In the light of SAP GTS 11.0 release featuring Foreign-Trade Zone (FTZ) capabilities, and as we gear up for the NAFTZ conference, we are compiling an FTZ FAQ. If you have additional questions which should be added or simply ones you’d like answered, please let us know!
- What’s included in SAP GTS 11.0 for FTZ?
- What is a Foreign-Trade Zone?
- How is a Foreign-Trade Zone established?
- What are the current zones?
- Why use Foreign-Trade Zones?
- What may be placed in a Foreign-Trade Zone?
- What can occur within a Foreign-Trade Zone?
- How is Krypt, Inc. involved?
- Is a Foreign-Trade Zone right for you?
What’s included in SAP GTS 11.0 for FTZ?
FTZ Goods Receipt Processes
- Transfer duty-unpaid goods from overseas to a Foreign-Trade Zone as a direct delivery scenario
- Transfer duty-unpaid goods from overseas to a Foreign-Trade Zone as a non-direct delivery scenario
- Clear duty-unpaid goods from overseas at the point of entry
- Transfer duty-paid goods from a domestic supplier to a Foreign-Trade Zone
FTZ Goods Issue Processes
- Export finished products or components from the United States
- Release finished products or components from a Foreign-Trade Zone into free circulation
FTZ Stock Postings
- Post stock to a Foreign-Trade Zone
- Display stock overviews and individual stock
- Perform a stock year-end close
- Release finished products from a Foreign-Trade Zone into free circulation
- Display forecast for a Foreign-Trade Zone
What is a Foreign-Trade Zone?
A Foreign-Trade Zone is a designated, secure geographical area in the United States where companies can use special procedures that help encourage U.S. activity and allow delayed or reduced duty payments on foreign merchandise.
How is a Foreign-Trade Zone established?
The Foreign-Trade Zones Board reviews and approves applications to establish, operate and maintain Foreign-Trade Zones. The FTZ Board may approve a zone or subzone that it deems necessary to serve adequately “the convenience of commerce”. U.S. Customs and Border Protection must approve activation of the zone before any merchandise is admitted under the Foreign-Trade Zones Act.
What are the current zones?
There are about 250 general-purpose zones and over 500 subzones approved. There are zones in all 50 states and Puerto Rico.
Why use Foreign-Trade Zones?
Global firms use FTZ to maintain the cost competitiveness of their U.S. based operations in relation to their foreign-based competitors. Zone status provides an opportunity to reduce certain operating costs associated with a U.S. location that are avoided when operating from a foreign site.
Some benefits include:
- Duty Exemption: No duties on or quota charges on re-exports.
- Duty Deferral: Customs duties and federal excise tax deferred on imports.
- Inverted Tariff: 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 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.
What may be placed in a Foreign-Trade Zone?
Any foreign or domestic merchandise not prohibited by law, whether dutiable or not, may be taken into a Foreign-Trade Zone.
Merchandise that lawfully cannot be imported into the United States is prohibited without exception. Merchandise that lawfully cannot be entered into the customs territory may be placed in a Foreign-Trade Zone because zones are considered outside customs territory (e.g. merchandise may be stored, repackaged or manipulated in a FTZ and exported).
What can occur within a Foreign-Trade Zone?
Foreign and domestic merchandise permitted in a zone may be stored, sold, exhibited, broken up, repacked, assembled, distributed, sorted, graded, cleaned, mixed with foreign or domestic merchandise, otherwise manipulated, destroyed or be manufactured without being subject to U.S. Customs laws.
This exemption does not apply to machinery and equipment that is imported for manufacturing use or the like within a zone.
No retail trade of foreign merchandise may be conducted in a FTZ.
How is Krypt, Inc. involved?
Krypt is a leading SAP GTS consulting partner. Krypt has vast experience implementing and customizing SAP GTS. We are also authorized resellers of SAP software if you are interested in purchasing licenses.
Is a Foreign-Trade Zone right for your Operations?
Car manufacturing plants, oil refineries, distributors, electronics, footwear, pharmaceuticals and textiles are all utilizing FTZs. So are companies with as few as 15 employees.
You may consider FTZs to streamline operations, minimize paperwork, increase flexibility and save money.