Foreign Trade Zone

1
Foreign Trade Zone Uses and Benefits
2
FTZ Regulations

• U.S. Foreign Trade Zones Act of 1934
• (19 USC 81a-u)
• Foreign Trade Zones Board Regulations
• (15 CFR Part 400)
• U.S. Customs Service Regulations
• (19 CFR Part 146)

3
Zone Terminology

• General Purpose Zone
• A site or facility that provides multiple users
• Public warehouse
• Industrial park
• Port complex
• Subzone (Special purpose zone)
• Single-purpose, single user site
• Typically manufacturing or large distribution
  operation

4
Zone Terminology

• Grantee
• Serves as public representative of the zone
  project
• Public or private entity (port authorities,
  city/county, economic developers)
• Submit applications for zone modifications, site
  approvals and manufacturing authority

5
Zone Terminology

• Operator
• Provide day-to-day oversight of zone site
  activities which include receipt, storage and
  shipping of merchandise, recordkeeping, and
  periodic reporting
• Responsible for Customs compliance within the
  zone site

6
FTZ 122

• Established in September 1985
• Grantee Port of Corpus Christi
• First continental zone with refinery subzones

7
FTZ 122

• 19 approved sites (2 inactive 1 pending Customs
  activation)
• 5 General purpose sites within FTZ 122
• All Port property and facilities are included in
  the boundaries of the general purpose area
• 4 other site locations within Corpus Christi
• 14 Subzones within FTZ 122

8
FTZ 122 Operators

• Valero Refining Corpus Christi location
• Diamond Shamrock Three Rivers location
• Citgo Refining
• Flint Hills Resources
• Equistar Chemicals
• BTB Refining
• Sherwin Alumina
• TOR Minerals
• International Resistive Company (IRC)
• Port of Corpus Christi

• Kiewit Offshore Services
• Gulf Marine Fabricators
• Bay Ltd.
• Baker Hughes Drilling Fluids
• Halliburton Energy Services
• Excalibar Minerals
• Gavilon Fertilizer
• Ray West Warehouses
• CC Distributors

9
Example of Zone Use and Benefit

• Production of resistor components used in
  automobiles
• Platinum coated lead wire imported from Japan
  10 duty rate
• Resistor produced is duty free
• Inverted tariff benefit
• Company able to manufacture, test, package and
  warehouse the resistors

10
Example of Zone Use and Benefit

• Petroleum
• Feedstocks imported for refining
• Various petroleum products produced
• Inverted tariff
• Duty deferral
• Duty eliminated on products exported
• Direct delivery
• Weekly entries reduce administrative fees (broker
  and merchandise processing fees)

11
Example of Zone Use and Benefit

• Barite
• Raw barite duty rate is 1.25/ton
• Product is processed into ground barite which is
  duty free
• Demand for barite continues to increase with
  drilling associated with Eagle Ford Shale
  projects
• 24 hour operation creates additional jobs

12
Example of Zone Use and Benefits

• Rig fabrication
• Offshore oil and gas platforms
• Platform structures are transported to various
  areas all over the world
• Deferral of duties benefit in cash flow since
  construction time period is typically 2 years
• Duty elimination for projects that are exported
• Duty reduced on scrap material

13
Basic Financial Benefits

• Duty deferral
• Duty reduction (inverted tariff)
• Streamlined entry procedures
• Direct delivery
• Weekly entries
• Duty reduction on scrap/waste
• Reduction in merchandise processing and brokerage
  fees
• Exemption from ad valorem taxes

14
Additional Financial Benefits

• Improved Customs compliance
• Lower security and insurance costs
• Shorter transit time using direct delivery
• No time constraints on storage
• Improved inventory control
• Customs interaction

15
Customs Interaction with FTZ 122

• Quarterly meetings with Customs and Operators
• Customs is available for discussions with
  Operators
• Opportunity for Customs Operators to share
  issues they may have encountered
• Continuous learning opportunities
• Develop and maintain good working relationships

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