FTZ Logistic Services in El Paso & Juárez

Cesar-Scott, Inc. offers FTZ Logistic Services to CMs, OEMs, and distributors. In response to tariffs, Cesar-Scott has applied to obtain Foreign Trade Zone Registration to offer its customers logistic value-added services to:

• Eliminate customs duties
• Reduce customs duties
• Defer customs duties  
• Streamline the process with US Customs – receiving & shipping

What is a Foreign-Trade Zone (FTZ)?

Foreign-Trade Zones (FTZ) are secure areas under U.S. Customs and Border Protection (CBP) supervision that are generally considered outside CBP territory upon activation. Located in or near CBP ports of entry, they are the United States' version of what is known internationally as free-trade zones.

Created by Congress in the Foreign-Trade Zones Act of 1934, Foreign-Trade Zones continue to thrive to better meet the needs of American companies in the global economy. Foreign-Trade Zones continue to be a vital resource for trade in the United States. According to its 2019 Annual Report to Congress, the Foreign-Trade Zones Board notes that were 193 active FTZ programs across the United States, employing approximately 460,000 people at approximately 3,300 businesses, and importing over $767 billion in shipments.

Certain types of merchandise can be imported into a Zone without going through formal Customs entry procedures or paying import duties. Customs duties and excise taxes are due only at the time of transfer from the FTZ for U.S. consumption. If the merchandise never enters U.S. commerce, then no duties or taxes are paid on those items.

How Does an FTZ work? 

Foreign-Trade Zones allow companies to bring items onto US soil without paying the duty tax, allowing them to store these goods free of tariff charges, or use parts to manufacture a finished product that can then be exported without the US import/export surcharges.

Any merchandise that is not prohibited from entry into the U.S. may generally be admitted into a Zone. Manufacturing, processing and any activity that results in a change of the tariff classification can occur in a Zone but must be specifically approved by the FTZ Board. Retail trade is prohibited in Zones.

Although FTZs are considered in international commerce, FTZ sites and facilities remain within the jurisdiction of local, state, and/or federal governments and agencies. If applicable, import licenses or permits from other government agencies may still be required. Products may be excluded if agencies determine that zone facilities are inadequate for storage and handling requirements. Products that are deemed detrimental to public health, interest, or safety may be excluded by the Foreign-Trade Zones Board. Similarly, the Board may place restrictions upon the zone status and type of operation that may be performed upon certain merchandise.

Merchandise entering a Zone may be:

What is an FTZ warehouse?

A free trade zone (FTZ) warehouse is a facility in an area the U.S. government classifies as being outside of U.S. customs territory, despite a location within the borders of the United States.

What can an FTZ be used for?

A foreign-trade zone (FTZ) is a defined physical area within the United States that, for customs entry purposes, is treated as if it is outside U.S. borders. Companies may use FTZs for both storage/distribution activities or, after specific authorization by the U.S. FTZ Board, for production.

What is the difference between FTZ and bonded warehouse?

Control of Goods FTZ has full control of goods 24 hours a day. U.S. Customs has primary control of goods. The goods can only be inspected and transferred during regular working hours in a bonded warehouse. The movement of goods is relatively unrestricted in and out of an FTZ.

As with an FTZ, duties aren't collected until the goods are withdrawn for consumption and the exportation of items is also duty-free. Two of the major differences are that bonded warehouses are only permitted to hold foreign goods and manufacturing is not allowed.

Foreign-Trade Zones are frequently used for storage, testing, cleaning, processing, assembling, manufacturing, re-labeling, repackaging, displaying, exhibition, and repairing of merchandise. 

Bonded Warehouses are generally used for the storage of imported merchandise entered for warehousing, placed in General Order, or for the manipulation of merchandise in-bond.

Tip: Merchandise in a free trade zone is not subject to excise or duty tax until it leaves the zone.

What are the benefits of using an FTZ? 

