ABC, XYZ, FTZ? What does it mean?
We are familiar with many acronyms that are used in our business and personal life: EOD, ETA, QCDP, LOL, ASAP to name a few. How about these? Do the acronyms FTZ, CBP or ASF mean anything to you?
If you suddenly feel like I am speaking a foreign language, I assure you that I am not.
FTZ is the acronym for Foreign Trade Zone. The Foreign Trade Zone Program has been around since the 1930’s but has not garnered much attention over the years unlike Free Trade Agreements and other government programs created to reduce barriers to imports/exports and increase international trade. In 2024 there are approximately 13 active FTZ operators in the Cincinnati/Northern Kentucky geographic area, with 25 more throughout the state of Ohio. Compared to the total number of businesses engaged in international trade, this is quite a small number.
So, what is an FTZ and why become one?
Foreign Trade Zones (FTZs) are designated, secure sites that are considered Outside of U.S. Customs Territory but are physically located in the United States. Usually, an FTZ needs to be in or near a Customs and Border Protection (CBP) port of entry.
Some of the key benefits of utilizing or becoming an FTZ are:
- Simpler and Quicker Customs Clearance: FTZ’s can apply for Direct Delivery of Goods with CBP, which means overall port-to-customs-to-final delivery time is greatly reduced.
- Duty Exemptions and Deferrals: for businesses who use FTZs, Duties and Merchandise Processing Fees are not paid until the goods are moved out of the FTZ (goods can stay in the FTZ duty free for an extended period). Duty may also be exempt if goods are exported, re-exported, damaged, defective, or obsolete.
- Tariff Inversion: Specific added value activities performed in an FTZ are not subject to customs duties. If Production is authorized for an FTZ Site and transformation is performed, the duty class may change and operating in an FTZ allows you to take advantage of whichever is lower (finished good duty value vs component duty value).
Other important benefits to an FTZ include: enhanced controls on inventory and business processes, and increased security measures which can help in meeting best practice requirements for the CTPAT (Customs Trade Partnership against Terrorism) program as well as lowering Insurance Premiums.
To become an FTZ, a company needs to go through an application and implementation process.
The three key steps to applying are:
The three key steps to applying are:
- Contact your local FTZ Grantee. In the Cincinnati area this would be GCFTZ/NKFTZ Foreign Trade Zones 46 and 47 www.gcftz.com
- Complete an FTZ application for submission to the local Grantee and approval by the National Foreign Trade Zone Board
- Once approved, activation will be carried out by CBP
This process can take 90-180 days, sometimes less, depending on the complexities of the individual zone. Once activated, the FTZ will have ongoing interactions with the zone Grantee, a public or private corporation that has received a grant of authority from the National FTZ Board. The activated FTZ will also have interactions with local CBP Officers.
Overall, FTZ’s have a significant impact on the U.S. supply chain. They can help strengthen the U.S. Economy by:
If you are examining where your factories are around the world, if nearshoring has gotten your attention, if you are looking to create a domestic hub for your business, then the FTZ Program may be something you want to examine more closely.
The CVG Airport Authority and REDI Cincinnati manage the administration of Greater Cincinnati Foreign Trade Zone Inc (Zone 46) and Northern Kentucky Foreign Trade Zone Inc (Zone 47). To learn more or if you would like additional information, visit www.gcftz.com or call Angela Cook with CVG at 859-279-5528.
