584 Public Works Shops 7,200 s.f.
- 51 Hazardous Waste Building 5,000 s.f.
- 53 Public Works Office 10,000 s.f.
- 81 CHRIMP Facility 7,000 s.f.
Total square footage in Brunswick Landing Foreign-Trade Zone: 679,285
Common FTZ Questions and Answers
Why do global firms use Foreign-Trade Zones?
To maintain the cost competitiveness of their U.S. based operations in relation to their foreign-based competitors. For a firm, zone status provides an opportunity to reduce certain operating costs associated with a U.S. location that are avoided when operating from a foreign site.
How is a Foreign-Trade Zone established?
The Foreign-Trade Zones Act of 1934 created a Foreign-Trade Zones Board to review and approve applications to establish, operate and maintain Foreign-Trade Zones. The Board may approve any zone or subzone that it deems necessary to serve adequately “the convenience of commerce.” U.S. Customs and Border Protection must approve activation of the zone before any merchandise is admitted under the Foreign-Trade Zones Act.
What may be placed in a Foreign-Trade Zone?
Any foreign or domestic merchandise not prohibited by law, whether dutiable or not, may be taken into a Foreign-Trade Zone.
Merchandise that lawfully cannot be imported into the United States is prohibited without exception. Merchandise that lawfully cannot be entered into the customs territory may be placed in a Foreign-Trade Zone because zones are considered outside customs territory. For instance, merchandise may be stored, repackaged or manipulated in a Foreign-Trade Zone and exported.
Some Federal agencies regulate storage and handling in the United States of certain types of merchandise, such as explosives. Depending on the nature of the requirement and the particular characteristics of the zone facility, such merchandise may be excluded. Moreover, agencies that license importers or issue importation permits may block entries into a zone that are not licensed or permitted.
The Foreign-Trade Zone Board may exclude from a zone any merchandise that in its judgment is detrimental to public interest, health or safety. The Board ensures that Foreign-Trade Zones are not used to bypass other trade laws of the United States.
What can occur within a Foreign-Trade Zone?
Foreign and domestic merchandise permitted in a zone may be stored, sold, exhibited, broken up, repacked, assembled, distributed, sorted, graded, cleaned, mixed with foreign or domestic merchandise, otherwise manipulated, destroyed or be manufactured without being subject to U.S. Customs laws. This exemption does not apply to machinery and equipment that is imported for manufacturing use or the like within a zone.
In specific cases, the Foreign-Trade Zones Board may deny permission to manipulate, manufacture or exhibit merchandise in a zone in order to protect public interest, health or safety.
Many products subject to an internal revenue tax may not be manufactured in a zone. These products include alcoholic beverages, products containing alcoholic beverages except domestic denatured distilled spirits, perfumes containing alcohol, tobacco products, firearms and sugar. In addition, the manufacture of clocks and watch movements is not permitted in a zone.
No retail trade of foreign merchandise may be conducted in a Foreign-Trade Zone. However, foreign and domestic merchandise may be stored, examined, sampled and exhibited.
How is U.S. Customs and Border Protection involved?
U.S. Customs and Border Protection is responsible for the transfer of merchandise into and out of a zone and for matters involving the collection of revenue. The Office of Regulations and Rulings at Customs headquarters provides legal interpretations of the applicable statue, Customs regulations and procedures.
The Port Director of Customs in whose district a zone is located is in charge of the zone as the local representative of the Foreign-Trade Zones Board. He or she controls the admission of merchandise into the zone, the handling and disposition of merchandise in the zone and the removal of merchandise from the zone. In addition to the Foreign-Trade Zones Act, he or she enforces all laws normally enforced by Customs that are relevant to Foreign-Trade Zones. In this case, the Port Director is located in South Portland, Maine.
Zones are supervised by U.S. Customs and Border Protection officers through periodic checks and visits; the security of the zone must meet U.S. Customs and Border Protection requirements.
Is a Foreign-Trade Zone right for your Operations?
If you are concerned about Foreign-Trade Zone operational issues or regulations, or you think zones are only suited to a particular industry, consider this:
- Car manufacturing plants, oil refineries and distributors, electronics, footwear, pharmaceuticals and textiles are all utilizing FTZs. So are companies with as few as fifteen employees.
- If you are already using another Customs tariff-reduction program, such as Duty Drawback, Temporary Importation Bond or a Bonded Warehouse, you need to consider an FTZ as a way to streamline operations, cut down on paperwork, increase flexibility and save additional money. Many companies are discovering that FTZs more efficiently meet their needs than other Customs programs.
- Activation: Approval by the grantee and U.S. Customs and Border Protection’s Port Director for operations to begin, which allow the admission and handling of merchandise in zone status.
- Admission: The physical arrival of goods into a zone in a specified zone status with the appropriate approvals of the zone grantee and the U.S. Customs and Border Protection. The word “admission” is used instead of “entry” to avoid confusion with Customs entry processes under Parts 141-144 of the Customs Regulations.
- Customs Territory: The territory of the U.S. in which the general tariff laws of the U.S. apply. The U.S. Customs territory includes the States, the District of Columbia and Puerto Rico minus any areas within the boundaries of foreign-trade zones.
- Deactivation: Voluntary discontinuation of the activation of an entire zone or subzone by the grantee or operator. (Discontinuance of the activated status of only part of a zone is an alteration).
