There are softer benefits as well to the FTZ program. Security requirements for the zone can help a company reduce the risk of product losses and also help ease the burden of compliance with import security programs such as the Customs- Trade Partnership Against Terrorism (CTPAT). Goods in a zone are also typically exempt from state and local taxes while they are in the zone. And, as Figuly’s earlier example company learned, manufacturing the an FTZ can provide an alternative to manufacturing off shore. That company was ready to move part of its manufacturing to Europe until it learned it could make all of its product in the US and avoid duties on goods that were manufactured inside the zone and exported. Not only did the company avoid the expense of building a plant overseas, it retained jobs in the region. With demand in its European market growing, that meant job growth that would accompany increased sales and production would occur in the Kansas City area. Those are some of the reasons economic development groups are beginning to look at FTZs as another asset for their region and they are promoting zone activity and even helping to find funding to expand the operations.

With warehouses and 3PLs operating in FTZs, the onerous task of applying for FTZ or subzone status can be avoided.

Information on foreign trade zones is available through the US Department of Commerce and from Customs and Border Protection. Determining the potential value of operating in an FTZ is a very individualized process and will require some research, but the National Association of Foreign Trade Zones (www.naftz.org) can help.

In an increasingly global economy with extended supply chains spanning the world, an FTZ may be the next big tool for many logistics operations.

Terms Related to Foreign Trade Zones

Duty exemption— no duties on or quota charges on re-exports.

Duty deferral—customs duties and federal excise tax deferred on imports.

Inverted tariff—in situations where manufacturing in a foreign trade zone results in a finished product that has a lower duty rate than the rates on foreign imports, the finished products may be entered at the duty rate that applies to its condition as it leaves the FTZ—subject to public interest considerations.

Logistical benefits—companies using FTZ procedures may have access to streamlined customs procedures such as weekly entry.

Other benefits—foreign goods and domestic goods held for export are exempt from state/local inventory taxes. Other state and local benefits unrelated to the Foreign Trade Zone Act may be available in an FTZ. General-purpose zones—are usually located at ports or industrial parks. They must be open to multiple zone users. The most common use of generalpurpose zones is warehousing and distribution activity, though manufacturing is permitted.

Subzones—are special-purpose Foreign Trade Zones. Usually located at a manufacturing plant, a subzone can be approved for use by one company for a specific activity. Applications for a subzone must demonstrate a significant public benefit in order to be approved.