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Is a Foreign Trade Zone Right For You?

By MarksNelson on April 30, 2014 in Articles, State & Local Tax

In spite of its exotic sounding name, there are a number of companies in the Kansas City area benefitting from this program.  If you import raw materials from overseas it might be beneficial to your company, too.

Setting up a Foreign Trade Zone (FTZ) is a relatively simple process and provides a variety of benefits.  The five primary benefits to getting designated as a FTZ are as follows:

  1. Reduced entry fees – each time you import something, you pay a merchandise processing fee.  So if you get 3 such shipments a day, you pay 15 fees per week.  If you are in an FTZ, you pay a single fee, once a week.
  2. Avoid tariffs entirely – if you export some of your finished goods, the tariffs due on the imported raw materials that become part of those exports are avoided.
  3. Delay payment of tariffs – for finished goods sold in the U.S., the tariffs owed on the imported raw materials are not due until the product leaves your designated zone.
  4. Inverted tariff – for finished goods sold in the U.S., you have the choice, when it leaves your facility, of paying the sum of the tariffs that would have been due on the component parts or the tariff on the finished item.  Because different component parts are subject to different tariffs, there are occasions when the tariff due on a finished product can be less than the tariffs due on the component parts.
  5. No tariff due on scrapped items – if any components are damaged and never leave the FTZ, simply report the loss to US Customs and no tariff is owed.

We would be happy to conduct a cost/benefit analysis to determine if an FTZ would be a good idea for you.  Contact your MarksNelson professional.

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MarksNelsonView all posts by MarksNelson
MarksNelson LLC works with clients to help safeguard and grow their businesses. Our ultimate goal is to help our clients to Move Forward. The firm provides Assurance, Accounting Services and Business Advisory, Business Valuation, Consulting, Cost Segregation, Employee Benefit Plan Audits, Litigation Support, Forensic Accounting, International Tax, State and Local Tax and Tax planning, advisory and compliance services. MarksNelson is a member of The Leading Edge Alliance, the second-largest international professional association of independently owned accounting and consulting firms, serving clients who need additional resources on a national or international level. MarksNelson has significant accounting and business advisory experience in the auto dealership, construction, insurance, manufacturing, distribution and real estate sectors. The firm was named among the 2014 Best Accounting Firms for Leadership Equity by the 2014 Accounting MOVE Project for its dedication to gender equity.