Items to Consider When Investigating FTZs

Look Before You Leap

• FTZ operations can deliver substantial financial savings and operational flexibility.
• FTZs do create additional costs and obligations.
• FTZs are not meant for every U.S. importer and exporter.

Why FTZ Cost/Benefit Studies Are Critical

• When doing a FTZ cost/benefit analysis, be thorough. Your FTZ study is only valuable when all pieces of the import/export puzzle are considered.
• Consider FTZ results over an extended period of time, particularly if facts and laws are expected to change in the area.

Keys To Information Gathering

• Go to the source of the information.
• Specific company data is critical.
• Know exactly what information you need and how you will use it.
• Identify a sponsor to coordinate information from different departments.

Limitations: Special Commodity Issues

• Always check for product-specific limitations in FTZ or customs laws.
  • Example: Steel Safeguards Case (Proclamation 7529, March 2, 2002)
• See published FTZ Board Orders for similar products and processes.
• Any grant limitations from FTZ Board?
  • Example: Standard Shipyard Restriction (Order No. 1210, February 25, 2002)

FTZ Considered In Context With Other Trade Agreements

• FTZ studies must consider the interplay between FTZ benefits and trade agreements relevant to the importing/exporting activity at hand.
• Trade agreements can create FTZ limitations or may produce better results without U.S. FTZ operations.

Specific FTZ Benefits to Evaluate

• MPF savings
  • Reduced through weekly entry, if U.S. consumption
  • Eliminated if products exported from zone out of U.S.
• Broker fee savings
  • Mirrors scenario of MPF savings
• Flexibility through direct delivery and weekly entry processes.
• Ability to cure problems with merchandise.
• Quotas generally inapplicable in FTZs, although benefits restricted.

Review Of Start-Up And Annual FTZ Costs

• FTZ fees and anticipated third-party payments
  • FTZ Board, Department of Commerce fees as follows:
    • Additional general purpose zones..... $3,200
    • Non-manufacturing special purpose subzone..... $4,000
    • Manufacturing special purpose subzone..... $6,500
    • Expansions..... $1,600
• Grantee fees
  • Application fee
  • Annual user fee
• Consultant fees
• Local government agreements
• Employee requirements both for implementation and ongoing employee needs
• Inventory control and record keeping needs – internal information technology
• Physical security requirements
• Bond cost

Summary

• Cost/benefit studies are essential.
• Accurate company-specific information is the key to good decision-making.
• FTZ is one factor among many that importers/exporters should consider.
• FTZ cannot be viewed in isolation.
• FTZ is not for every company.
• With careful planning, a FTZ can provide substantial benefits well worth the costs.