1. Improve Cash Flows / Defer Duties — Custom duties are paid only when the merchandise leaves the zone and is entered into the U.S. Customs territory.
   
   
2. Reduce Duties — In certain instances, there are duty relationships that actually penalize companies for making their products in the U.S. This occurs when a component part carries a higher duty than the finished product. Thus, the importer of the finished product pays a lower duty than a manufacturer of the same product in the U.S. The importer has an unfair advantage. An FTZ user levels the playing field because they have the opportunity to pay the lower duty too. This is also referred to as inverted duty savings.
   
   
3. Reduce or Eliminate Duties — Duties can be substantially reduced or eliminated for merchandise that is scrapped, wasted, destroyed or consumed in an FTZ.
   
   
4. Eliminate Duties — No duties are paid on foreign merchandise received in an FTZ and then exported.
   
   
5. Eliminate Value-Added Costs — Dutiable value on foreign merchandise removed from an FTZ can exclude zone costs associated with processing or fabrication, such as labor, overhead and profit.
   
   
6. Eliminate Inventory Taxes — No ad valorem taxes are paid on personal property held in an FTZ.
   
   
7. Eliminate Drawback Duties — Through the use of an FTZ, the need for drawback may be eliminated allowing these funds to remain in the operating capital of the company.
   
   
8. Eliminate Duties on Sales to DoD and NASA — No duty is charged on merchandise sold from an FTZ to the U.S. Military or NASA or returned to the country of origin for repair or simply destroyed.
   
   
9. Reduce Weekly Entry / Merchandise Processing Fee — This could now be the single largest advantage of operating within an FTZ. Passed and signed in 2000 by President Clinton, a new provision now allows the use of the weekly entry procedure for all manufacturing, processing and distribution operations in an FTZ. Under the weekly entry procedure, the zone user files only one custom entry per week, as opposed to one custom entry per shipment. Also, U.S. Customs no longer has to process an entry for each and every shipment being imported into zones and the zone user no longer has to pay for the processing of each and every entry.
   
   
10. Other — There are a host of other advantages. Inspections can identify sub-standard goods to be destroyed or returned without duty. No country-of-origin labels are required on merchandise admitted to a zone. Increased accountability reduces problems with inaccurate inventory, helps tracks waste and scrap, etc. Merchandise can be held for exhibition without duty payment. Duty payable on FTZ merchandise need not be included when calculation insurable rates. Due to FTZ security, discounted cargo insurance rates have been negotiated. Title of merchandise may be transferred in an FTZ if there is no “retail” sale.

Some examples on how to make money or reduce operating costs follows:

1. Reduce Weekly Entry / Merchandise Processing Fee — Companies located outside an FTZ pay a .21% merchandise processing fee for each and every entry processed by U.S. Customs. The minimum fee is $25 with a maximum of $485 per entry, regardless of the duty rate. The maximum fee is reached for entries or shipments with a value of over $230,952. Companies often receive many shipments over this amount. Example: Assume a company receives 10 shipments per week, each with a value of over $230,952. The processing fee would be $252,200 (10 entries x $485 x 52 weeks). An FTZ user would pay only $25,220 and hence reduce operating costs or save $226,980.
   
   
2. Reduce or Eliminate Duties — Assume an FTZ user imports a motor that carries a 4% duty rate and uses it in the manufacture of a finished product that is duty free. When the finished product leaves the FTZ and enters the commerce of the U.S., the duty rate on the motor drops from the 4% motor rate to the free vacuum cleaner rate. By participating in an FTZ program, the manufacturer has virtually eliminated duty on this component, and therefore reduced the component cost by 4%. Assume the user imports $2,000,000 in motors. By participating in an FTZ program, the user would reduce operating costs or save $80,000.
   
   
3. Reduce or Eliminate Duties — A chemical plant manufacturing hydroxywidgitpropolyne, which carries a 15% duty rate, uses the raw material oxyovertaxophene, which also carries a 15% duty rate, for one of its raw materials. Part of the production process consists of bringing the imported oxyovertaxophene to extreme temperatures. During this process 30% of the oxyovertaxophene is lost as heat. If a processing company not in the Zones program imports $10,000,000 per year of oxyovertaxophene, it will pay $1,500,000 in duty as the raw material enters the United States.

   If the same company utilizes the zones program, it does not pay duty on the oxyovertaxophene until it leaves the zone and is imported into the United States. The zone user brings the oxyovertaxophene into the zone with no duty owed. It then processes the oxyovertaxophene into hydroxywidgitpropolyne. Remember, during this process 30% of the raw material is lost due to waste factors, so the $10,000,000 in oxyovertaxophene is now worth only $7,000,000. Assuming all of the end product is sold into the United States, the 15% Customs duty totals only $1,050,000. This represents a reduction in operating costs or a savings of $450,000.

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