Sally Hanley Director of Business Development ForeignTrade Zone

Sally Hanley, Director of Business Development Foreign-Trade Zone #114 Economic Development Council for Central Illinois WELCOME TO FOREIGN-TRADE ZONES

A Foreign-Trade Zone is… A FTZ site or park is a specially designated and secured area operating under U. S. Customs supervision Usually located in or near Customs Ports of Entry at industrial parks or terminal warehouse facilities 60 miles or 90 minute drive from port of entry Almost any type of goods may be brought in duty free for any kind of manipulation

Foreign-Trade Zones areas which are geographically inside the U. S. but are legally considered outside its Customs territory. Exports Imports to the Zone Admissions into FTZ: Exports from FTZ: Imports to U. S. from FTZ: Imports Exports

Establishment of FTZs Foreign-Trade Zones are established: To encourage and expedite U. S. participation in international trade To expedite exportation of domestic goods with foreign and domestic content To defer payment of duties until goods enter into the commerce of the U. S.

Terminology U. S. Foreign-Trade Zones Board Agency responsible for the establishment and administration of Zones through Board’s regulations Does not handle day-to-day administration of any Zones Provides grants to Grantees

Terminology Grantees Almost always public corporations or government agencies Establish, operate, and maintain Zones Enters into agreements with Operators or Subzones

Terminology Operator or Subzones Responsible for compliance with Customs regulations relating to Zones Responsible for day-to-day operation of the Zone which can include warehousing, storage, transportation, distribution, and manufacturing May enter into agreements with Users

Terminology Users Uses a Zone for its benefits and pays the Grantee or Operator for their services such as rent on facilities, storage, handling, or manufacturing.

Types of Foreign-Trade Zones How businesses can take advantage of FTZ Become a General Purpose Operator ○ Manufacturing ○ Distributing Use a General Purpose Warehouse Become a Manufacturing Subzone ○ A special purpose zone used for a limited purpose that cannot be accommodated in an existing zone. Normally privately owned.

FTZ #114 Organization U. S. Dept. of Commerce U. S. Dept. of Treasury & Homeland Security U. S. Foreign-Trade Zones Board GRANTEE FTZ #114 Economic Development Council for Central IL General Purpose Operation on Site Peoria Barge Terminal Subzone Operator: CAT Subzone Operator: Mitsubishi

Top Industries Using FTZs… Petroleum Automotive Computers/Electronic Equipment Machinery/Equipment and Supplies Pharmaceutical

FTZ Candidates Profile Manufacturing, Distribution or Warehousing Global Trade Activities Significant volume of imports as well as re-export of foreign merchandise

What can you do in an FTZ? A facility where goods may be: received manipulated exhibited tested destroyed repacked stored manufactured examined calibrated exported assembled mixed with domestic goods title transferred

FTZ Savings Derived exclusively from a tax management approach to U. S. Customs Duties and Fees. Realized in Four Ways: Customs Duty Elimination -Scrapping, Exports Customs Duty Reduction -Inverted Tariffs Deferral of Customs Duty Payment –Inventory (a one time benefit usually the least profitable of the 3) Customs Fee Reductions –Merchandise Processing Fees (MPF)

Duty Elimination Imported Product A Potentially Dutiable Import Duty Free Assembled New Product B Exported Duty Free EXPORT

Inverted Duty Rate Component B 12% Duty Component C 5% Duty Final Product 5% Duty Rate Component C 5% Duty Component A 10% Duty Component B 5% Duty Component A 5% Duty

Deferred Duty Product A Duty Owed RECEIVED JANUARY SHIPPED APRIL Product A Duty Paid

Other Financial Savings Cash flow Zone to zone transfers U. S. labor/overhead/profit Scrap/waste/obsolete material Weekly entry Time and cost efficiencies realized Tax Savings ○ “Bona fide” Customs reasons

Public Benefits Encourage and facilitate exports Help attract offshore activity (imports) and encourage retention of domestic activity Allows businesses to continue to employ THEIR workers Help create employment opportunities Assist state/local economic development efforts

Economic Development Tool Kit • • • Foreign-Trade Zone – FTZ designation is an attractive incentive to businesses involved in international trade. The FTZ as an incentive will support the community’s goals related to attracting new business and retaining existing industry. Incentives Marketing Community Strategies Business resources

FTZ Support Team Foreign-Trade Zone Grantee Bradley University International Trade Center DCEO Office of Trade and Investment US Dept of Commerce US Dept of Treasury and Homeland Security Foreign-Trade Zone Board

Economic Development Council for Central Illinois Foreign-Trade Zone #114 Sally Hanley shanley@edc. h-p. org 309. 495. 5953 www. edc. centralillinois. org THANK YOU !