Foreign Trade Zones
Foreign Trade Zones are commerce sites (industrial sites, buildings) set up in or near U.S. Customs ports of entry where merchandise is considered legally outside U.S. Customs territory.
The zones are operated as public utilities by states, port authorities, other political groups, or corporations charted by the state.
Companies can use foreign trade zones to reduce duty payments, streamline supply chain costs and improve your competitive position in domestic and foreign markets.
There are two types of foreign trade zone: General Purpose Zones and Subzones.
General Purpose Zones
General Purpose Zones provide leased storage or distribution space in general warehouse buildings. This type of zone is for both long-term and occasional use.
There are eight General Purpose Zone sites in Minnesota, including six in the Minneapolis-St. Paul metropolitan area (FTZ#119), one site in Duluth (FTZ#51), and one site in International Falls (FTZ#259).
Here are their locations:
- Minneapolis Convention Center
- Saint Paul
- Eagan Industrial Park
- The Greater Airport Bloomington Site
- Mid-City Industrial Park
- Seaway Port Authority of Duluth
- International Falls
- Bloomington Central Industrial Area
Subzones
Individual companies may apply to the U.S. Department of Commerce to designate an area of their facility as a Subzone. This situation is ideal for companies too far from a General Purpose Zone.
While it is easier and less expensive for a company to realize benefits by utilizing the general Zones in the Twin Cities area, any company in Minnesota can apply to make their existing facility a Subzone of FTZ #119.
Benefits of Foreign Trade Zones
- Merchandise in inventory within an FTZ may be held indefinitely without paying Customs duty. You only pay duty when the merchandise is brought into U.S. Customs territory so you can manage and conserve cash.
- Your goods may be cleaned, stored, tested, assembled, manipulated (subject to required approvals), displayed or destroyed while in the Zone. If you combine domestic and foreign goods in an FTZ, duty is paid only on the foreign content of the finished product imported into the U.S. market.
- Goods imported and stored in a Foreign Trade Zone may be re-exported without ever incurring Customs duties, avoiding lengthy drawback procedures.
- Goods imported and held in an FTZ, and tangible personal property produced in the U.S. and held in a Zone for exportation, are not subject to state and local value-added taxes. Most state and county tax authorities exempt all merchandise in an FTZ from inventory taxation.
- The FTZ may be used to inspect your incoming products duty-free. Product not meeting specifications can be repaired, re-exported or scrapped without duty payments.
- Correct marking and/or labeling may be applied on merchandise in an FTZ. This can substantially reduce expenses for improper marking on goods entering the U.S
- Production or assembly operations within an FTZ can result in significant savings. By importing finished product, U.S. duty is applicable on foreign labor, overhead and profit since it is included in the value of the product. Substantial savings in duty may be obtained by making the finished product within an FTZ.
- Merchandise under quota restrictions can be stored until quotas are changed or lifted. Quota-restricted goods may also be processed in a Zone into products not subject to a quota