Foreign-Trade Zones: How to lessen the effects of increased tariffs

Are you looking for ways to alleviate the impact of the current trade war? Importers, exporters and manufacturers alike are all feeling the effects of the additional 10 to 25 percent levies on imported goods. Everyone is looking for a way to reduce the effect of the higher taxes, and Access World may have a solution – Foreign-Trade Zones (FTZ). A free or Foreign-Trade Zone is exempt from many of the rules and regulations of U.S. Customs, making them invaluable in the current climate. Are you aware of the benefits of passing your goods through a Foreign-Trade Zone?


The five benefits of using a Foreign-Trade Zone

Deferral or elimination of certain duties

Importers can use Foreign-Trade Zones to postpone or eliminate duties expenses on goods entering the US market or being re-exported. These warehouses fall under a separate zone, putting them outside of Customs laws and requirements. Due to this zoning, products entering an authorized warehouse will only incur duties when they exit the zone. Depending on the timeframe between imports and exports, a company can put off, and in some cases even eliminate these fees and expenses. A prime example is the shipment of parts or raw materials into the zone for manufacture. It’s possible to avoid certain taxes when exporting the components as a finished product.

Relief from Inverted Tariffs

Manufacturing taking place on U.S. soil can be at a costly due to the higher duty rate imposed on parts and raw materials. Due to the high tariffs, local U.S. manufacturers are often at a disadvantage to importers. By operating in a Foreign-Trade Zone, U.S. manufacturers can balance out the cost disadvantages by being able to select the lower duty rate and benefit a higher profit margin. Inverted tariffs only apply to manufacturers operating within a Foreign-Trade Zone.

Indefinite storage

Unlike bonded warehouses, Foreign-Trade Zones don’t limit storage to a specified timeframe. Goods may remain in storage for indefinite periods. This can be a positive move for a number of reasons. One of which is the avoidance of inventory tax. Taxes will only apply once the inventory reaches the company’s facilities. Storing goods before entry into the country also allows for the avoidance of quota-based tariffs. Instead of importing when the tax rates are high, a company keeping their products in a Foreign-Trade Zone can wait until the quotas reset before moving their shipment. To determine the best strategy for your business, always consult you tax advisor first.

No duties on damaged or non-conforming items

All goods imported into the U.S. are subject to Customs duties, regardless of their condition. To avoid paying taxes on damaged or defective products, a Foreign-Trade Zone can be used to inspect the products before entry into the country. Any items found in an unsatisfactory condition can be returned without ever formally crossing the border and incurring duties.

Duty exemption on re-exports

Companies can further reduce the effects of Section 232 and 301 by exporting their goods directly from a Foreign-Trade Zone. When goods are imported into the U.S. for exportation, Customs duties apply to all stock entering the country. But, when companies use Foreign-Trade Zones, the entry duties are deferred. If the product is then exported directly from the free zone, no Customs duties will apply as the goods never formally entered the U.S.

Access World America offers Foreign-Trade Zone warehousing

Here at Access World America, our warehouses are Foreign-Trade Zones. Our clients importing goods into the U.S. can utilize our facilities to delay import duties until quotas or tariffs are lifted, or until clearance for U.S. consumption. If you would like to find out more about our facilities, please get in touch with your nearest location.

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