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, firstname.lastname@example.org, or Chris Donner, Director of Foreign Trade Zone No.2, Port of New Orleans at email@example.com or by phone 504.528.3322.