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What is a Foreign Trade Zone and why should I care?
What is a free trade zone?
A free trade zone is a designated area that eliminates traditional trade barriers, such as tariffs, and minimizes bureaucratic regulations. The goal of a free trade zone is to enhance global market presence by attracting new business and foreign investments.
(Source: Small Business Administration (SBA))
What types of business use free trade zones?
Free trade zones are utilized by everyone from large manufactures to small businesses to individuals. Any person or entity that intends to import or export goods and can consider taking advantage of free trade zones.
(Source: Import Administration)
What are the benefits to a zone user?
* 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 zone production results in a finished product that has a lower duty rate than the rates on foreign inputs (inverted tariff), the finished products may be entered at the duty rate that applies to its condition as it leaves the zone (requires prior authorization).
* Logistical Benefits. Companies using FTZ procedures may have access to streamlined customs procedures (e.g. "weekly entry" or "direct delivery").
* Other Benefits. Foreign goods and domestic goods held for export are exempt from state/local inventory taxes. FTZ status may also make a site eligible for state/local benefits which are unrelated to the FTZ Act.
Ad Valorem Tax Relief
The Foreign-Trade Zone Corporation has a wealth of experience and an exceptional success rate at facilitating equitable ad valorem tax arrangements with businesses, grantees, and local communities. The federal law that established the U.S. Foreign-Trade Zones Program allows companies to obtain exemptions from inventory taxes. Certain tangible personal property is generally exempt from state and local ad valorem taxes. A small number of states assess local taxes on business inventories. The Foreign-Trade Zones Act exempts most merchandise from such taxes in Foreign-Trade Zones
Zone to Zone Transfers
A vendor located in one Foreign-Trade Zone may sell goods to a company in another Zone or Subzone anywhere in the U.S. and transfer those goods to the purchasing company’s FTZ with no duty paid on the goods. The FTZ Corporation has assisted companies in a wide variety of industries, from automobiles to pharmaceuticals to food products, to implement Zone-to-Zone transfer procedures with U.S. Customs and Border Protection. By helping to extend FTZ benefits through a company’s U.S. supply chain, the FTZ Corporation can help the company to lower its overall cost structure and optimize just-in-time supply chain elements.
Duty Exemption of Re-Exports
When not utilizing a Zone, an importer is required to pay Custom duties at the time the imported merchandise enters U.S. commerce. Merchandise in a Foreign-Trade Zone is considered to be outside the commerce of the United States, so no Customs duty is owed when foreign merchandise is brought into a Foreign-Trade Zone, for as long as it remains in the Zone. If the foreign merchandise is exported from the U.S., no Customs duty is ever due. This benefit is available to companies in General-Purpose Zones and to companies that have received Subzone approval from the FTZ Board.
Source (Emphasis Mine)
The duty exemption on re-exports benefit available to U.S. companies under the U.S. Foreign-Trade Zones program is often available in free trade zones abroad. This makes it especially important for U.S.-based distributors to take advantage of the FTZ program in the U.S. in order to gain a level playing field against their foreign competitors and sister companies.
Originally posted by ThirdEyeofHorus
So,in other words, to save money on tariffs, Canada is simply going to bypass it by building a special pipeline which bypasses local taxing authorities. Is that what you are trying to say with all this?
The largest share of Venezuela's global downstream operations is in the United States. CITGO, a wholly-owned subsidiary of PdVSA, operates three refineries (Lake Charles, LA; Corpus Christi, TX; Lemont, IL), with a combined crude oil distillation capacity of 755,400 bbl/d. CITGO's gulf coast refineries source most of their crude oil with PdVSA under long-term supply contracts. PdVSA also owns a 50-percent stake in the 189,000-bbl/d Chalmette facility in Louisiana.
U.S. foreign - trade zones (FTZs) are sites administered by U.S. Customs and Border Protection (CBP) officials located in or near a U.S. Customs Port of E ntry, where foreign and domestic merchandise is consi dered to be outside the country, and therefore outside of U.S. Customs territory for purposes of duty payment .
Some of the primary manufacturing industries benefitting from FTZs are consumer electronics, automotive, and energy (primarily oil refining).
Texas leads the nation with 31 FTZs, more than any other state.
Of in coming zone shipments, over 58 percent , or $248.6 billion, involve domestic status merchandise
SHOULD the US be able to charge duties and tariffs on Oil or Refined products that never left the fence of the refinery from the time the Venezuelan ship came and docked? Probably not.. No. See why that works though? Into an FTZ and back out again ... whatever gets sent into the US is paid full duty on ..whatever goes back out, isn't charged anything because it was never "IN" the United States at all (So the law says).
The TransCanada line is doing the very same thing, except they aren't bringing a ship to dock and unload into the refinery...they are building a 1,600 pipeline to add to the many they already use and operate across our soil...our national territory ... so they can play the same game and export without ever having the product "inside" the U.S. by technical stroke.