- Direct Delivery: A procedure for delivery of merchandise to a zone without prior application and approval on Customs Form 214; designed for low-risk, repetitive shipments whose ordering and timing are under the control of the operator. Approval to utilize direct delivery must be obtained from the Port Director.
- Domestic (D) Status: Status of zone merchandise grown, produced or manufactured in the U.S. on which all internal revenue taxes have been paid, or the status of zone merchandise previously imported on which all applicable duties and internal revenue taxes have been paid.
- Drawback: Import duties or taxes repaid by the government, in whole or in part, when the imported goods are exported or used in the manufacture of exported goods.
- Entry: Notification to Customs of the arrival of imported goods in the Customs territory of the United States. Merchandise withdrawn from a zone for consumption in the U.S. is entered when it is removed from the zone. Goods brought into a zone are admitted.
- Foreign-First (FOFI): An accounting method based on the assumption that foreign-status merchandise is disposed of first. Permission to use FOFI must be obtained from Customs and is granted on a case-by-case basis.
- General-Purpose Zone: A general-purpose zone (GPZ) is established for multiple activities by multiple users. Storage, distribution, testing, repackaging and repair are some of the possible activities in a GPZ. Processing or manufacturing in a GPZ requires the permission of the Foreign-Trade Zones Board.
- Grantee: A corporation to which the privilege of establishing, operating and maintaining a foreign-trade zone has been granted by the Foreign-Trade Zones Board. Grantee corporations must be either public corporations including a state, political subdivision (including a municipality), public agency, corporate municipal instrumentality of one or more states or private corporations organized for the purpose of establishing a zone project. Qualified private corporations must be charted for this purpose under a law of the state in which the zone is located. The Midcoast Regional Redevelopment Authority is a Grantee of Foreign-Trade Zone #282.
- Harmonized Tariff Schedule of the United States: The Harmonized Tariff Schedule of the United States (HTSUS) Published by the U.S. International Trade Commission, the HTSUS is used in the classification of imported merchandise for rates of duty and statistical purposes.
- Inverted Tariff Structure: Where imported parts are dutiable at higher rates than the finished product into which they are incorporated.
- Magnet Site: A site intended to draw future users to that location/industrial park.
- Manipulation: As defined in Section 562 of the Tariff Act, processing wherein merchandise is packed, unpacked, repacked, cleaned, sorted, graded or otherwise changed in condition. The precise distinction between manipulation and manufacturing is subject to interpretation and enjoys a long history of case law.
- Manufacturing: The FTZ Board has defined manufacturing as any process that results in a change in Customs classification of the merchandise and, therefore, requires prior clearance from the Board pursuant to the manufacturing conditions in specific foreign-trade zone grants.
- Merchandise: FTZ merchandise includes goods, wares and chattels of every description. Not included is prohibited merchandise, building materials and supplies for use in the operation of a zone. Nonprivileged Foreign Status (NPF): Status of zone merchandise not previously cleared by Customs which is appraised in the condition of the merchandise at the time it enters the Customs territory upon exiting the zone. NPF status may be changed upon approval from Customs, provided the merchandise is still in the same condition as when admitted to the zone. While in the zone, NPF status merchandise can be manipulated or manufactured into another commercial item with a different tariff classification. NPF status allows zone users to pay duty at the rate of the finished product produced in the zone.
Operator: A corporation, partnership or person that operates a zone or subzone under the terms of an agreement with the grantee. A grantee may act as its own operator.
- Operator’s Bond: A bond submitted to Customs on Customs Form 301 to assure compliance with the Customs Regulations as set forth in 19 CFR 113.73.
- Port of Entry: A place designated by the U.S. Government at which a Customs officer is assigned with authority to accept entries of merchandise, collect duties and enforce the various provisions of the Customs laws.
Privileged Foreign Status: Zone status whereby merchandise is classified and appraised, with duties and taxes determined, at the time the status is elected. Privileged foreign status cannot be changed once chosen.
- Service Area: The designated area approved by the FTZ Board. Typically the area is made up of one or more specified counties which have each elected to be served by a specific Grantee.
- Subzone: A special-purpose zone established as part of a zone project for a limited purpose that cannot be accommodated within an existing General Purpose Zone. Subzones must be sponsored by the grantee of a General Purpose Zone.
- Usage-Driven Site: A site that is designated to meet a specific user’s need. The site needs to be within the Grantee’s approved Service Area.
- User: A person or company using a zone for storage, handling or processing of merchandise. An operator may authorize a user to maintain its own inventory system and procedures manual. However, the operator remains responsible to Customs for inventory control unless the user posts its own operator’s bond.
- Weekly Entry Procedures: A Customs procedure that permits zones and subzones to file a weekly entry on Customs Form 3461 for the estimated removals of merchandise destined for domestic consumption during the following business week. Once the Port Director has approved the entry, the operator may ship the products all week up to the quantity estimated.
- Zone Lot: A collection of merchandise maintained under an inventory control method based on specific identification of merchandise admitted into a zone by lot and lot number (ZLN).
- Zone Restricted Status: Status of zone merchandise transferred to a zone for the sole purpose of exportation or destruction. Zone restricted merchandise cannot be changed or brought into the Customs territory without the specific permission of the Foreign-Trade Zones Board on a case-by-case review.
- Zone Status: The status of merchandise admitted to a zone, i.e. domestic (D), non-privileged foreign (NDF), privileged foreign (PF) or zone restricted (ZR).