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Georgia Foreign-Trade Zone, Inc. Media Kit Georgia Foreign-Trade Zone, Inc. 2014 Media Kit Georgia Foreign-Trade Zone, Inc. Media Kit About Us WHAT The Georgia Foreign-Trade Zone (GFTZ) establishes and maintains federally approved Foreign-Trade Zones (FTZs) in Georgia; enabling companies to save money on imported merchandise by diminishing import duties, as well as streamline formal customs entry procedures. WHY FTZs facilitate trade and increase the global competitiveness of companies doing business in Georgia by reducing operating costs associated with international trade. HOW GFTZ WORKS GFTZ provides foreign-trade zone incentives to companies and facilitates the application process and program involvement. This non-profit organization offers technical assistance and support with federal authorities. APPROVED ACTIVITIES Foreign and domestic merchandise can include raw materials, components and finished goods. Merchandise admitted into an FTZ may be: Stored indefinitely Assembled Manufactured* Repackaged Sampled Relabeled Salvaged Destroyed Tested Manipulated Processed Repaired Displayed Distributed *Approval Required BENEFITS TO USERS Businesses lower costs by deferring or reducing customs duties on imported goods. Other advantages may include distribution savings, streamlined processing of goods and elimination of quota restrictions. As a result, Georgia companies are better able to compete with foreign manufacturers. BENEFITS TO COMMUNITY GFTZ stimulates economic growth and development through retention and creation of jobs, as well as an expanded tax base. The program nurtures a positive business environment by removing trade barriers and providing incentives for existing and prospective companies to establish or expand operations in Georgia. Georgia Foreign-Trade Zone, Inc. GFTZ ADVANTAGES Media Kit GFTZ participants enjoy advantages inherent to the metro Atlanta market, including: • 80% of the U.S. population is within a 2-hour flight of HartsfieldJackson Atlanta International Airport • Excellent interstate access • Lower labor costs • The significant size of the U.S. Customs Service in Atlanta streamlines activities once a company establishes FTZ operations. ESTABLISHED GFTZ received its grant of authority from the U.S. Foreign-Trade Zones Board, Department of Commerce, in 1977. CONTACT Georgia Foreign-Trade Zone, Inc. 270 Peachtree Street, NW, Suite 2200 Atlanta, Georgia 30303 404-223-2297 www.georgiaftz.com Georgia Foreign-Trade Zone, Inc. Media Kit FTZ Program Frequently Asked Questions 1. What is a foreign-trade zone? A federally approved site treated as being outside the territory of U.S. Customs and Border Protection (CBP) for the purposes of the tariff laws and CBP entry procedures. Therefore, foreign and domestic merchandise may be admitted to a FTZ for operations such as storage, exhibition, assembly, manufacture and processing, without being subject to formal U.S. CBP entry procedures, the payment of duties or the payment of federal excise taxes. When merchandise is removed from a FTZ, duties may be eliminated if the goods are then exported from the United States. If the merchandise is formally entered into U.S. commerce, duties and excise taxes are due at the time of removal from the FTZ, often at a lower rate. 2. What are free zones, export processing zones & enterprise zones? Free zones allow merchandise to enter an area for storage and be exported or entered into the host country. Export processing zones (EPZs) are duty-free zones dedicated to manufacturing for export. No duties are charged for entry of raw materials, components, machinery, equipment, and supplies used to produce manufactured goods provided these are then exported. Enterprise zones encourage new industrial and commercial activity in economically depressed areas by removing most zoning, taxation, and federal and local business regulations from carefully defined districts. 3. What savings/benefits does a foreign-trade zone offer? Improved Cash Flow: Payment of U.S. Customs duties is deferred until the goods are removed from the zone for entry into the commerce of the U.S. Reduction in Duties: If the duty rate on imported goods used in the production of a finished product is higher than the duty rate of the finished product, then the lower rate is applied to the imported merchandise. The “inverted tariff” benefit results in lower duty payments to U.S. Customs. For example, if an imported part used in the production of a finished product has a duty rate of 6%, but the duty rate on the same finished product is only 3%, then FTZ procedures allow the imported part to be classified at 3%. The U.S. government allows the reduction in duty because it levels the playing field for U.S. manufacturers competing internationally. Georgia Foreign-Trade Zone, Inc. Media Kit Elimination of Duties: No duties are paid on merchandise exported from a FTZ. This includes the elimination of duty on imported finished products or imported materials used in the production of a finished product that is exported from the FTZ. Faster, Streamlined Movement of Goods & Lower Processing Fess: Many FTZ users are eligible to take advantage of special Customs procedures such as direct delivery and weekly entry. These procedures expedite the movement of cargo, thereby supporting just-in-time inventory methodologies. The weekly entry benefit might also result in reduced Merchandise Processing Fees (MPF) and brokerage fees. 3. How many foreign-trade zones are in Georgia? The 3 international ports of entry in Georgia each have FTZ projects associated with them: (Atlanta, Savannah, Brunswick) Within these zone projects, there are multiple zone sites including industrial parks and individual companies with FTZ status. 