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Presented by:  Jim ChesterJ.D., LL.M, CHB, CCS                       "
About Jim Chester                                                       Managing Attorney, CHESTER pllc                   ...
Foreign-Trade Zones (FTZs)Areas located in the United States,but designated by the federalgovernment as lying outside the ...
Foreign-Trade Zones (FTZs)  Created by FTZ Act of 1934  FTZs are in all 50 states, plus Puerto Rico  FTZ received $180 ...
Foreign-Trade Zones (FTZs) Currently about 250 general purpose FTZs have been granted  Plus over 500 special purpose   “...
Types of Industries Using FTZs   Automotive                 Chemicals   Oil Refining               Shipbuilding   Pha...
General Purpose FTZs  Granted to a public, non-profit entity  Many possible users and uses  Must be within 60 miles (or...
Dallas Area FTZs  General Purpose FTZs      D/FW Airport (39)      Midlothian (113)      Dallas (168)      Alliance Airpo...
FTZ Subzones  Cannot be accommodated within existing General Purpose  FTZ  Attached to General Purpose FTZ  Typically d...
Dallas Area FTZs  Subzones      General Motors (Arlington)      Sanden International (Wylie)      Pier 1 Imports (Mansfie...
FTZ Benefits - Domestic Economy    Job creation/preservation    Economic Growth                                 11
FTZ Benefits - Private Industry  No duties are owed until goods are shipped from FTZ into  Customs territory  No duties ...
  Choice of paying duty on raw materials or on final products,  whichever is lower  Can hold quota merchandise in FTZ un...
FTZ Benefits - Private Industry  Most FTZ merchandise exempt from local and state ad  valorem taxes  Can transfer goods ...
FTZ Administration: FTZ           Board  Agency within the Department of Commerce  Comprised of the Secretary of Commerc...
FTZ Administration: Customs  Customs & Border Protection (CBP/Customs)  Part of Department of Homeland Security  Local ...
Establishing an FTZ  Application to FTZ Board    Must show “public benefit” from FTZ    Approval often takes approximat...
Establishing an FTZ  Activation by CBP     Operator” activates the zone by getting    “     Customs approval of procedur...
FTZ Operations: Terminology  Entry        Customs Entry        Goods are imported and duties are assessedvs.  Admissio...
FTZ Operations: Admissions  Customs Form 214  Declare status of the goods          Domestic          Privileged Foreig...
FTZ Operations:          Domestic Goods U.S. origin goods, or goods that have already been entered into U.S. Customs terr...
FTZ Operations:  Privileged Foreign (PF) Goods Locks-in the duty on the raw materials on the date they are admitted into ...
FTZ Operations:     PF Duty Savings Example  ABC, Inc., admits three components into an FTZ  If duties were assessed on ...
FTZ Operations: NonPrivileged Foreign (NPF) Goods  Duty will be assessed on the finished products as a whole,  not on the...
FTZ Operations:            Inverted Tariff (NPF)                  Example  ABC, Inc., admits three components into an FTZ...
FTZ Operations:    Zone Restricted Goods Goods admitted onto the FTZ for use only in the FTZ                 26
Activity in the FTZ  Salvage                                 Mixing  Labeling                                 Assembly...
Activities Prohibited in FTZs Retail Trade Living in the FTZ Any other activities prohibited by US law                 ...
  General Purpose Zones     Little Up-front cost     Ongoing (mostly out-source)       E.g., Document and storage cost...
  Subzones     Up-front cost (application, activation, software)       $100k - $200k (some savings if more than one zon...
Contact UsEmail info@chester-law.com       214.988.9248 Toll Free 877-34-WORLD        31
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Foreign Trade Zones (FTZ) Basics: Creating Profit with Savings

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Presentation discussing the basics of FTZs including the different types, the benefits, and the regulatory agencies supervising the FTZ program in the U.S.

