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FTZ vs. Customs Bonded Warehouse: A Business Guide

Tuesday, June 16th, 2020

Many businesses wonder whether the benefits of a foreign trade zone (FTZ) can be equally realized by using a bonded warehouse.

While different businesses have different needs, an FTZ often provides greater advantages.

To that end, we’ve created this guide for helping your business decide:

 

Foreign Trade Zones

Foreign Trade Zones or FTZs have been around since the 1930s. They are areas within the United States that the government considers to be outside of U.S. customs territory.

Because of this, merchandise of certain types can move through an FTZ without first having to travel through formal customs entry procedures, including import duties.

The purpose of these zones is to increase trade and competitiveness of U.S. companies.

 

Customs Bonded Warehouses

Bonded warehouses have been around since the 1800s. They provide secure storage for dutiable goods to be stored, manipulated, or manufactured without payment of duty.

The purpose of bonded warehouse facilities is to provide government supervision and security for goods before payment of duty. The duty is then due upon transferring the goods from the warehouse for consumption.

 

Advantages of Foreign Trade Zone

An FTZ is considered to be outside of U.S. customs territory, unlike bonded warehouses. While customs entry is typically made at the time goods enter a bonded warehouse, this is not the case in a foreign trade zone. This means duty payment in a bonded warehouse cannot be delayed, reduced, or eliminated.

Additionally, many activities are restricted in bonded warehouses. For instance, manipulation of a product is only permitted in a Class 8 bonded warehouse and manufacturing may only occur in a Class 6 (and only for export). The bonded warehouse option also includes the cost of a bond when merchandise is admitted to the warehouse.

Furthermore, only dutiable products are permitted in a bonded warehouse, unlike FTZs where all non-prohibited merchandise may be admitted. That merchandise is allowed to remain in the FTZ indefinitely, where bonded warehouses are limited to five years.

 

Advantages of Customs Bonded Warehouses

Many businesses may want to establish or utilize a customs bonded warehouse for reasons beyond delayed duty payments.

Goods in bonded warehouses are permitted to move between bonded warehouses, as well as into FTZs. However, the movement of a product from a bonded warehouse to an FTZ must only be for purposes to export, destruct, or permanently store the product.

No duty is collected in bonded warehouses until the product is withdrawn for consumption. This is one of the most popular features of bonded warehouses as importers have control over the use of their money until the product is needed for consumption.

Additionally, if the importer fails to find a buyer in the U.S., the importer is then able to export the product without any obligation to pay duty.

 

Trust CWI Logistics For All Your FTZ or Bonded Warehouse Needs

At CWI Logistics, we have over 50 years of experience helping our partners find the warehouse solution that best fits their needs.

Whether its a foreign trade zone or bonded warehouse, contact us today to learn more about how we can help you find the best fitting warehouse solutions for your business.

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