Foreign Trade Zones serve multiple purposes including managing transshipping operations and saving money on manufacturing processing fees. Typically companies use FTZs for exports. However, Foreign Trade Zones can also be used to take advantage of crossdocking and transferring goods from one FTZ to another – often referred to as zone to zone transfers ­- without paying Customs duties. Companies are leveraging this capability to transfer goods to FTZs both within and outside the United States.

A vendor located in one FTZ may sell goods to a company in another zone or subzone in the U.S. and transfer those goods to the purchasing company’s FTZ with no duty paid on the goods. By helping to extend FTZ benefits through a company’s U.S. supply chain, companies can lower their overall cost structure and optimize just-in-time supply chain elements.

The integration of zone to zone transfers helps more than the final manufacturer of a product. Manufacturers whose end products have a lower duty rate than the raw materials or components can receive raw materials and components duty unpaid and elect the duty rate of their finished goods. This can result in a reduction, or even elimination, of duty rates on raw materials and components. This in turn makes those U.S. suppliers more attractive relative to their foreign competitors. In certain cases, companies will utilize facilities overseas in conjunction with their U.S. FTZ operations to minimize their duty costs.

With SAP GTS 11.0, Foreign Trade Zone functionalities are pretty extensive. Later this year, customers will also have the zone to zone transfer functionality available in SAP GTS 11.0. For Foreign Trade Zone FAQs and more details of currently SAP GTS FTZ functionalities, check out a previous blog post.