U.S. Foreign-Trade Zones Program Use Grows Among U.S. Based Manufacturing Operations

Growth in the use of the U.S. Foreign-Trade Zones Program continues, especially in the manufacturing sector. International trade agreements would seem to reduce the savings opportunities available through the FTZ Program, but savings such as relief from the "inverted tariff" relationships created by those agreements have actually encouraged businesses to use the program to reduce their Customs-related costs.

Mobile, AL (PRWEB) September 16, 2006 -- Greg Jones, Senior Consultant for the Foreign-Trade Zone Corporation (www.ftzcorp.com), discusses growth in use of the U.S. Foreign-Trade Zones (FTZ) Program among U.S.-based manufacturers in an upcoming article in Trade & Industry Development entitled “Making it in America: Use of the U.S. Foreign-Trade Zones Program Continues to Grow Among U.S. Based Manufacturing Operations.”

The 66th Annual Report of the Foreign-Trade Zones Board to the Congress of the United States shows continued growth in the use of the U.S. FTZ Program, especially in the manufacturing sector, with shipments received at General-Purpose Zones and Subzones increasing more than $50 billion last year to a total of more than $300 billion.

While the proliferation of free trade agreements would seem to reduce the costs of Customs duties that form the basis of Zone-related savings opportunities, today’s changing trade environment creates challenges that encourage the continued growth of the program.

The FTZ Program offers U.S.-based companies benefits that are not available under many of the foreign “Free Trade Zone” regimes. One key benefit of the U.S. Foreign-Trade Zones Program is relief from “inverted tariff” relationships. For example, the pre-Uruguay Round tariff rate on capacitors was 10%, while the tariff on etched capacitor foil used to produce capacitors was 5.3%. This encouraged U.S.-based manufacturers to manufacture capacitors on U.S. soil, using imported etched capacitor foil.

However, under the Information Technology Agreement (part of the Uruguay Round Tariff reductions), capacitors may be imported at the rate of “free,” while imported etched capacitor foil remains dutiable at a rate of 5.3%. The FTZ Program eliminates this disincentive to produce capacitors in the United States, allowing the effective duty rate on etched capacitor foil to be reduced to the rate of “free,” if it is used in the manufacture of a capacitor in a Foreign-Trade Zone.

Manufacturing operations use the FTZ Program to manufacture products as diverse as computers, video and telecommunications equipment, plastics, food products, power tools and lawn care products, industrial and agricultural equipment, large and small appliances, medical equipment, chemicals and petrochemicals, automobiles and auto parts, pharmaceuticals, ships, and sporting goods.

Greg Jones began working in the FTZ program in 1986, and has been an active member in the National Association of Foreign Trade Zones (NAFTZ) since 1987. He served as president of the NAFTZ from 1993 to 1995, and was designated as an Honorary Life Member in 2000. The Foreign-Trade Zone Corporation (www.ftzcorp.com) is a service provider offering FTZ cost-benefit analyses, FTZ Board applications, activation with Customs and Border Protection (CBP), training, assistance in designing, creating and managing Zone projects, and its SmartZone® Foreign-Trade Zone management software (www.ftzsoftware.com).

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