Although authority for establishing a Foreign Trade Zone (FTZ) in the U.S. was first granted long ago, in the first half of the 20th Century, many companies are still unaware or confused about their existence. Under the Foreign-Trade Zones Act of 1934, a Foreign Trade Zone Board was created to review and approve applications to establish, operate, and maintain FTZs.
Simply put, FTZs are secure areas under the supervision of U.S. Customs and Border Protection (CBP), and upon activation, are generally considered outside CBP territory. Under the standard zone procedure there is no requirement to follow the formal CBP entry process or pay duty on foreign merchandise, unless and until it enters CBP territory for domestic consumption. Although FTZ sites are subject to the laws and regulations of the states and communities in which they are located, as well as those of the U.S., FTZs are akin to the U.S. version of an international Free Trade Zone. Companies that regularly import merchandise to the U.S. in high volume, for example, will often use FTZs to store, re-package, assemble, re-export, and manufacture goods.
What Are the Benefits of Using a FTZ?
Merchandise is not subject to U.S. duty or excise tax (if applicable) while in the FTZ, and the merchandise may be exported from the FTZ free of duty or excise tax. Whether or not subject to duty, merchandise may remain in a FTZ indefinitely, and CBP security requirements help provide protection against theft.
Minimize Duty Payments
Once admitted to a FTZ the rate of duty and tax on merchandise may change based on what occurs within the zone. If the merchandise will be entered into CBP territory for consumption, typically it will be possible to elect to either pay the duty rate that applies to the foreign material placed in the FTZ, or the duty rate on the finished merchandise transferred from the FTZ, whichever is more advantageous to the FTZ user.
What Merchandise May be Placed in a FTZ?
Whether dutiable or not, any foreign or domestic merchandise not prohibited by law or otherwise subject to restriction may be taken into a FTZ. Furthermore, since FTZs are considered to be outside of CBP territory for entry purposes, merchandise for which a quota on entry is established or quota is filled may be placed into a FTZ until the quota opens or is removed.
However, merchandise that cannot lawfully be imported into the U.S. is prohibited from FTZs, without exception, the same as it would be in the U.S. outside of the FTZ. In addition, merchandise judged by the Foreign Trade Zone Board to be detrimental to the public interest, health, or safety may also be excluded.
Where Are FTZs Located in Minnesota?
There are eight General Purpose Foreign Trade Zones in Minnesota. Six are in the Twin Cities Metro Area (FTZ#119), including large sites at the Minneapolis-St. Paul Airport and at the Mid-City Industrial Park. There are also two FTZs in Greater Minnesota, in Duluth at the Seaway Port Authority along Lake Superior (FTZ#51) and in International Falls near the Canadian border (FTZ#259). In addition, it is possible for any company in Minnesota to apply to make their existing facility a Subzone of FTZ#119.
How Do I Apply to Use a FTZ?
To apply to operate in an FTZ, a company must fill out “Customs Form 214” and submit it to the administrator of the site they want to work in. After receiving a signature of approval from the FTZ operator, the form should than be sent to U.S. Customs for final authorization.
For more information, contact the appropriate FTZ administrator:
The Greater Metropolitan Area Foreign Trade Zone Commission (GMAFTZC)
P.O. Box 4933
St. Paul, MN 55101
Contact: John Shoffner – John.Shoffner@state.mn.us
Duluth Seaway Port Authority
International Falls (Koochiching Economic Development Authority)
Contact: Paul Nevanen