The Strategic Advantages of Utilizing a Foreign Trade Zone in North Carolina (and elsewhere)

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The recent announcement of a new Foreign Trade Zone (FTZ) in North Carolina is a timely reminder of the many benefits provided by FTZs.  FTZs are geographically designated and secured areas that, for legal purposes, are considered outside of US Customs territory.  North Carolina recently gained a new FTZ in the western part of the state.  Zone #301, or the Land of Sky Zone, is based in Asheville and includes portions of Buncombe, Haywood, Henderson, and Transylvania Counties. The Land of Sky Regional Council administers the zone. 

There are now six general-purpose FTZs serving North Carolina, five based within the state’s borders, with eighteen active subzones approved for use by individual companies. In addition, three zones have successfully transitioned to the Alternative Site Framework (ASF), significantly simplifying service to users.  Nationwide, more than 290 FTZs are spread from coast to coast. The map below illustrates the counties North Carolina’s FTZs cover as geographic jurisdictions determine their authority. 

Sitting outside of US Customs territory affords zone users numerous advantages, including but not limited to:

1. Duty Deferral and Reduction.  One of the most significant advantages of operating in an FTZ is the deferment or reduction of import duties and taxes. When goods are brought into an FTZ, they are considered outside the United States customs territory. As a result, businesses can only pay duties once the products leave the zone and enter the U.S. domestic market.  In some cases, manufacturers may benefit from reduced duties or tariff exemptions if the final products are destined for re-export or undergo substantial transformation within the FTZ.  Certain tangible personal property is also generally exempt from state and local ad valorem taxes while in the FTZ.
2. Streamlined Customs Procedures.  FTZs provide a favorable environment for customs procedures and regulations. Manufacturers operating within an FTZ often experience expedited clearance processes, reduced paperwork, and simplified compliance requirements compared to standard customs procedures.
3. Inventory Management and Flexibility.  Manufacturers can also benefit from improved inventory management while operating in a Foreign Trade Zone. Companies can maintain a ready supply of raw materials and components within the zone without paying import duties upfront. Merchandise may remain in a zone indefinitely.  Additionally, US Customs and Border Service security requirements for an FTZ provide additional protection from theft.
4. Enhanced Logistics and Distribution.  Foreign Trade Zones are typically strategically located near major transportation hubs, such as ports, airports, and railways. This proximity to key transportation networks can facilitate smoother and more cost-effective movement of goods in and out of the zone.
5. The Possibility of Lower Duties/Taxes.  The rate of duty and tax on the merchandise admitted to an FTZ may change as a result of operations conducted within the FTZ. Therefore, an FTZ user who plans to enter the merchandise into commerce from the FTZ may elect to pay either the duty rate applicable on the foreign material initially placed in the zone or the duty rate applicable to the finished article transferred from the zone, whichever is to the user’s advantage.
6. Managing a Duty to Export Goods. Merchandise imported under bond may be admitted to an FTZ to satisfy a legal requirement of exporting the merchandise. For instance, merchandise may be admitted into an FTZ to satisfy any exportation requirement of the Tariff Act of 1930 or an exportation requirement of any other Federal law (and many state laws) insofar as the agency charged with its enforcement deems it so.

Establishing or operating within an FTZ does involve certain costs.  However, the benefits of duty deferral, cost savings, streamlined customs procedures, inventory management, logistics, and customs compliance make an FTZ an attractive option for manufacturers and distributors engaged in international trade.

The Maynard Nexsen Government Solutions and Economic Development teams routinely assist companies in conducting cost-benefit calculations related to locating in FTZs and navigating state and local programs around the zones. Please let our team know if we can help you!