Should I Work With a Third-Party Logistics Provider Offering Foreign Trade Zone Services?
As products continue to be sourced globally, companies that import goods are always looking for ways to make their supply chains more efficient. Working with a 3PL partner who also offers foreign trade zones (FTZs) can provide big benefits in the right scenarios.
Q: What is an FTZ?
A: An FTZ is a designated area, supervised by U.S. Customs and Border Protection, where goods, despite having already arrived in the United States, are still considered as being located on foreign soil. FTZs enable companies to defer duty and taxes on those goods until they are either sold into U.S. commerce or moved out of the FTZ.
Q: When does it make sense to move product through an FTZ?
A: Here are a handful of scenarios where using a 3PL provider who operates an FTZ makes good business sense.
- When moving temperature-controlled product. The risk of temperature-sensitive product sitting at a non-temperature controlled port is eliminated, as product does not need to wait for customs clearance.
- New product launch. When products are pending FDA approval or have an upcoming product launch date, moving them to an FTZ allows companies to locate their product closer to the customer, thereby increasing speed to market.
- High import volume on high-duty product. Companies that import multiple containers per week of high-duty goods realize cost savings in Merchandise Processing Fees (MPFs) alone when using their 3PL’s FTZ. In an FTZ environment, MPFs are required weekly, rather than per container, so processing fees are significantly lowered.
- Non-consumed goods. Goods that are not consumed may sit in an FTZ and be sent back to their country of origin without a company ever paying duty on them because they never entered U.S. commerce.
- Zone-to-zone transfers. For companies that transfer goods between FTZs in the United States, Canada and Mexico, goods can move duty-free from zone to zone until the goods are consumed or-re-exported.
Q: What are the benefits?
A: Working with a 3PL that operates an FTZ offers customers the opportunity to realize both cost and time savings. From an economic perspective, companies using an FTZ not only realize a reduction in MPFs, and duty and tax deferment, they are also able to take advantage of an already established FTZ. Doing so reduces the costs associated with becoming an FTZ and the additional personnel required to oversee FTZ management and filings.
From a time-saving perspective, companies using a 3PL FTZ are able to capitalize on speed to market and mitigate risk for temperature-controlled product. In the case of new product launches, this can mean the difference between moving from second to first to market.
Also read: e-Commerce Fulfillment and Omni-Channel Logistics.