A free trade zone (FTZ) is an area within the borders of the United States that the U.S. government considers outside of U.S. customs territory. A free trade zone warehouse operates under different rules from a bonded warehouse, which is considered to be inside U.S. territory.
How Are FTZ Warehouses Used?
You can import many kinds of merchandise into a FTZ without going through formal customs entry procedures and paying import duties. You only need to file customs entry just before you remove merchandise from a FTZ and you only have to file it for the goods you are removing. You have a choice of the tariff in effect when the goods entered the warehouse or the tariff in effect when you ship them out. You are not required to post a bond on goods in a FTZ warehouse.
FTZ Warehouses are not new. The federal government created them in the 1930’s to facilitate trade and increase global the competitiveness of U.S. companies. These warehouses are located near Customs and Border Protection ports of entry.
(As a quick side note: a foreign trade zone is synonymous with a free trade zone.)
What Can You Do In A Free Trade Warehouse?
You can do many hands-on things in a FTZ including:
- Assembly and testing
- Re-labeling, repackaging, and mixing
- Mixing, manipulation, and cleaning
- Salvaging and processing
With special permission from the FTZ board, you can even manufacture goods in a FTZ warehouse.
What Can Be Stored And What Will Be Taxed?
You can store any legal merchandise, domestic or foreign, in a free trade zone warehouse. Merchandise that you bring in from another country is not taxed upon entry. If that same international merchandise goes out for export without leaving the zone, there is no tax or duty charged. In some special cases a Federal Excise Tax is charged when domestic goods are admitted. Regardless of the merchandise’s origin, it can be stored for an unlimited amount of time.
What About Customs Regulations?
Customs entry regulations only apply to goods that are removed from a FTZ and slated for consumption in the United States. You can destroy and salvage the goods you store in a free trade zone warehouse. No duty payment is due on goods that are destroyed, damaged, or non-usable for any reason.
Contact us today to learn more about using a free trade zone warehouse and how CWI can help.