4. How does a company obtain foreign-trade zone status? Applications for FTZ designation are submitted to the Foreign-Trade Zones Board, U.S. Department of Commerce. Depending on the type of application, processing and approval time is from 1 to 6 months on average. 5. Are any items restricted from entering an FTZ? Any item that can be legally imported into the United States is eligible for FTZ status. Goods cannot be admitted into an FTZ as a way to circumvent trade laws. Products related to sensitive US industries such as textiles and agriculture have some restrictions. 6. Where can I find duty rates for specific products? Duty rates are listed by product and country of origin in the U.S. Customs Tariff Schedule available online at www.customs.ustreas.gov. Because product categories are very specific, a licensed customs broker should be contacted for assistance. Georgia Foreign-Trade Zone, Inc. Media Kit 20 Ways the FTZ Program Can Save Your Company Time and Money 1. Duty Deferral: Imports may enter the FTZ and be held in inventory indefinitely without payment of Customs duty. 2. Re-exports: Customs duties are not paid on merchandise exported from the FTZ 3. Defects, Damage, Waste, Scrap: Customs duties are reduced or eliminated on merchandise subject to defect, damage, obsolescence, waste and scrap in the FTZ. 4. Inverted Customs Duty Savings: FTZ occupants may elect to pay the duty rate on component material or merchandise produced from the component materialwhichever is lower. 5. Labor, Overhead and Profit Not Dutiable: Customs duties are not owed on labor, overhead and profit attributed to FTZ production operations. 6. U.S. Quotas: Most merchandise may be held in a FTZ until quotas open. 7. International Returns: Duties are not paid on merchandise that is repaired in a zone and re-exported. 8. Quicker Delivery: Delays in Customs clearances and duty drawback procedures are eliminated. Delivery times are reduced by direct shipments to the FTZ. 9. Quality Control: The FTZ may be used for quality control inspections to ensure that only products that meet specifications are imported. Sub-standard goods can be destroyed or returned before duty is paid. 10. Country of Origin Marking and Labeling: No country-of-origin labels are required on merchandise admitted to the FTZ. If needed, the labels can be applied in the FTZ. 11. Cargo Insurance: Reduction in cargo insurance is possible because imported merchandise is shipped directly to the FTZ, avoiding potential pilferage at ports. 12. Reduction of Merchandise Processing Fee (MPF): The importer may file one estimated entry per week reducing the MPF. 13. Inventory Control: FTZ operations require careful accounting on receipt, processing and shipment of merchandise, improving overall systems. Georgia Foreign-Trade Zone, Inc. Media Kit 14. Consumed Merchandise: Merchandise consumed in processing in the FTZ is generally not subject to duties. 15. Inventory Taxes: Tangible personal property imported from outside the U.S. and held in a zone, as well as that produced in the U.S. and held in a zone for exportation, are not subject to State and local ad valorem taxes. 16. Exhibition: Merchandise and machinery may be held for exhibition or displayed in a FTZ without duty payments. 17. Reduced Insurance Costs: Insurance costs may be reduced due to increased security and a lower insurable value (duty does not need to be included in figuring rate.) 18. Zone-to-Zone Transfer: Merchandise may be transferred in-bond from one zone to another. 19. Transfer of Title: Title to merchandise may be transferred in the FTZ, as long as there is not “retail” sale. The global supplier can own it until it is shipped just-intime to local manufacturers. 20. Foreign Production Machinery: Duty may be deferred on foreign production equipment imported into a designated zone area for plant construction until equipment is assembled, installed, tested, and used in production for which it was admitted to zone. Georgia Foreign-Trade Zone, Inc. Media Kit Industry Case Studies Case studies reprinted with the permission of the National Association of Foreign Trade Zones. Manufacturing Vehicles in an FTZ By Donnie Barnes BMW Manufacturing Co., LLC Manufacturing vehicles in a foreign-trade zone is the same as manufacturing vehicles anywhere– but with some very distinct advantages. I state this to emphasize that a company does not have to radically change the way it does business in order to use an FTZ. Direct delivery is reason enough for a company operating under a just-in-time inventory basis to be in an FTZ. If a shipment