FTZ Presentation by Masashi Morimoto 5.28.2013

An Overview of the An Overview of the Foreign-Trade Zone 202 Foreign-Trade Zone 202

May 28, 2013Port of Los Angeles

What is an FTZ?What is an FTZ?

• An area inside the United States An area inside the United States that is designated as being outside that is designated as being outside U.S. Customs and Border U.S. Customs and Border Protection (Customs) territory. Protection (Customs) territory.

What is Foreign Trade ZoneWhat is Foreign Trade Zone

• Federally approved legislation Federally approved legislation (1934)(1934)

• Promote U.S. CommercePromote U.S. Commerce• Duty savings Duty savings (defer, reduce or (defer, reduce or

eliminate)eliminate)

• Weekly Merchandise Processing feeWeekly Merchandise Processing fee

Foreign-Trade Zones Board Foreign-Trade Zones Board

• FTZ Board is comprised of the FTZ Board is comprised of the – Secretary of Commerce : Secretary of Commerce : Chaired for FTZ BoardChaired for FTZ Board

– Secretary of the Treasury. Secretary of the Treasury.

• The Commissioner of U.S. Customs and Border The Commissioner of U.S. Customs and Border Protection, providing a position during the FTZ Protection, providing a position during the FTZ Board voting process with respect to customs Board voting process with respect to customs security, control, and resource matters. security, control, and resource matters.

FTZ GranteeFTZ Grantee

• Zone Grantee - The corporate Zone Grantee - The corporate recipient of a grant of authority for a recipient of a grant of authority for a zone project.zone project.

• More than 286 FTZ Grantees in all 50 More than 286 FTZ Grantees in all 50 states and Puerto Rico states and Puerto Rico

Activation by the U.S. CBPActivation by the U.S. CBP

• A FTZ site need to be approved for A FTZ site need to be approved for FTZ activation by U.S. Customs and FTZ activation by U.S. Customs and Border Protection officials, and the Border Protection officials, and the zone activity remains under the zone activity remains under the supervision of CBP. supervision of CBP.

What are the public What are the public benefits? benefits?

• Facilitate international trade Facilitate international trade

• Help firms conduct international trade Help firms conduct international trade related operations in competition with related operations in competition with foreign plants. foreign plants.

• Attract offshore activity and encourage Attract offshore activity and encourage retention of domestic activity. retention of domestic activity.

• Assist state/local economic development Assist state/local economic development efforts. efforts.

• Help create employment opportunities. Help create employment opportunities.

Foreign-Trade Zone No. 202Foreign-Trade Zone No. 202

• 33 Sites throughout the Los Angeles 33 Sites throughout the Los Angeles AreaArea– 20 Activated General-Purpose Operators20 Activated General-Purpose Operators

• 3 Subzones are operating.3 Subzones are operating.– Conoco PhillipsConoco Phillips– ChevronChevron– SonySony

Service Area under ASFService Area under ASF

What are the types of zones?What are the types of zones?

• General-purpose zonesGeneral-purpose zones • They must be opened to multiple zone They must be opened to multiple zone

users. users.

• SubzonesSubzones • Special-purpose zones, approved for a Special-purpose zones, approved for a

specific company. specific company.

What Is a Zone Site?What Is a Zone Site?

• An Industrial Park.An Industrial Park.

• An industrial development inside a An industrial development inside a port or an airport.port or an airport.

• A company’s facility.A company’s facility.

What Can I Do in an FTZ?What Can I Do in an FTZ?

• DistributeDistribute

• StoreStore

• Test and InspectTest and Inspect

• RepackRepack

• AssembleAssemble

• RepairRepair

• ManufactureManufacture

FTZ BenefitsFTZ Benefits

• Duty Deferral:Duty Deferral: Deferred duty paymentDeferred duty payment

• Duty Elimination:Duty Elimination: Scrap, Re-ExportScrap, Re-Export

• Duty Reduction (Duty Reduction (Inverted Tariff):Inverted Tariff):If finished product has a lower duty rate than If finished product has a lower duty rate than

parts import, the finished products may be parts import, the finished products may be entered at lower duty rate. entered at lower duty rate.

• Merchandise Processing Fees (MPF):Merchandise Processing Fees (MPF): 0.3463% $25 0.3463% $25 290290

SSavings by using Weekly Entryavings by using Weekly Entry

MPFMPF

• 0.3463 % of invoice value0.3463 % of invoice value– Maximum is $485 per entryMaximum is $485 per entry

• $100,000,000 importer: $100,000,000 importer: – Potentially pay $346,300 annuallyPotentially pay $346,300 annually

• FTZ Weekly entryFTZ Weekly entry– 52.14 week/a year x $485 = $25,29052.14 week/a year x $485 = $25,290

Thank you!Thank you!