Benefits of Foreign-Trade Zones to New Orleans Businesses

If your busi­ness is engaged in inter­na­tional trade (e.g. importing/exporting), were you aware that many places within the City of New Orleans may qual­ify as a For­eign Trade Zone? There are many  bottom-line ben­e­fits for busi­nesses in a For­eign Trade Zone.

The Port of New Orleans oper­ates For­eign Trade Zone #2, with sites stretch­ing from Jef­fer­son parish, through Orleans and St. Bernard parishes.

Prior to 2009, Foreign-Trade Zones oper­ated under the same rules since 1934, when they first came into exis­tence by an Act of Con­gress.  The Tra­di­tional Site Frame­work which FTZ grantees oper­ated under was a cum­ber­some process requir­ing a sig­nif­i­cant invest­ment in time and money to move an exist­ing busi­ness oper­a­tion onto the exist­ing Foreign-Trade Zone Sites around the coun­try.  Many busi­nesses there­fore did not con­sider the ben­e­fits of FTZs accessible.

Just a few of the ben­e­fits include:

Duty Defer­ral: Duties are not paid on imported mer­chan­dise held in the Foreign-Trade Zone until it is admit­ted into United States com­merce for con­sump­tion. For some busi­nesses, this could pro­vide sub­stan­tial cash flow savings.

Duty Reduc­tion: If a com­pany does man­u­fac­tur­ing or pro­cess­ing with for­eign com­po­nents, it has the option to pay the duty on the fin­ished prod­uct or the imported com­po­nents (in their con­di­tion as imported), whichever is lower. The com­pany is not required to pay the duties until the prod­uct is entered in United States com­merce for consumption.

Duty Elim­i­na­tion: If imported mer­chan­dise is either destroyed in the Zone or re-exported back into the global mar­ket, a com­pany is not required to pay any duties on that mer­chan­dise because it never entered United States com­merce. This is an incred­i­ble ben­e­fit for com­pa­nies using Amer­i­can labor to man­u­fac­ture prod­ucts with for­eign com­po­nents that are exported around the world.

Direct Deliv­ery: With prior approval from Cus­toms, a busi­ness can have their imports deliv­ered directly to their facil­ity with­out wait­ing for Cus­toms clear­ance. This can pro­vide a much more effi­cient sup­ply chain.

Weekly Entry: In an FTZ, a busi­ness is only required to make one esti­mated weekly entry for cus­toms, rather than mak­ing an entry for every arriv­ing ship­ment. There­fore, a com­pany only pays a cus­tom broker’s fee and mer­chan­dise pro­cess­ing fee once a week, result­ing in sig­nif­i­cant sav­ings for a com­pany that brings in a large num­ber of ship­ments per week.

Duty Draw­back Elim­i­na­tion: An FTZ elim­i­nates the need for duty draw­back because duties are never paid at all on mer­chan­dise that is re-exported. This increases cash-flow and reduces tedius duty draw­back paperwork

Until 2009 TSF was only the frame­work avail­able.  TSF con­sisted of Gen­eral Pur­pose Zone Sites and Sub­zones.  Com­pany had to either locate within exist­ing Gen­eral Pur­pose Zone (GPZ) site or the Grantee had to expand the bound­aries of the GPZ,  or file for Sub­zone sta­tus for a  for com­pany.  A very inflex­i­ble plan and from a tim­ing per­spec­tive, imprac­ti­cal for com­pa­nies look­ing for FTZ usage

The Foreign-Trade Zones Board ini­ti­ated an optional man­age­ment process for GPZ sites called Alter­na­tive Site Frame­work (ASF). In Feb­ru­ary 2010, the grantee for the Port of New Orleans (FTZ#2) was per­ma­nently approved to uti­lize the ASF process to expand FTZ usage and access.  With the new adop­tion of the ASF pro­gram, com­pa­nies located on parcels, zoned busi­ness or indus­trial and located in a des­ig­nated ASF admin­is­tra­tion area, can now quickly and inex­pen­sively be des­ig­nated with FTZ status.

Under an ASF, an entire region (in the case of the Port of New Orleans FTZ, a 60 mile radius) is cov­ered where as a tra­di­tional FTZ is site spe­cific with the poten­tial of cre­at­ing sub-zones. The ben­e­fit to a South­east­ern Louisiana com­pany is they do not have to move their cur­rent oper­a­tions in order to take advan­tage of the FTZ benefits.

The most sim­plis­tic expla­na­tion is that a com­pany would sim­ply file an appli­ca­tion and com­mit to mod­i­fy­ing their exist­ing facil­ity to meet FTZ requirements.

The ASF des­ig­na­tion has breathed new life into the FTZ con­cept, cre­at­ing new and excit­ing oppor­tu­ni­ties for eco­nomic growth in ASF des­ig­nated zones nationwide.

If you feel your com­pany may ben­e­fit from being des­ig­nated as a FTZ site under this new pro­gram, please con­tact the New Orleans Busi­ness Alliance, info@nolaba.org, or Wayne Cole­man at FTZ Net­works, Inc. by phone 901.857.5583 or email wcoleman@ftznetworks.com

For more infor­ma­tion about For­eign Trade Zones, down­load the Foreign-Trade Zone White Paper or visit www.ftznetworks.com.