Duty Deferral Via The Use of a Foreign Trade Zone -FTZ & Distribution Services in Michigan
A Foreign Trade Zone (FTZ) like TVI Logistics is a government designated facility that allows duties & taxes to be deferred until the goods leave the facility. Supervised by U.S. Customs, items can be imported into the zone, and then stored, kitted, assembled or otherwise modified. Then when the goods leave the trade zone, that’s when duties are charged. These zones were set up by the Federal Government to “even the playing field” and offset advantages that some overseas suppliers have in the customs process. A Foreign Trade Zone is a secure area under the supervision of the Bureau of Customs and Border Protection (CBP). FTZs are considered to be outside of the Customs territory of the United States for the purposes of payment of duty. Such facilities were created for the purpose of increasing global trade and function under the Foreign- Trade Zones Act of 1934, (FTZ Act) as amended (19 U.S.C. 81a-81u), and the FTZ Board’s regulations (15 C.F.R. 400).
As stated in the FTZ Act, “the purpose of establishing FTZs is to expedite and encourage foreign commerce and other purposes”. The FTZ Act is administered in the context of evolving U.S. economic and trade policy and economic factors relating to international competition. The Secretary of Homeland Security assigns CBP personnel to FTZs to protect the revenue and provide for entry of foreign merchandise into the Customs territory from FTZs. Under FTZ procedures, foreign and domestic merchandise may be admitted into FTZs for operations such as storage, exhibition, manipulation, destruction, assembly, manufacture and processing, without being subject to formal CBP entry procedures and payment of duties, unless and until the foreign merchandise enters the Customs territory for domestic consumption. The importer ordinarily has a choice of paying duties either at the rate applicable to the foreign material in its admitted condition, or, if used in manufacturing or processing, at the rate applicable to the emerging product.
There are many benefits to using a US Foreign-Trade Zone (FTZ) like TVI Logistics, which is a public FTZ. One, in particular, is the elimination of duty when goods within an FTZ are shipped out of the US. Once the decision to export from the FTZ has been made, the TVI Logistics team can take care of the Customs paperwork.
NAFTA Duty Deferral Entry Summary
This applies to foreign merchandise imported under a duty deferral program that is manufactured or changed in condition and subsequently exported to Canada or Mexico.
- Entry (Part 1) – Sets the filer’s obligation of US duties due and payable; must be filed on a 7501 within 10 working days after the date of export
- Claim (Part 2) – Submitted to claim a waiver of reduction of US duties owed along with any payment of any duties and fees must be filed on a 7501 within 60 calendar days from the date of export
The advantage of using an FTZ such as TVI Logistics is that they adhere to all CBP export regulations and FTZ operating procedures, as well as all Federal Government export laws and regulations for exporting merchandise from the United States, including the submission of the export data to the Automated Export System (AES).