Bond Spotlight - FTZ Benefits
With tariff increases, Customs penalties and supply chain disruptions on the rise, there is a much greater opportunity to add Foreign Trade Zone (FTZ) into the Supply Chain for imported goods. Foreign Trade Zones, also known as Free Trade Zones, are secure areas under CBP’s supervision allowing certain operations which are not otherwise prohibited by law. There are many benefits to using a FTZ and the list keeps growing!
• Duty Deferral
Defer duty payment on imported goods while in FTZ to improve cash flows. Duties on imported goods will be deferred until the goods exit the FTZ, entering the commerce of the US for consumption.
• Customs Penalty Avoidance
Fix non-conforming goods to avoid Customs penalty upon importation.
Imported goods can be inspected and altered upon entering the FTZ to ensure compliance before entry into the US commerce. For example, foreign goods missing the proper country of origin label can be repaired while in the FTZ, by adding the proper country of origin label to avoid the costly Marking Duty bill and Liquidated Damage Penalty.
• Duty Avoidance
Reduce or eliminate duty payment completely if imported goods are 1) subsequently exported from the US from the FTZ or 2) further manufactured while in the FTZ, resulting in a tariff classification and duty rate change.
• New Benefit
Customs recently implemented a new benefit for CTPAT members to utilize FTZ for the storage of goods that could be the subject of forced labor enforcement action. Please see CSMS #62269186.
To operate an FTZ, a Customs bond is needed to ensure compliance with the wide array of Customs laws and regulations. The Foreign Trade Zone bond is Activity Code 4 on the Customs bond form.