Two Minutes in Trade:
Podcast from Sandler, Travis & Rosenberg
By Lenny P. Feldman*
Staying on top of the international trade developments can be difficult these days but listening to St&R’s Two Minutes in Trade podcast is like having your own daily briefing.
Lenny Feldman, Senior Member, discusses the benefits and limitations of foreign trade zones. Podcast link follows or simply read below. TMIT – Foreign Trade Zones.
Today’s Discussion: FTZs – A Comfort Zone or Twilight Zone?
Foreign trade zones or FTZs are secure areas under CBP supervision that, when activated, are considered outside CBP territory. If not prohibited by law, foreign and domestic merchandise may be admitted for storage, exhibition, assembly, manufacturing and processing.
There are numerous advantages to FTZs. Some include that: a.) CBP duty and federal excise taxes only are paid when transferred from the zone for consumption; b.) while in the zone, your merchandise is not subject to U.S. duty or tax; c.) goods may be exported from zones free of duty and tax; d.) merchandise may remain in an FTZ indefinitely; and e.) you can make weekly entry to minimize processing fees. The most unique advantage is that the zone user can choose to either pay the duty rate on the foreign material placed in the zone or the duty rate on the finished articles transferred from the zone, whichever is more beneficial.
However, there are many misconceptions as to how much leeway CBP grants to merchandise admitted into an FTZ. First, if your merchandise is inadmissible into the U.S. altogether you cannot admit into an FTZ. Zones are not a safe haven for merchandise manufactured with forced labor, containing counterfeit trademarks or if prohibited under health or safety laws.
Second, you cannot avoid trade remedies such as the section 301 tariffs or antidumping or countervailing duties by admitting them into a zone and then withdrawing it for U.S. consumption. In essence, CBP requires you to admit them as privileged foreign status and “lock-in” those tariff rates down the road.
Third, FTZs cannot be used for the section 321 de minimis duty free exemption for small packages valued at $800 or less. CBP has ruled that for the exemption to apply the merchandise must already be sold to a consignee at a value of less than $800 at the time of importation. You cannot admit a container load of merchandise into an FTZ and then conduct the de minimis retail sales from the zone – the sale has to be consummated by the time of import, in other words, when the goods first arrive in U.S. ports, not afterwards.
So, are FTZs still the panacea to your trade woes? Maybe not to the extent one would hope, but if used strategically FTZs still may get you to…well, the end zone!
enny Feldman is a Member of Sandler, Travis & Rosenberg, P.A., resident in the Miami office and a member of the firm’s Operating Committee. He currently co-chairs the twenty-member U.S. Customs and Border Protection’s Commercial Customs Operations Advisory Committee providing strategic recommendations directly to CBP and the departments of Homeland Security and the Treasury on issues such as e-commerce policy, trade partnership programs, enforcement and facilitation mechanisms, and regulatory reform.
Mr. Feldman innovatively and resourcefully resolves complex issues pertaining to import classification compliance and tariff engineering; valuation requirements and first sale duty savings; seizure and penalty prior disclosures and mitigation petitions; antidumping and countervailing duty administration and enforcement; trade preference qualification for NAFTA/USMCA, CAFTA-DR, and other programs; intellectual property pre-compliance and forfeiture defense; importer/broker compliance reviews and cost savings analysis; export control reviews and enforcement strategies; and CTPAT/border security certification, validation, and suspension/revocation support.
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