Foreign Trade Zones. "Free Zones" in International Shipping

A Foreign Trade Zone (FTZ) in international shipping is a yard guarded by U.S. Customs.

It is similar to a Bonded Warehouse, but the differences are:

1. You can leave goods in a Foreign Trade Zone forever;
2. The CF 214 is used to ship goods internationally. If you need to manipulate it, use CF 216 "Activity Report."
3. Take internationally shipping goods out of the Foreign Trade Zone, used 7512 or 7501

The Foreign Trade Zone was established by the Border Director with Customs approval. It requires record keeping (similar to bonded warehouses, with just no 300 reports). All are regulated by CFR 15 part 400.

• You CANNOT bring in foreign trade zone goods prohibited for international shipping.
• You CANNOT have any RETAIL trade in a Foreign Trade Zone.

Procedure to enter into the Foreign Trade Zone:

Use Form 214 to bring international shipping goods into the Foreign Trade Zone. It is given LOT# (Inventory Control #). The Foreign Trade Zone Operator assigns 214 first.

1. The Foreign Trade Zone Operator's approval is required BEFORE entering the Foreign Trade Zone.
2. Then you must DECLARE THE STATUS. Duty depends on the status. You must declare the status BEFORE internationally shipping goods enter the Foreign Trade Zone;
3. The Port Director approves admitted international shipping goods to the Foreign Trade Zone.
4. Take goods out of the Foreign Trade Zone using CF 216

4 (FOUR) TYPES OF STATUS Foreign Trade Zone:

1. Privileged - international shipping duty rate is FROZEN on the date of entry into the Foreign Trade Zone. No matter if it is higher on the withdrawal date, "PARTS-AS-PARTS" means if you assemble an international shipping machine (cars), then the duty rates on withdrawal will be the same as on global shipping parts. The benefits are:
   - You pay lower duty on parts versus assembled machines;
   - Labor is duty-free
   (Example: Toyota pays duty on Camry assembled in a Foreign Trade Zone at 3.2% on parts instead of 15% on cars. PLUS labor is duty-free)
2. Non-Privileged - Duty rate on the date of withdrawal. "PARTS-AS-CARS. " Benefits are:
   - When duty on an assembled machine is LOWER than on international shipping parts;
   - Labor is duty-free.
3. Duty Paid or Domestic Status - You can keep duty-paid or US international shipping goods in such zones under certain circumstances. However, the rent rate is very high. Such a situation is infrequent.
4. Zone Restricted - you can only place into such a type of Foreign Trade Zone for:
   1. Destruction;
   2. Export
   3. To satisfy requirements;
   4. Just one exception: you can make an entry if it is a PUBLIC INTEREST (I.e., emergency products from the Foreign Trade Zone must be brought to a disaster area).
   5. TIB - Transportation (international shipping) in Bond (to #2 for Export);
   6. For Drawback - i.e., wait to get duty paid back;
   7. Form 216 to take, destroy, or manipulate international shipping goods requires that you do so before destroying or manipulating it.

Transfers with Foreign Trade Zone:

1. If within the same port and SAME Foreign Trade Zone Operator, then use CF 6043;
2. If within the same port but with DIFFERENT Zone Operator, then use CF 7512 and 214 at a different location;
3. If there are other ports, then CF 7512 and new 214.
4. If exported out of the Foreign Trade Zone for IE or TE, then 7512.
5. If the export is for consumption, then 3461 + 7501 with duty attached.

Other rules that apply to the Foreign Trade Zone:

1. TEXTILE
- You CANNOT change the category of international shipping textiles after entry into the Foreign Trade Zone if it will be a consumption entry.
- You CAN change the category of international shipping textiles after entry into the Foreign Trade Zone if it will be exported.
It is done to avoid the quota system. Then, you CANNOT make an entry under another category and avoid a quota.

2. TIME LIMIT
For consumption entry, use 3461 + 7501.
After consumption entry is approved, YOU HAVE 5 (FIVE) WORKING DAYS TO TAKE INTERNATIONALLY SHIPPED GOODS OUT OF THE Foreign Trade Zone.

3. RECOVERABLE WAIST IS ALWAYS NON-PRIVILEGED. No exceptions!

4. Goods MOVE FROM the Foreign Trade Zone TO BONDED WAREHOUSE:

- Non-privileged CAN go to the bonded warehouse. OK.
a. Same port = 6043 - 7501 (in the warehouse)
b. Different port = 7512 - 7501

- Privileged CANNOT go to the bonded warehouse! Because there is a conflict: In a Privileged Foreign Trade Zone, the international shipping duty rate is frozen, but in bonded warehouses, duty is due on the withdrawal date.

- Foreign Trade Zone Restricted CAN, but for export or destruction only.

5. TIME LIMIT IF MOVING FROM Foreign Trade ZONE TO BONDED WAREHOUSE:
If you have an international shipping warehouse entry and the product has been in the Foreign Trade Zone for 3 YEARS, then you MUST CALCULATE TIME IN THE Foreign Trade Zone FOR THE period IN THE BONDED WAREHOUSE. I.e., now it can stay in the bonded warehouse for ONLY 2 (TWO) YEARS before it will be declared unclaimed.

6. RECORDS KEEPING system, etc., is THE SAME AS IN BONDED WAREHOUSES. It has the same rules and the same international shipping regulations. Just one exception: THERE IS NO 300 REPORT. Only the RECONSOLIDATION report.

7. SUSPECTED and PROHIBITED international shipping merchandise will be held outside the Foreign Trade Zone until it is determined whether it is prohibited.

8. OVERAGES in FTZ reported in 214 and required a new 7501