Top Ten Common FTZ Operational

Problems

FTZ: It’s Worth All The Pain!

• FTZ Benefits

– Duty savings

– MPF/Broker fees savings

– No drawback program

– Jobs & investment

• But Activation Can Also Come With Some Headaches

– Most are solvable

– Most have been experienced by another zone operator

– Many can be avoided in the first place

A Little Info About Crate and Barrel

• 3 FTZ’s (Newark, Chicago, SFO)

• 1st zone activated in 2006

• Goods subject to FDA, USDA, F&W, EPA, CPSC

• Exporting in-bond to Canada and Dubai

• Zone-to-zone transfers

• No manufacturing/production

• Volumes:

– 15,000 active SKU’s

– 500 HTSUS Numbers

– 9,000 annual import shipments

• Using a purchased FTZ software package

#1: Setting Up Your Systems

• Your ERP/WMS Has to Learn a New Language

– Translating inventory movements into FTZ transactions

• Out-of-Balances

– What didn’t we think about?

– What doesn’t happen very often?

#1: Setting Up Your Systems

• Validation Errors

• What’s Missing?

– Country of Origin

– Ports

– Currency

– HTSUS Numbers

– UOM’s

– Weight

#1: The Solutions

• “Know Before You Go”

• Pilot, Pilot, Pilot

• Validate Inventory Balances Frequently

– The higher your volume of SKU’s and transactions, the more often you should check balances

#2: CBP’s Systems

• It’s not enough to have your own systems in place – CBP has some work to do too!

– FTZ Online

– ACE Account

• A lot of data to get wrong

– FIRMS Code

– Facility Code

– Filer Code

– Zone #

– Site #

– ACE ID

– Port Code

– Bond #

#2: The Solutions

• Your Two New Best Friends:

– Your ABI Rep

– Your FTZ Officer

• Confirm Specific Data Points are Set Up Prior to Go-Live

#3: Off-System Transactions

• Regular Inventory Movements

– “Just passing through….”

– Extra samples/prototypes

– Part of another business channel

• Occasional Other Business Needs

– Customer Service

– Sales

#3: The Solutions

• Deactivated Space

– Is it in a warehouse address?

– Plan for future need, such as peak seasons

– Designate the area clearly

• Manual Transactions

– Your FTZ software can be a filter between your WMS and CBP

– Excellent internal communication

WMS FTZ CBP

#4: e214 & Estimated 3461 Issues

• e214 DOCS REQUIRED (B5)

– Direct Delivery

• Merchandise already received at facility

– Non-Direct Delivery

• Merchandise not yet authorized for movement to the zone

– Common reasons

• Census warnings

• HTS level screening/targeting

• OGA

– Adjustment e214s

• No documents available

#4: e214 & Estimated 3461 Issues

• Estimated 3461 DOCS REQUIRED

– Weekly Consumption Entry

– Estimate of what could ship vs. what actually ships (7501)

– Creating and maintaining the estimate

#4: The Solutions

• e214 DOCS REQUIRED

– Discuss with CBP in advance which documents must standardly be presented for review (if any), method of transmission and time frame for manual authorization

• Estimated 3461 DOCS REQUIRED

– Educate CBP about Weekly Entry and the intent of the estimated 3461 vs. the 7501

– Removing classifications from estimate

• Document Imaging System (DIS)?

#5: Receipt Discrepancies

• Direct Delivery

– Merchandise received, quantity verified, and information input into inventory system; then admission reported to CBP

– Quantity received/admitted vs. manifest quantity in AMS

• Non-Direct Delivery

– Admission reported to CBP; then merchandise received at zone, quantity verified, and information input into inventory system

– Quantity received/admitted vs. manifest quantity in AMS

vs.

Quantity Physically Received &

Recorded in Systems

13 cartons

#5: The Solutions

• Manual logs or additional electronic reporting tools may assist operators with receipting complexities

• Communicate with carriers/shippers in advance of activation so that solution for resolving manifest discrepancies in AMS is known and agreed upon

– Include requirements in contract language

#6: In-bond Issues

• In-bond merchandise moving to the zone

– Direct delivery or non-direct delivery?

– Bonded carriers

– Arrival in AMS

– Manual submission to CBP vs. electronic (QP/WP)

• Use of non-automated partners

– CFS/airlines

– Blanket PTTs

#6: In-bond Issues

• In-bond merchandise leaving the zone

– Manual submission to CBP vs. electronic (QP/WP)

• Weekly Export

– Bonded carriers

– Arrival in AMS

– Manifest discrepancies

#6: The Solutions

• Educate bonded carriers (and other partners) in advance on the process and expectations

• Select partners with FTZ experience if possible

#7: Scrap/Waste/Destruction

• Classification & valuation

• Process of destruction

• Proof of destruction

• Recoverable vs. irrecoverable

#7: The Solutions

• Programming systems to track & report scrap & waste/by-products correctly

• Educating employees on process

• Educating CBP on process

• CBP approval

– 216 and/or entry reporting

#8: Educating PGAs

• Are your imports controlled by PGAs?

– Subject to entry release

– Require reporting at the time of importation

• Examples:

– FDA

• Weekly Entry

• Prior Notice

– EPA

• Notice of Arrival

• TSCA

– USDA

– F&W

– And more…

#9: The Solutions

• Understand the regional/district office’s requirements and coordinate in advance

• ACE/ITDS

Image: FDA MAY

PROCEED in

ABI

#9: Educating CBP

• Ports with Few or No FTZ’s

• Turnover/Lack of Training

– Your officer may only be experienced in bonded warehouses

• Points That May Need Clarification

– Direct Delivery Privileges

– The extent to which your 3461 is an estimate

– Exception Situations

F T Z 101

#9: The Solutions

• Know Your Rights

– Resources

– Consultants

• Document Everything

– Procedures Manual

– Letters of Authorization

– On-Going Operations

• Conversations

• Audits

#10: Adjusting to Being an FTZ

• A New Mindset

– We’re not just a warehouse/factory any more

• Security

– Now it’s a felony to steal from us

– Signage

– Enhanced security measures

What would my FTZ

Administrator want

me to do?

#10: The Solutions

• Training

– Start a few months before expected activation

• Share the rewards

– Publish your successes/savings

– We’re all in this together

• Put the “Fun” in FTZ!

The Key to Avoiding FTZ Operational Problems

• Prepare

– Systems

– Training

• Communicate

– Internally

– With Customs

– With PGA’s

– With Partners (brokers/carriers)

– With Other Zone Operators

• Document

– Everything!!