Free Trade Zones in the United States
A class of special economic zone, USA Free Trade Zones are also commonly referred to as “Foreign Trade Zones”. Businesses receive multiple benefits of USA free trade zones.
Within its premises, businesses get to enjoy customs duty exemption for their goods. Generally organized around major seaports, it also holds many trade advantages.
According to the Free trade zone directory of the United States Department of Commerce, there are around 298 USA free trade zones throughout the 50 states. Within the US free trade zones, there are two specific types – the General Purpose Zones and Subzones. Tetra Consultants recommends clients who are engaging in international commerce to adopt the available free zones.
Advantages of USA Free Trade Zones
- By taking advantage of the US Foreign Trade Zones program, companies can benefit from a sizeable amount of cost savings. These free zones allow companies to bring goods in without duties or fees.
- This includes exemption from inventory tax and local Ad Valorem taxes and tax credit. In many cases, companies in the Free Trade Zones do not have to pay any tariff for manufacturing goods. This eliminates any costs associated with importing resources and reducing the cost of production. Importing components or raw materials into the Foreign Trade Zone also does not require the payment of any Customs duty.
- The USA Foreign Trade Zone program allows companies to hold their goods indefinitely in the zone. Therefore, any import that is subjected to quota can be admitted when a new quota year begins. As such, companies utilizing the free zones can gain access to potentially discounted inputs.
- With the passing of the Trade and Development Act, zone users only have to file for one Customs entry per week. This amendment creates additional cost savings for zone users.
- The Free Trade Zones in the United States have strict security measures in place. As zone users, companies can benefit from enhanced security protection and do not have to worry about crimes such as theft.
General Purpose Zones
- The General-Purpose Zones comprise industrial parks and port complexes. These areas have facilities that are available for the use of the general public. By leasing space within a General-Purpose Zone, costs can be cut to the minimum. Thereby, reducing each company’s liability. These zones are also meant for importing or exporting finished products, parts, or components.
- If your company is looking for a short-term space in the Foreign Trade Zones, Tetra Consultants will search the General-Purpose Zones available and share with you the one most suited for your business.
- Located within 60 miles or 90 driving minutes away from the outer limits of the customs port of entry, these General-Purpose Zones offer greater flexibility in the customs phase. Thereby, boosting companies’ international competitiveness.
- Some examples of third-party warehouses include Swafford Warehousing, Logistics Plus, and Scarbrough International. Adopted commonly by businesses in heavy industrial, manufacturing, energy, machinery industries, some notable clients include Google, Siemens, Canadian Solar, and more. These third-party operations offer similar services in inventory control and bookkeeping, supply chain solutions, and “Zone to Zone” shipments. Their secured facilities ensure that all of your goods are well-protected.
- Tetra Consultants will assist our clients by recommending the most suitable warehouse for their business needs.
- Subzones are made available by General Purpose Zones. Typically made up of single-purpose sites, they are classified primarily as Subzones since their operations are not feasibly capable of being moved to or accommodated in a General-Purpose Zone. All financial responsibilities for subzones will be dedicated to the firm solely.
- As subzones are normally private plant sites, Tetra Consultants would recommend large companies to opt for a subzone instead.
- Some companies that have set up their own subzone sites include Hitachi Automotive Systems Americas. Other operators include Tri-Link which is authorized in establishing subzones on private premises. Commonly, these operators set up subzones as they utilize a large space – this means that operating a subzone might be more cost-effective.
How to proceed with registering a company in USA Free Trade Zones?
Does the US have free trade zones?
- Yes. According to the Department of Commerce, there are 298 Free trade zones (FTZ) in the US throughout the 50 states. According to the Free trade zone definition, these zones are an area within which commodities can be manufactured, imported, reexported, and more without the custom authorities intervening.
- In fact, there is a free trade zone between USA and Canada which was established by the Canada-United States Free Trade Agreement (CUSFTA) in 1988. Moreover, these three countries have signed the newly updated United States-Mexico-Canada Agreement (USMCA) to remove duties on the goods produced in these nations and serve as a mutually beneficial agreement. However, a free trade zone between USA and Mexico alone has not been established yet but is in the works.
How many foreign trade zones are there in the US?
- Foreign trade zones are also called free trade zones and are regulated by the FTZ Board where businesses receive multiple benefits, free from the intervention of customs authorities. There are presently 298 zones in the US.
How many FTZ are there in the US?
- There are 298 FTZ in the United States, according to the Department of Commerce. An example of such a trade zone is the Miami free zone which is beneficial, especially to collect raw materials and intermediate products needed for manufacturing.
Where are free trade zones located?
- The 298 free trade zones are located throughout the 50 states in the United States. For example: foreign trade zone California is available in one of the ports in California to allow for cost savings.
Who benefits from free trade zones?
- Exemption from duties or fees such that there are cost savings
- Exemptions from taxes levied by the relevant authorities
- Businesses can hold their goods in the Free trade zone warehouse in case they face a quota and can bring the goods into the country in the next year at a discounted cost.
How do you start a foreign trade zone?
In order to start a foreign trade zone, you must follow these steps:
- Step 1: Fill in the International free trade zone USA application and submit it to the FTZ board
- Step 2: Allot the type of authority you wish to have (General purpose zones, Special purpose subzones, and more)
- Step 3: Make the required payment (dependent on the type of authority you want)
- Step 4: Activate your free zone trade license through the U.S. Customs and Border Protection (CBP)
- Step 5: Once the application is approved, you can start bringing in the goods
Who is in charge of foreign trade zones?
- The foreign trade zones are under the charge of the United States Customs and Border Protection (CBP). The CBP must ensure proper enforcement of importing laws and also monitor the activities in these trade zones.
What is a FTZ subzone?
- An FTZ subzone is an area that is designated for one type of business activity or special purpose to a single firm. Such a firm is mainly suited for large and well-established firms to set up their plants.
What is an FTZ warehouse?
- A Free Trade Zone warehouse is a facility in an area which the government considers to be outside the jurisdiction of the US customs even though it is located within the US.
What is an FTZ identifier?
- An FTZ identifier is one that provides the information of the cargo zone from which the goods were exported. This is done so that the U.S. Foreign Trade Board can have statistics that are valid and accurate to show the impact of FTZ on exports.
What is an FTZ administrator?
- An FTZ administrator is one that ensures that everything in the zone is happening in accordance with the policy of the government. They must keep the records of any import and export in the country and report the same to the relevant authority, among other tasks.