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Southeastern Wisconsin Foreign-Trade Zone No. 41

Southeastern Wisconsin Foreign-Trade Zone No. 41.

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Southeastern Wisconsin Foreign-Trade Zone No. 41

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  1. Southeastern Wisconsin Foreign-Trade Zone No. 41 “The history of Milwaukee is closely tied to the development of trade and the development of the trade gateways in and out of our city. By using the cost advantages of a Foreign Trade Zone, companies are able to operate on a more level playing field with international competitors and increase the profitability of local operations.” -Tom Barrett, Mayor, City of Milwaukee

  2. What is a Foreign Trade Zone? The U.S. Foreign Trade Zone (FTZ) Program is based on federal legislation dating back to 1934 intended to foster economic development through international trade. An FTZ is an area within the United States, in or near a U.S. Customs port of entry, where foreign and domestic merchandise is considered to be outside the country, or at least, outside of U.S. Customs territory. Certain types of merchandise can be imported into a Zone without going through formal Customs entry procedures or paying import duties. Customs duties and excise taxes are due only at the time of transfer from the FTZ for U.S. consumption. If the merchandise is re-exported and never enters the U.S. commerce then no duties or taxes are paid on those items.

  3. Establishment of FTZs • Foreign-trade zones are established: • To encourage and expedite U.S. participation in international trade • To encourage capital investment in the U.S. rather than abroad and secures American jobs. • The benefit occurs only if the activity takes place in the U.S. • Through tax savings, allows US companies to remain competitive with their global counterparts.

  4. Recent Changes in FTZs Alternative Site Framework (ASF) • FTZ Board strategy adopted in 2009 to streamline the Grantee’s ability to bring FTZ benefits and competitiveness to companies. • Streamlined access to FTZ designation • Simplified Minor Boundary Modification for new uses (within 60 miles or a 90 minute drive from the Customs Port of Entry)

  5. Where is FTZ No. 41? • 12 Included counties: • Dodge • Fond du Lac • Jefferson • Kenosha • Milwaukee • Ozaukee • Racine • Rock • Sheboygan • Washington • Walworth • Waukesha

  6. FTZ Board United States Customs Grantee (Port of Milwaukee) Operator (Typically a business) User (Operator or contracted 3rd party) Who is Involved? • Creates regulations, issues grants of authority and is responsible for FTZ zone approvals • Oversees the zone as FTZ Board’s representative, approves activation, ensures compliance with regulations • Recipient of grant of authority, public representative of the zone project, and submits applications to FTZ Board • Operates under contractual terms with the Grantee, and is responsible for zone operation with concurrence of U.S. Customs • Entity using zone under agreement with Grantee or Operator (the User can be the same as the Operator)

  7. What can you do in a Foreign-Trade Zone? Merchandise entering a Foreign Trade Zone may be: • Assembled • Tested • Sampled • Relabeled • Manufactured* • Stored • Salvaged • Processed* • Repackaged • Sorted • Mixed • Manipulated *The user must receive special approval from the FTZ Board for manufacturing and certain types of processing.

  8. Potential FTZ Company Benefits(Tariff and Duty Savings): • Immediate Inventory Duty Deferral: Cash flow benefit from “immediately” deferring the payment of duty for one inventory turn of merchandise in the FTZ. • Ongoing Duty Deferral: Enhanced cash flow benefit by having merchandise admitted to the FTZ but having the assessment and collection of duties/fees when the merchandise is shipped from the FTZ into domestic commerce. • Tariff Inversion: Importers have the option to declare to CBP the duty rate for finished goods shipped from the FTZ or the duty rate for the imported parts (in their condition as imported) used in the production of finished goods, whichever is lower.

  9. Potential FTZ Company Benefits(Duty Exemptions): • Duty Exemption on FTZ to FTZ Transfers: Dutiable goods shipped from one FTZ to another FTZ in bonded, foreign status do not enter commerce, and are not dutiable. • Duty Exemption on Exported Merchandise: Imported goods that are re-exported are not subject to duties. • Duty Exemption on Scrapped Merchandise: Imported goods that are destroyed in the FTZ are not subject to duties.

  10. Primary Financial Savings • Inverted Duty –6.8%→0%, 5%→2.5%. • Cash Flow • Exports • Zone-to-Zone Transfers • Direct Delivery • U.S. Labor / Overhead / Profit • Scrap / Waste / Obsolete Material • Weekly Entry – Merchandise Processing Fee Savings – Customs Brokerage Expense Savings – Paperwork Reduction • Tax Savings – “Bona Fide” Customs Reasons

  11. Is an FTZ Right for Your Company?Operationally, the FTZ must make sense for your unique operating environment. • Indicators of an FTZ opportunity • High volume of entries into the US • Large customs duty payments • History of shipment delays (supply chain issues, OGA clearance, exams) • Already have Secure Facilities and Compliant Operations • Planned expansion of facility or increase of manufacturing • Feasibility Study • Calculate the benefits • Duty Deferral, Duty Elimination, Inverted Tariff, Direct Delivery, Merchandise Processing Fee savings, Customs Broker Fee savings, etc. • Consider the costs • FTZ Board Fees, Operator’s Bond Fee, Grantee Fees, Training, Security, Software, etc. • Determine if the cost-benefit analysis predicts enough of a savings to make an FTZ a worthwhile enhancement to your business There are FTZ consultants who can provide a more comprehensive analysis while you are evaluating your potential FTZ participation

  12. Why would a community want an FTZ? • Foreign-Trade Zone Program benefits only companies with established presence in US • Companies invest in facilities adding to property tax rolls • Companies employ individuals from local communities surrounding the zone • Provides financial benefits to existing or new business without any local funding • Secures existing jobs

  13. “The Ripple Effect” • With increased employment, additional support services are required • Second tier vendors may locate in the area to provide direct services to the company or may increase production • Retail trade establishments gain from increased sales leading to increased revenue for the community from sales tax

  14. Southeastern Wisconsin Foreign-Trade Zone No. 41 2323 S. Lincoln Memorial Drive Milwaukee, Wisconsin 53207, USA Contact Us: Betty Nowak Phone: 414-286-8131 Marketing Manager Email: bnowak@milwaukee.gov Nick Grahovac Phone: 414-286-8133 Trade Development Representative Email: ngraho@milwaukee.gov www.milwaukee.gov/port

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