arrives at midnight and is needed on the assembly line, that shipment can be received into the inventory control system, taken straight to the line for use, and then be reported to Customs and Border Protection the next day. The cost of a line-down situation far exceeds any duty savings to be realized. If the company exports, manufacturing in an FTZ can put the company in a much better cash flow situation. Instead of paying duty on imported parts, going through the manufacturing process, exporting the vehicles, gathering documentation, and waiting for CBP to refund the duties paid under its drawback program, the vehicle manufacturer simply never pays the duty on the parts that are used in the exported vehicles. Remember that only 99 percent of the duty paid is eligible for drawback. The merchandise processing fee is not eligible for drawback. And, if the manufacturer has not yet localized the purchase of parts subject to anti-dumping duties, it should remember that those “penalty” duties are also not eligible for drawback. Additionally, most drawback recipients use a specialized drawback broker to file the claims – which can cost 10 to 25 percent of the refund. As much as a vehicle manufacturer hates to admit it, scrap is one of the products of the manufacturing process. Duty is never paid on the scrapped material. The ability to file a weekly entry allows the vehicle manufacturer to reduce brokerage fees and merchandise processing fees. This is in addition to the administrative efficiencies that allow shipping to occur 24 hours per day – even when Customs is not available. The security requirements for an FTZ closely mirror the C-TPAT security requirements. This should facilitate the vehicle manufacturer’s C-TPAT validation so that it can enjoy additional benefits – such as qualification to participate in the Importer Self-Assessment program. The reasons go on and on . . . but the information contained in this short article should encourage non-zone companies to investigate the use of an FTZ! Ms. Barnes is the Customs Manager for BMW Manufacturing Co. and Rolls-Royce Motor Cars NA. She is also a past president of the National Association of Foreign-Trade Zones. Georgia Foreign-Trade Zone, Inc. Media Kit Industry Case Study FTZs are Valued as Vehicle Processing Centers By David Ostheimer, Lamb & Lerch A number of motor vehicle importers have their Vehicle Processing Centers (VPC) located within General Purpose FTZ sites. The FTZ designation for the VPC provides the motor vehicle importer with two major benefits. The primary benefit is duty deferral -- the postponement of the payment of customs duties until the motor vehicle has been processed and been shipped from the VPC to the dealer. This can generate substantial savings particularly when inventory levels rise. For example, an imported motor vehicle with a dutiable value of $20,000 is subject to a payment of $500 in customs duties (2.5% X $20,000). Utilizing a 7.5% rate of return on the company’s money, each day the motor vehicle remains within the FTZ results in a savings $.10 per vehicle ($500 X 7.5% ÷ 365). The greater the number of vehicles that are processed through the VPC and the longer the vehicles remain in inventory, the greater the FTZ savings. A second major benefit is the potential reduction in the dutiable value of the imported vehicle. At the VPC the imported motor vehicle is oft times accessorized with either domestic status or foreign status components. For example, an AM/FM radio may be installed at the VPC located within a FTZ. If the AM/FM radio is a U.S. produced radio, the cost of the radio is not added to the value of the imported vehicle when entered into the customs territory, thereby resulting in a lower dutiable value for the motor vehicle. Parts Distribution Centers A number of motor vehicle parts importers have been studying and some have estab- lished their Parts Distribution Centers (PDC) within General Purpose FTZ sites. Due to extended warranties, motor vehicle companies must maintain a large inventory of parts within the United States for a lengthy period of time, which makes the FTZ program extremely attractive from a duty deferral perspective. In addition, a large number of the imported parts become obsolete and have to be destroyed. By obtaining FTZ designation on their PDCs, the motor vehicle companies are able to avoid the payment of customs duties on those parts that become obsolete and are destroyed. From a logistics perspective, FTZ utilization provides the benefits of direct delivery and the consolidation of import paperwork. Through direct delivery, the parts are moved directly to the PDC from the port of unloading with much of the in-bond paperwork now being handled electronically. This results in an expedited movement of the parts to the PDC. Utilization of a cumulative C.F. 214 enables a company to file a single admission document for all parts received on a given day rather than filing multiple customs entries covering each shipment. This results in substantially less paperwork for both Customs and the company and reduces the company’s costs with regard to brokerage fees and merchandise processing fee. There may be