Loading...

Foreign Trade Zone as Business Relocation Incentive

Does your company store, distribute or manufacture products? You may want to consider doing business within a Foreign Trade Zone.

Moreno Valley is part of Foreign Trade Zone #244. Foreign Trade Zones (FTZs) were originally created in 1934 to reduce costs for companies operating in the United States and engaging in international trade.

A FTZ is a defined geographical area – in this case, encompassing northwestern Riverside County – that is treated like it is outside the borders of the United States. This means that companies involved in storage, distribution or manufacturing activities that choose to locate within a FTZ like Moreno Valley do not have to pay import duties on any product components that are coming from outside the United States to the company location.

Once the product is finished being assembled or stored, the company has two options: shift the product to the United States market, or shift the product to the international market. Companies choosing to ship their products to the U.S. market may pay the finished duty rate instead of the component duty rate, as finished duty rates can either be lower or non-existent than component duty rates. Companies choosing to re-export their finished product may never have to pay duties on their component product.

Here’s an overview of the benefits of operating under a Foreign Trade Zone designation:

  • Deferral, reduction or elimination of import duties
  • Reduction or elimination of re-export duties
  • Elimination of duties on waste and scraps
  • Filing of one customs entry per week instead of per shipment
  • Improved inventory tracking and quality control
  • Increased storage time
  • Elimination of duties between FTZ transfers

For more information on each of these benefits, click here. (Goes to our FTZ incentive section)

In order to operate within an FTZ, you’ll need to contact your local Foreign Trade Zone and request production authority. Production notification typically takes 120 days for approval. If you need approval sooner than 120 days, interim authority can be requested by letter. That way you can operate on an interim basis during the 120-period while your request is being approved.

And here’s another perk – you don’t necessarily need to be located in a Foreign Trade Zone to use the program. The FTZ Board has a procedure for you to work with your local FTZ to create a “subzone” or “usage-driven site” at your facility.

There is no fee to apply for production authority.

To estimate your company’s potential duty savings under a FTZ, click here.

July 12th, 2019|

About the Author:

Translate »