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Foreign Trade Zones (FTZ) Basics: Creating Profit with Savings

  1. 1. Presented by: Jim ChesterJ.D., LL.M, CHB, CCS "
  2. 2. About Jim Chester Managing Attorney, CHESTER pllc Of Counsel, Klemchuk Kubasta, LLP Adjunct Professor, Baylor University School of Law  I advise entrepreneurs, start-ups and privately-held companies of all sizes in a variety of industries regarding trademark, copyright, and trade secret protection, licensing & enforcement in the US and abroad. In addition, I assist companies in international business transactions and joint ventures.  To date, I have advised clients on business deals involving almost 100 countries. I also coordinate with foreign counsel on legal projects around the world on behalf of U.S. clients, and serve as legal advisor to foreign companies doing business with or in the U.S.  Of course, to be an effective international business attorney, I must also have significant experience and expertise handling domestic business matters, including entity formations, transactions, acquisitions, contracts and other legal issues commonly faced by my clients. MY international practice also involves advising clients regarding international trade regulations, including compliance and enforcement issues involving Customs/import and export laws, ITAR, and the FCPA.  I have represented numerous clients before US Customs & Border Protection, US Department of Commerce, US Department of Defense Trade Controls, the Office of Foreign Asset Controls, the US International Trade Administration, and other state, federal and foreign governing bodies and agencies. In addition to being admitted to practice law in Texas and Washington, DC., I am a licensed US Customs Broker. In addition to my work at the firm, I am an adjunct professor of law at Baylor University Law School, teaching courses on International Trade Law and International Business Transactions.  I also previously served as an adjunct professor of Business Law at the University of Dallas.HONORS  “Super Lawyers - Rising Stars Edition,” Law & Politics Magazine published in Texas Monthly & Texas Rising Stars (2008, 2009, 2011)  “AV® Preeminent” Peer Review Rating by Martindale Hubbell® EDUCATION  LL.M., International Economic Law, University of Houston School of Law, 2000  J.D., South Texas College of Law (Law Journal, Varsity Mock trial), 1997  B.S., Economics/Political Science (Double major), magna cum laude, Texas A&M University, Commerce, 1994CREDENTIALS  Licensed U.S. Customs Broker  Certified Customs Specialist (NCBFAA)  Admitted to practice in Texas & Washington, DC
  3. 3. Foreign-Trade Zones (FTZs)Areas located in the United States,but designated by the federalgovernment as lying outside the U.S.Customs territory 3
  4. 4. Foreign-Trade Zones (FTZs)  Created by FTZ Act of 1934  FTZs are in all 50 states, plus Puerto Rico  FTZ received $180 billion in merchandise - 87% into Subzones  Employment at zone sites is approx. 350,000  Exports from FTZs = $18 billion 4
  5. 5. Foreign-Trade Zones (FTZs) Currently about 250 general purpose FTZs have been granted  Plus over 500 special purpose “Subzones” 5
  6. 6. Types of Industries Using FTZs   Automotive   Chemicals   Oil Refining   Shipbuilding   Pharmaceuticals   Apparel   Computers   Aerospace   Telecommunications   Medical   Other High-Tech   Other Consumer Products 6
  7. 7. General Purpose FTZs  Granted to a public, non-profit entity  Many possible users and uses  Must be within 60 miles (or 90 minutes drive) of Customs Port of Entry 7
  8. 8. Dallas Area FTZs  General Purpose FTZs D/FW Airport (39) Midlothian (113) Dallas (168) Alliance Airport (196) Durant, OK (227) Waco (246) 8
  9. 9. FTZ Subzones  Cannot be accommodated within existing General Purpose FTZ  Attached to General Purpose FTZ  Typically designated for a single company’s operations 9
  10. 10. Dallas Area FTZs  Subzones General Motors (Arlington) Sanden International (Wylie) Pier 1 Imports (Mansfield) Fossil Partners (Richardson) Zale Corp. (Irving) 10
  11. 11. FTZ Benefits - Domestic Economy   Job creation/preservation   Economic Growth 11
