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Relief From Inverted Tariff When Manufacturing

in a Foreign-Trade Zone or SubZone

Benefit's of FTZ's
    

Relief from Inverted Tariffs

Inverted tariff (duty rate) relationships penalize companies for making their product in the United States. The U.S. FTZ program enables companies to apply to the FTZ Board for the authority to obtain relief from inverted tariffs when a component item or raw material is subject to a higher duty rate than the finished product. Hence, 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 Program levels the playing field in these circumstances.

The Foreign-Trade Zone Corporation’s experience and expertise in understanding both the application process and the trade policy issues associated with applications for Subzone or General-Purpose Zone Temporary Interim and Permanent Manufacturing Authority make it the right choice when a company wants to obtain relief from inverted tariff savings.

FOR EXAMPLE: A Foreign-Trade Zone User imports a motor (which carries a 4% duty rate) and uses it in the manufacture of a vacuum cleaner (which is duty-free). When the vacuum cleaner leaves the FTZ and enters the commerce of the U.S., the duty rate on the motor drops from 4% to the “FREE” vacuum cleaner rate. By participating in the Zones Program, the vacuum cleaner manufacturer has eliminated duty on this component, thereby reducing the component cost by 4%.

The FTZ Corporation has done more than 1,000 FTZ projects and helped its clients to obtain relief from inverted tariffs in numerous industries. A few of these industries are pharmaceuticals, automobiles and automotive parts and components, electronics, textiles and upholstered furniture, aerospace products, petroleum exploration, production, refining, petrochemicals, dietary supplements, shipbuilding and repair, bulk chemicals, electronics, and forklifts.

The U.S. FTZ program differs substantially from other countries’ free trade zones, which do not provide a mechanism for obtaining relief from inverted tariffs. Also, the integration of foreign and domestic parts, components, and raw materials in goods manufactured in U.S. FTZ’s gives companies better flexibility at each point in the supply chains of their U.S.-based manufacturing operations.

    

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