HOW TO OVERSEE FTZ OPERATIONS, MODULE 2

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Evolution of Global FTZ Programs and The Effect
of WTO Agreement On Subsidies and Countervailing
Measures on Central America and the Dominican
Republic
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Agenda

• Evolution of FTZ/In Bond Manufacturing Programs
• U.S. Foreign Trade Zone Program
• EU Processing Under Customs Control
• Mexico Transition IMEX, RFE
• Article 27.4 Central America-Dominican Republic
  Current State

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U.S. Foreign Trade Zone Model

• Program established in 1934
• 491 Billion Activity during FY2006
• 8.7 of U.S. Imports admitted into FTZs
• 256 authorized General Purpose FTZs
• 506 authorized Special Purpose FTZs
• Located in all 50 States and Puerto Rico
• Considered outside of U.S. Customs Territory for
  Customs Duty purposes

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U.S. Foreign Trade Zone Model(cont)

• Goods not considered entered until withdrawn
  from FTZ for U.S. consumption
• FTZ manufacturing/processing activity considered
  U.S. for determining Free Trade Agreement
  eligibility upon export from U.S. FTZ

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U.S. Foreign Trade Zone Model(cont)

• It is not an Export Performance program
• Less than 10 of FTZ manufactured items are
  directly exported
• Intention is to create or maintain U.S.
  manufacturing jobs (350,000)
• 61 of FTZ activity related to domestic inputs
• Import Distribution Operations fastest growing
  segment

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U.S. Foreign Trade Zone Model(cont)

• Principal advantages
• Duty reduction related to use of finished product
  duty rates for goods entered for U.S. consumption
  from FTZ
• Import Merchandise Processing Fee reduction
  related to use of Weekly Consumption Entry
  procedures
• Reduced import transit times associated with
  electronic admission process

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U.S. Foreign Trade Zone Model(cont)

• U.S. FTZ Program Success Enablers
• Weekly Entry authorization for distribution
  operations (2000)
• Elimination of quotas on apparel imports (2005)
• Fully electronic FTZ admission processing (2006)
• Availability of robust, scalable 3rd party FTZ
  software capable of processing high transaction
  volumes
• FTZs considered Secure Supply Chain Best
  Practice by Homeland Security

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EU Processing Under Customs Control (PCC)

• New EU in-bond import program
• Available to individual companies
• Approved by local country
• Principle benefits
• Duty savings related to use of finished product
  duty-free rates for goods entered for E.U.
  consumption
• VAT deferred until withdrawal from PCC

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Mexico Transition

• Maquiladora In bond manufacturing program has
  evolved into IMEX WTO SCM and NAFTA compliant
  program
• New RFE Free Zone law enacted that is WTO SCM
  compliant
• Currently 6 ZF locations have been authorized
• 1 currently active

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Article 27.4 Subsidy Elimination Timelines

• Prohibited export performance subsidies shall not
  apply to
• United Nations designated Least Developed
  countries
• Certain developing countries noted in SCMA Annex
  VII (including Guatemala and Nicaragua)
• Other developing country Members must phase out
  export performance subsidies by the year 2015.

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Article 27.4 CURRENT STATUS
Guatemala El Salvador Dominican Republic
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GUATEMALA

• 1. Declared 3 Incentive Programs to WTO
• FTZ Law, Decree No. 65-89
• Maquila Law, Decree No. 29-89
• EPZ Law, Decree No. 22-73 (ZOLIC)
• 2. New FTZ law introduced in Congress
• (Currently in the approval process)
• CZFA is working directly with the government to
  establish
• new reforms within the law that address
  2015 issues
• 3. Congress approved the new EPZ Law in January
  2008

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EL SALVADOR

• 1. Two very important laws
• FTZ Law 405
• Investment Law 732
• 2. The government currently has no interest in
  undertaking any work to revise the FTZ Law 405 at
  this time.
• 3. The congress approved the International Law
  for Services this year. The principal issue
  addressed is attraction of foreign investment in
  the BPOs sector (no WTO issues)

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• Dominican Republic (cont)
• Income tax will be phased in for FTZs at the
  following rates
• - 5 1st January 2025
• -10 1st January 2030

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Presented by Ray E. Shaw Managing
Member Aligned Border Solutions LLC 2129 El
Dorado Way Carrollton, Texas, USA
75006 ray.shaw_at_alignedborder.com 1.214.725.8945


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