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Going Global: Partnering for International Growth                                                       Export Ready      ...
This material was used by Elliott Davis during an oral presentation; it is not                 a complete record of the di...
Indirect Taxes             •      Indirect taxation includes customs                    duties, value added taxes, sales t...
Indirect Taxes             •      How your product is warehoused locally,                    and where the title is passed...
Duty Drawback                       Drawback is a refund of monies – customs                          duties, certain inte...
Duty Drawback                       Three Primary Types of Drawback                       •      Manufacturing Drawback   ...
Manufacturing Drawback                    Imported Merchandise designated for use in                       Manufacturing  ...
Manufacturing Drawback                       Example:                       US Manufacturer imports prunes and uses them t...
Unused-Merchandise Drawback                       Unused –Merchandise Drawback                       •      Imported Merch...
Unused-Merchandise Drawback                       Example:                       European Sunglass Manufacturer imports fr...
Rejected-Merchandise Drawback                       •      Does not Conform to Sample or Specifications                   ...
Substitution                       •      Drawback is a Function of Matching Exports to Corresponding                     ...
Drawback Benefits                       •      Refund of 99% of Customs Duties                       •      Accelerated Pa...
Foreign-Trade Zones                Foreign-Trade Zones are secure areas legally outside the customs territory             ...
Foreign-Trade Zone                       •      Zones are usually located in or near CBP ports of entry                   ...
Permissible Activities Within the Zone                 •      Merchandise lawfully brought into the zones may be stored, s...
Foreign Trade Zones                   •      Generally, merchandise is exempt from payment of duty even if it is:         ...
Foreign – Trade Zones                 • If the final product is exported from the United States,                   no cust...
Foreign Trade Zones           Businesses save on personal property and sales and use taxes since           state and local...
Foreign-Trade Zones in North Carolina     Source : Thrive in North Carolina http://thrivenc.com/incentives/financial/other...
Going Global: Partnering for International Growth                                                       Export Ready      ...
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Tax perspectives for exporters indirect taxation and duty drawback - kay biscopink, elliott davis - 25 january 2012

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Tax perspectives for exporters indirect taxation and duty drawback - kay biscopink, elliott davis - 25 january 2012

