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Free Trade Zones

Other countries around the world have Free Trade Zones that are often confused with the U.S. Foreign-Trade Zones program. While there are similarities, the FTZ program is very different from other countries' Free Trade Zone. In a number of “free trade zones” in other countries – particularly those in developing countries – the sole benefit is the avoidance of internal customs duties on products that are re-exported from the Free Trade Zone. Often, the goods are not even allowed to be sold in the country where the Free Trade Zone exists. You often here these zones referred to as “Export Processing Zones”. The U.S. Foreign-Trade Zones program not only allows the sale and importation of merchandise to the U.S. Commerce, but in many cases enables companies to reduce or eliminate duties on products manufactured for domestic consumption. This relief from inverted-tariff benefit is one of the key distinctions between the U.S. Foreign-Trade Zones program and other countries Free Trade Zone programs. Generally Free Trade Zones offer significantly less opportunity for benefits and tariff savings. As previously mentioned, in many cases you must actually export all the merchandise you bring into a Free Trade Zone (if it is a Export Processing Zone. In other cases, importation is allowed, but not manufacturing of merchandise. Under the U.S. FTZ program, companies can obtain FTZ benefits such as, duty exemption on re-exports, duty elimination on waste, scrap, and yield loss, duty exemption on damaged, or nonconforming items, reduction in merchandise processing fees (MPF) and brokerage fees through weekly entry, cash flow savings, and relief from ad valorem tax, and the previously described relief from inverted tariffs.

    

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