additional benefits that a PDC can realize through FTZ designation. If the PDC serves as a North American distribution center and services Canadian or Mexican dealerships, no customs duties will ever be paid on those components that are shipped from the PDC to Mexico or Canada. Furthermore, if the PDC is located in a state in which state or local ad valorem taxes are imposed on inventory, the FTZ will provide additional tax savings. Georgia Foreign-Trade Zone, Inc. Media Kit How the FTZ Program Can Improve Logistics By Curtis Spencer IMS Worldwide, Inc. Congress passed the Trade and Development Act of 2000, which included a provision authorizing the foreign-trade zone industry to utilize weekly entry processing for entries of goods coming out of a foreigntrade zone warehouse or distribution centers in addition to previously authorized manufacturing operations. The growth in General Purpose Foreign-Trade Zones (those that are not specifically established for a single company, usually involved in manufacturing) has risen dramatically since then, driven in large part by the growth in trans-Pacific imports from Asia. Dozens of new, import gateway-driven sites have been added to the foreign-trade zone program nationwide, including industrial parks owned and developed by the nation’s largest real estate developers. Developers of big-box industrial parks, including ProLogis, IDI, Centerpoint Properties, AMB Properties, Duke, Keystone, Opus and DP Partners, whose properties house the nation’s largest import distribution centers, are establishing FTZ sites at gateway locations where they can be fed by the trans-Pacific logistics system. The demand by retail and consumer goods importers for FTZ space is at an all-time high. In the greater Los Angeles area, where five different General Purpose Zones have been established, the growth rate in new general purpose FTZ sites and active operations has been in double digits. Other areas that are seeing significant growth in GPFTZ operations include Houston, Atlanta, central Pennsylvania, Chicago (near the major intermodal ramps), Dallas and New York-New Jersey. The growth is not just in niche-specific FTZ subzones as was the case in the 1980s and 1990s. Instead, it’s in new, large-sized distribution centers for the import distribution of finished goods. Leading retail and consumer goods importers are realizing that use of an FTZ for trans-Pacific and other imports is a functional and viable strategy to cut logistics and import-processing costs from the supply chain. The addition of the weekly entry process means that the importers are allowed to consolidate entries into a single Customs entry filing of one per week, 52 per year. For a large importer that has multiple entries per day, going to a one-a-week process provides a direct financial benefit. A recent Journal of Commerce Trans-Pacific Maritime Conference illustrated the case of Huffy Bicycles. The firm’s import manager, Pat Volkman, said recently, “We have continued to see a marked improvement in our supply chain velocity while saving substantially with the weekly entry program. Make no mistake, it does require constant vigilance, but what is there about the program after 9-11 that doesn’t anymore?” Importers of electronics, footwear, high-end consumer goods and apparel, are becoming increasingly interested in the opportunities afforded by FTZs. “If we can keep earning our clients the additional profits that this cost-cutting allows, our customers are going to be thrilled with the development of our revitalized FTZ program,” said Ted Henderson, vice president of customs compliance for EGL Global Logistics. “We have found quite an audience willing to listen as we have begun to roll out our ‘newgeneration’ FTZ program. Once they Georgia Foreign-Trade Zone, Inc. understand that their cost-cutting affects their brokerage and supply chain logistics expenses and does not delay the process, they are eager to become involved.” EGL, Exel, NYK Line, Nippon Express and other international 3PLs have added the FTZ program to their menu of services. How does the FTZ program fit into the new 24-Hour Rule and the Customs-Trade Partnership Against Terrorism? Ever since the 1930s, when the foreign-trade zone program was first created in the U.S., operators of FTZs have been required to provide more security than other importers. Since an FTZ is a “secure Custom’s controlled facility” by definition, enhanced physical, procedural and personnel security has been the norm, indeed a requirement to become activated. U.S. Customs and Border Protection has made it clear to the FTZ industry that security is imperative. In fact CBP C-TPAT Program executives note that receiving and admitting imported merchandise into a FTZ is considered a CTPAT “Best Practice”. In addition, the recent automation of the FTZ admission process brings FTZ’s into a fully automated import supply chain environment. Because an FTZ operates “in-between” the normal flow of importing, from the first point of contact with the U.S. to distribution points in between, FTZ operations have historically been advised in advance of incoming shipments so that paperwork (now almost fully