  1. 1. Going Global: Partnering for International Growth Export Ready “Tax Perspectives for Exporters: Indirect Taxation and Duty Drawback” Kay Biscopink Shareholder International Tax Chair January 25, 2012© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 1
  2. 2. This material was used by Elliott Davis during an oral presentation; it is not a complete record of the discussion. This presentation is for informational purposes and does not contain or convey specific advice. It should not be used or relied upon in regard to any particular situation or circumstances without first consulting the appropriate advisor. No part of the presentation may be circulated, quoted, or reproduced for distribution without prior written approval from Elliott Davis.© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 2
  3. 3. Indirect Taxes • Indirect taxation includes customs duties, value added taxes, sales tax, etc. Duty drawbacks and free trade zones are techniques to minimize indirect taxation and maximize cash flow. • Regular Duties, internal revenue taxes paid upon import and fees (merchandise processing fees and harbor maintenance) are all drawback eligible© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 3
  4. 4. Indirect Taxes • How your product is warehoused locally, and where the title is passed has a significant impact on cash flow and foreign tax credit utilization© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 4
  5. 5. Duty Drawback Drawback is a refund of monies – customs duties, certain internal revenue taxes and other fees collected at importation To be paid the imported merchandise must be exported or destroyed under Customs and Border Protection (CBP) supervision after importation.© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 5
  6. 6. Duty Drawback Three Primary Types of Drawback • Manufacturing Drawback • Unused-Merchandise Drawback • Rejected-Merchandise Drawback© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 6
  7. 7. Manufacturing Drawback Imported Merchandise designated for use in Manufacturing • Exported or Destroyed • Manufactured within Three Years of Receipt • Exported or Destroyed within Five Years of Importation • Available on Commercially Interchangeable Merchandise© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 7
  8. 8. Manufacturing Drawback Example: US Manufacturer imports prunes and uses them to produce prune juice, which is subsequently exported. Upon export of the juice the US exporter receives a refund of the 14% duty associated with the prunes used to make the juice.© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 8
  9. 9. Unused-Merchandise Drawback Unused –Merchandise Drawback • Imported Merchandise • Exported or Destroyed without Undergoing any Manufacturing • Never used in the US • Exported within Three Years of Importation© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 9
  10. 10. Unused-Merchandise Drawback Example: European Sunglass Manufacturer imports frames to a US distribution center. The center ships within the US and to Canada and Mexico. Upon export the US importer can request a drawback refund of the regular duty and any other fees (merchandise processing and harbor maintenance fees) incurred upon the initial importation.© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 10
  11. 11. Rejected-Merchandise Drawback • Does not Conform to Sample or Specifications • Shipped without the Consignee’s Consent • Defective at Time of Importation© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 11
  12. 12. Substitution • Drawback is a Function of Matching Exports to Corresponding Imports • A Company Can Match Exports and Imports of Like Materials • Substitution© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 12
  13. 13. Drawback Benefits • Refund of 99% of Customs Duties • Accelerated Payment (30 to 45 days) Available • Period of Three Years From the Date of Export to File Claim • Multiple Party Drawbacks (Exporter has first right) • Consolidated Filings© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 13
  14. 14. Foreign-Trade Zones Foreign-Trade Zones are secure areas legally outside the customs territory of the US Purpose: To attract and promote international trade and commerce Subzones are special-purpose facilities for companies that cannot operate effectively at public zone sites© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 14
  15. 15. Foreign-Trade Zone • Zones are usually located in or near CBP ports of entry • CBP is responsible for activitating foreign-trade zones, controlling dutiable merchandise moving in and out, protecting and collecting revenue and other administration. • Foreign or domestic merchandise may enter these areas without a formal customs entry or the payment of customs duties or government excise taxes and without a thorough examination.© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 15
  16. 16. Permissible Activities Within the Zone • Merchandise lawfully brought into the zones may be stored, sold, exhibited, broken up, repacked, assembled, distributed, sorted, tested, repaired, sampled, salvaged, relabeled, destroyed, processed, graded, cleaned, mixed with foreign or domestic merchandise or otherwise manipulated or manufactured • Savings in shipping charges, duty and taxes may result from such operations as shipping unassembled or disassembled furniture, machinery, etc. to the zone and assembling or reassembling it there.© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 16
  17. 17. Foreign Trade Zones • Generally, merchandise is exempt from payment of duty even if it is: – Manipulated – Used in a manufacturing process – Inspected – Combined with other domestic or foreign materials – Displayed for sale – Re-exported – Spoiled or damaged goods or waste materials may be disposed of or re-exported without payment of duty.© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 17
  18. 18. Foreign – Trade Zones • If the final product is exported from the United States, no custom duty is levied. If the final product is imported into the U.S., duty and excise taxes are due at the time of transfer from the foreign trade zone and formal entry is made into the U.S. Duty is paid on the product itself or its imported parts, whichever is lower© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 18
  19. 19. Foreign Trade Zones Businesses save on personal property and sales and use taxes since state and local governments generally do not impose such taxes on items in the FTZ. Additional savings on interest, labor and shipping costs may also result.© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 19
  20. 20. Foreign-Trade Zones in North Carolina Source : Thrive in North Carolina http://thrivenc.com/incentives/financial/other-cost-saving-programs/foreign-trade-zones© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 20
  21. 21. Going Global: Partnering for International Growth Export Ready Questions? Kay Biscopink Shareholder International Tax Chair January 25, 2012 kbiscopink@elliottdavis.com© 2012 Elliott Davis, PLLC © 2012 Elliott Davis, LLC 21

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