  12. 12. FTZ Benefits - Private Industry  No duties are owed until goods are shipped from FTZ into Customs territory  No duties incurred for goods exported  Duties reduced or eliminated on materials subject to defect, damage, obsolescence, waste and scrap 12
  13. 13.   Choice of paying duty on raw materials or on final products, whichever is lower  Can hold quota merchandise in FTZ until window opens (limited)  No hassle of Customs clearance and duty drawback  Materials consumed in FTZs not subject to duties 13
  14. 14. FTZ Benefits - Private Industry  Most FTZ merchandise exempt from local and state ad valorem taxes  Can transfer goods to other zones without paying duty  Ability to take advantage of special Customs programs (e.g., weekly entry procedure) 14
  15. 15. FTZ Administration: FTZ Board  Agency within the Department of Commerce  Comprised of the Secretary of Commerce and Secretary of the Treasury.  Day-to-day administration by Executive Secretary  Issues and administers FTZ grants pursuant to its regulations (15 CFR Part 400) 15
  16. 16. FTZ Administration: Customs  Customs & Border Protection (CBP/Customs)  Part of Department of Homeland Security  Local representative of FTZ Board  Supervise FTZ operational activities pursuant to Customs’ FTZ regulations (19 CFR Part 146) 16
  17. 17. Establishing an FTZ  Application to FTZ Board   Must show “public benefit” from FTZ   Approval often takes approximately 1 year   “Grantee” receives the grant of authority to establish the FTZ   Grant defines FTZ scope and activity 17
  18. 18. Establishing an FTZ  Activation by CBP Operator” activates the zone by getting   “ Customs approval of procedures   Operator must post a special “FTZ Operating Bond”   in addition to the import bond, if applicable 18
  19. 19. FTZ Operations: Terminology  Entry   Customs Entry   Goods are imported and duties are assessedvs.  Admission   Goods brought onto FTZ   No Customs entry 19
  20. 20. FTZ Operations: Admissions  Customs Form 214  Declare status of the goods   Domestic   Privileged Foreign   Non-Privileged Foreign 20
  21. 21. FTZ Operations: Domestic Goods U.S. origin goods, or goods that have already been entered into U.S. Customs territory and duty (if any) has been paid. 21
  22. 22. FTZ Operations: Privileged Foreign (PF) Goods Locks-in the duty on the raw materials on the date they are admitted into the zone 22
  23. 23. FTZ Operations: PF Duty Savings Example  ABC, Inc., admits three components into an FTZ  If duties were assessed on the components, they would total $200  Once the components are assembled into the final product, they are imported into the U.S.  Duties on the final product total $1,000  ABC, Inc., pay only $200 in duties 23
  24. 24. FTZ Operations: NonPrivileged Foreign (NPF) Goods  Duty will be assessed on the finished products as a whole, not on the raw materials   A.k.a. “Inverted tariff ” 24
  25. 25. FTZ Operations: Inverted Tariff (NPF) Example  ABC, Inc., admits three components into an FTZ  If duties were assessed on the components, they would total $1,000  Once the components are assembled into the final product, they are imported into the U.S.  The final product qualifies for duty-free entry 25
  26. 26. FTZ Operations: Zone Restricted Goods Goods admitted onto the FTZ for use only in the FTZ 26
  27. 27. Activity in the FTZ  Salvage   Mixing  Labeling   Assembly  Destruction   Display  Repackaging   Storage  Cleaning   Testing  Sampling   Repairing  Manufacturing (1949)   Processing  Refining 27
  28. 28. Activities Prohibited in FTZs Retail Trade Living in the FTZ Any other activities prohibited by US law 28
  29. 29.   General Purpose Zones   Little Up-front cost   Ongoing (mostly out-source)   E.g., Document and storage costs of FTZ operator 29
  30. 30.   Subzones   Up-front cost (application, activation, software)   $100k - $200k (some savings if more than one zone at a time)   Ongoing -- depends on in-house v. outsource 30
  31. 31. Contact UsEmail info@chester-law.com 214.988.9248 Toll Free 877-34-WORLD 31

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