Deferral, reduction, or elimination of certain duties

FTZs allow the most duty deferral of any kind of Customs program. Companies can bring goods into the FTZ without duties or most fees, including exemption from inventory tax. Free trade zones allow goods to be imported and stored without being charged customs duties.

Instead, taxes are charged when the goods move from the free trade zone into areas of the host country where customs duties are imposed. The customs-free zone allows businesses to manage cash flow by paying taxes on goods as they are shipped out of the free trade zone rather than paying duties in a lump sum when goods arrive.

Relief from inverted tariffs

In some cases, tariffs on U.S. component items or raw materials have a higher duty rate than the finished product, putting a U.S. manufacturer at a cost disadvantage to an importer. However, by participating in an FTZ, the U.S. manufacturer pays whichever duty is lower. In many cases the tariff of the manufactured good is zero, eliminating any costs associated with importing raw materials and goods. There is no way to take advantage of inverted tariffs without operating in an FTZ.

An inverted tariff applies when standard customs duties charged on raw materials used in manufacturing are higher than duties on the resulting finished product. The higher cost structure resulting from inverted tariffs can put local manufacturers at a significant competitive disadvantage in relation to importers of finished products. In free trade zones, manufacturers can select the lowest tax rate for raw materials and finished goods, resulting in competitively priced products.

Duty exemption on re-exports

One of the many FTZ zone benefits is the elimination of export duties allows goods and materials to be imported to the zones and then exported without being taxed. For example, raw materials or components could be shipped to a manufacturer located in the free trade zone without incurring customs duties.

The manufacturer then incorporates the materials or components in the building of finished products. The products can then be exported without being taxed. Since an FTZ is considered outside the commerce of the United States and U.S. Customs, a company importing components or raw material into the FTZ doesn't pay Customs duty until it enters U.S. commerce. If the good is exported from the FTZ, no Customs duty is due.

Duty elimination on waste, scrap, and yield loss

Since a manufacturer operating in an FTZ doesn't pay duties on imports until its goods leave the FTZ and enter the United States, it essentially is paying for the duties on the raw materials after they have been processed. Thus, duties owed do not include manufacturing by-products, such as waste, reducing the number of goods taxed.

Weekly entry savings

Instead of filing an entry every time a shipment enters the country, an importer operating in an FTZ only needs to file one Customs entry a week, reducing bureaucratic headaches and costs associated with entry filings. There is a 0.21-percent merchandise processing fee for every entry, with a minimum of $25 and a maximum of $485 per entry, which is for goods with a value of over $230,952.

A company with 10 shipments a week, each of which is over $230,952, would save $226,980 annually with weekly entries. Weekly entries also save on customs brokerage fees.

Improved compliance, inventory tracking, and quality control

FTZs allow companies to more closely track their inventory. By bringing goods into an FTZ warehouse that you control, you can identify and classify goods at the warehouse instead of at the port at a Customs control location.

Indefinite storage

A company can hold its goods indefinitely in an FTZ until a port opens up, or if there are quotas on a good until they can be entered into U.S. Commerce without falling under quota restrictions.

Waived customs duties on zone-to-zone transfers

FTZs can be used to manage transshipping operations, saving money on manufacturing processing fees. While most companies are focused on using FTZs for exports, FTZs can also be used to take advantage of cross-docking and transferring goods from one FTZ to another without paying Customs duties. Many mid-level companies, in particular, are using this capability to transfer goods to FTZs both within and outside the United States.

Logistical Benefits

Companies using FTZ procedures may have access to streamlined customs procedures (e.g., "weekly entry" or "direct delivery").

Other Benefits

Foreign goods and domestic goods held for export are exempt from state/local inventory taxes. FTZ status may also make a site eligible for state/local benefits which are unrelated to the FTZ Act. 

Contact Cesar-Scott, Today!

If you’d like to learn more about our FTZ logistic services, simply give us a call!