Federal Incentive

US Foreign-Trade Zones

Summary

Foreign-Trade Zones (FTZ) are secure areas under U.S. Customs and Border Protection (CBP) supervision that are generally considered outside CBP territory upon activation. Located in or near CBP ports of entry, they are the United States' version of what are known internationally as free-trade zones.

The Advantages of Using a Foreign-Trade Zone

Many San Patricio County industries benefit from the flexibility and deferral or elimination of duties payments provided through Foreign Trade Zone #122.

United States (U.S.) foreign-trade zones (FTZs) are designated sites near a port of entry where foreign and domestic merchandise is considered to be outside the country, and therefore outside of U.S Customs territory for purposes of duty payment.

The Port of Corpus Christi, grantee of FTZ #122, received the Foreign Trade Zone grant of authority from the federal government in 1985 and became the first continental zone to have an oil refinery subzone. On July 16, 2013, Port Corpus Christi received approval to reorganize under the Alternative Site Framework (ASF). This new program provides even greater access to the benefits of the FTZ program, by using simpler and less time-consuming procedures to bring FTZ designation to specific locations. FTZ #122 is one of the largest in existence, encompassing nearly 25,000 acres with three active general-purpose areas, 9 activated subzones, and additional subzones in progress.

Within FTZs, companies can manufacture, assemble, test, sample, process, repackage, or store foreign and domestic merchandise without payment of duties, quotas, or other important restrictions, until the goods enter the U.S. market. This allows companies within the zone to be more competitive and creates flexibility and savings for manufacturing companies that import raw materials. FTZs are a fiscal tool which can defer or reduce duty payments, streamline supply chain costs and improve a company’s competitive position in domestic and foreign markets. Some of the primary manufacturing industries benefitting from FTZs are consumer electronics, automotive, pharmaceuticals, and energy (primarily oil refining). Logistics firms and others also benefit, as companies can utilize FTZs for warehousing, inspection, labeling, salvaging, and distribution.

FTZs enhance the international competitiveness of U.S.-based businesses, facilitate their international trade, and encourage manufacturing and logistics within the U.S. FTZ operations primarily involve domestic operations combining foreign inputs with significant domestic inputs.

BENEFITS OF FOREIGN TRADE ZONE #122

Defer Duties
Customs duties are paid only when and if merchandise is transferred into U.S. Customs territory and are not paid if the items are exported to a country outside the United States. This benefit equates to a cash flow savings that allows companies to keep critical funds accessible for their operating needs while the merchandise remains in the zone. There is no limit on the length of time items can remain in the zone.

Reduce Duties
With zone status, companies may be allowed to pay lower duties on goods and products assembled or manufactured within the zone. If the duty rate on a finished product is lower than the rate on the components, the company pays the lower rate.

Eliminate Duties
Customs duties are eliminated on merchandise exported from the zone. No duties are paid on labor, overhead, or profit attributed to production operations in the zone. Duty is not paid on in-bond, zone-to-zone transfer of goods and products. Duties are also eliminated for material scrapped, destroyed or consumed in the zone.

Security and Insurance Costs
Customs security requirements and federal criminal sanctions are deterrents against theft. This may result in lower insurance costs and fewer incidents of loss for cargo imported into an FTZ.

Eliminate Inventory/Ad Valorem Tax
Since goods in a zone are considered to be in international commerce, materials and merchandise imported from outside the United States and held in a zone, as well as that produced in the United States for export, are not subject to state or local ad valorem taxes.

Eliminate Drawbacks
In some cases, duties previously paid on exported goods and products may be refunded through a process called drawback. The drawback law has become increasingly complex and expensive to administer and the need for drawbacks may be eliminated by using the zone.

Avoid Quotas
United States quota restrictions do not apply to items admitted to the zone, though quotas will apply when the items enter into U.S. Commerce. Quota merchandise may be stored in the zone so that when a particular quota opens, the relevant items may then be immediately shipped into U.S. Customs territory.

Simplify Inventory Controls and Record Keeping
Many companies find their inventory control systems operate more efficiently in the zone, which increases their competitiveness. Zone users also find that meeting their governmental reporting responsibilities makes them eligible for special Customs procedures, such as direct delivery and weekly entry which expedite product movement, facilitating just-in-time inventory procedures.

SPECIFIC ADVANTAGES OF FOREIGN TRADE ZONE #122 AT PORT CORPUS CHRISTI

C-TPAT Membership
Port Corpus Christi is an official member of the Customs-Trade Partnership Against Terrorism (C-TPAT) program. C-TPAT provides the framework for trading communities to develop procedures to protect global commerce against terrorism. Participating importers enjoy preferential processing by Customs.

Ship Channel Activation/Depth
Port Corpus Christi has activated the Corpus Christi Ship Channel with customs for refinery subzones to allow overflow storage in barges or vessels. The Port is also deepening the ship channel from 45 feet to 54 feet, widening from 400 feet to 530 feet, and constructing two 200-foot barge shelves to accommodate larger vessels, increase shipping efficiency, and enhance navigational safety.

Location/Multimodal Transportation
According to the Texas Transportation Institute, Corpus Christi area is one of the least congested major metropolitan areas in the United States.

Port Corpus Christi lies along the Texas gulf coast, 150 miles north of Mexico. The warm, dry climate of South Texas and the Port’s modern, multipurpose infrastructure support year-round operations, making it an ideal location for improved cost-effectiveness and greater productivity. In addition to excellent highway access to all major markets on uncongested US Highway 181 and NAFTA arteries I-35 and I-37, the Port also offers dockside rail access by the Union Pacific Railroad, BNSF Railway and Kansas City Southern Railroad. Three shipside tracks facilitate direct transfers between vessels and railcars. Covered tracks at the Dock 9 warehouse accommodate weather-sensitive cargo.

Systematic Operator Support
FTZ #122 and Customs
The Port’s Foreign-Trade Zone Manager and the Customs Port Director host bi-monthly meetings with zone operators, users, and consultants to discuss problems, develop resolutions, provide updates, and discuss FTZ issues which may be of concern to local operators. When necessary, special meetings are held for operators involved in importing and exporting.

SUBZONES

Within FTZs, subzones may be assigned to companies for specific activities. FTZ #122 at Port Corpus Christi hosts nine subzones from a diverse array of manufacturers. The industries represented in FTZ 122 include manufacturers of petroleum products, minerals, offshore drilling platforms, plastics, steel pipe and hot briquetted iron.

 

CONTACT

For more information on Foreign Trade Zones, visit the U.S. Foreign-Trade Zones Board https://enforcement.trade.gov/ftzpage/, the National Association of Foreign-Trade Zones https://www.naftz.org/, or view the Foreign Trade Zone #122 brochure https://portofcc.com/wp-content/uploads/Port-FTZ-OneSheet-1-lowres.pdf, produced by Port Corpus Christi. If you are interested in obtaining more information about zone application and activation process, or fee schedule, please contact:

Danielle Converse
Foreign-Trade Zone #122 Manager
Port Corpus Christi
400 Harbor Drive
Corpus Christi, Texas 78401
Email: danielle@pocca.com
Telephone: (361) 885-6187