electronic) could be managed properly. The extension of advanced manifest rules modeled on the original 24-hour rule for ocean imports to all modes have dovetailed with FTZ operations. Most FTZ inventory management systems are geared to accept web-based and EDI information in advance of shipments so that proper notifications can be made to bring the freight into the zones. Media Kit The 24-hour rule, for the most part, will not impact a FTZ distribution center any more than it does a sophisticated and fully integrated supply-chain importer today. When it comes to exporting from an FTZ (which will be impacted by the 24-hour rule for exporting, coming into play sometime in the near future), advanced notification is required anyway, as the zone operator must prepare all export documents in advance. No delay should occur to a zone operator in implementing the export 24-hour rule at all. The opportunity for lowering costs of importer processing through utilization of the automated admission process and weekly entry, is only available within a FTZ environment. Third-party logistics providers are adding it to their service mix because it is being demanded by more importers. Real estate developers are making sure their industrial parks at import gateway locations are included into foreign-trade zone programs. As the use of FTZs for import distribution becomes more common, Customs should start to reap some of the processing benefits associated with automated admission and weekly entries while experiencing a sense of confidence that such supply chains have the layered security of both C-TPAT and FTZ fully employed. Lastly, by bringing additional value to the international supply chain here in the U.S., we all benefit by keeping logistic jobs in our own country rather than having them migrate to our neighbors. Curtis Spencer is president of IMS Worldwide, Inc., an international trade advisory firm. He is a member of the best practices committee of the Container Working Group, and is subcomittee chair of the COAC Technology Task Force. Georgia Foreign-Trade Zone, Inc. Media Kit GFTZ Leadership BETTY McINTOSH, CHAIR Betty McIntosh serves as the Chairman of the Board of the Georgia Foreign-Trade Zones and as Managing Director of Business Incentive Practice, Global Business Consulting at Cushman & Wakefield. Betty has represented clients in telecom, consumer markets, industrial products, soft-ware related businesses, and financial services on incentive matters. She has conducted site location analyses for numerous industries and has also been involved with projects for various economic development organizations related to investment attraction. Betty obtained her BBA in Accounting from the University of Mississippi (cum laude) and her Masters in Taxation from the University of Memphis. She is a CPA. Betty is nationally recognized as an expert on economic development issues and frequently lectures to economic development organizations across the country. JULIE BROWN, PRESIDENT and CEO Julie Brown is President & CEO of Georgia Foreign-Trade Zone, Inc., a private, non-profit organization formed by business and government leaders in 1976 to promote, support and stimulate economic growth for the State of Georgia. Georgia Foreign-Trade Zone is the Grantee of Foreign-Trade Zone (FTZ) #26 and is based in Atlanta, GA, home of the world’s most-traveled airport, and ranked 3rd in the nation for FORTUNE 500 companies and Global 500 headquarters. In 2013, companies within FTZ #26 received nearly $4.5 billion worth of merchandise, and exported more than $1 billion. Employment in FTZ #26 sites topped 5,600 in 2013, representing a 35% increase since 2011. Ms. Brown serves on the board of directors and as an officer for the National Association of Foreign-Trade Zones. She also serves as a founding member, and one of only two from the U.S., on the board of directors for the World Free Zones Organization, formed in 2014 to promote and improve free zone operations around the world. Prior to joining Georgia Foreign-Trade Zone, Ms. Brown helped lead marketing and economic development initiatives in the Atlanta area through positions with the Atlanta Committee for the Olympic Games, the Atlanta Regional Commission and The Ritz-Carlton Hotel Company. Ms. Brown is a native of Atlanta and a graduate of the University of Georgia. Georgia Foreign-Trade Zone, Inc. 2014 Board of Directors Betty McIntosh, Chair Managing Director, Business Incentive Practice, Global Business Consulting Cushman & Wakefield Jose Ignacio Gonzalez, Immediate Past Chair President MAPA Group Brian McGowan, Vice Chair Executive Vice President & COO Metro Atlanta Chamber of Commerce John “Trip” Martin, Treasurer Partner Georgia Link Public Affairs Group Patrick J. “Pat” Topping, CEcD, Secretary Senior Vice President Macon Economic Development Commission Joseph R. “Joe” Bankoff Chair, Sam Nunn School of International Affairs Georgia Institute of Technology Richard Sargent President & CEO Peach State Labs Charlie Gatlin Senior Projects Consultant Georgia Department of Economic Development David Luckie Executive Director Griffin-Spalding Development Authority Cliff Pyron Chief Commercial Officer Georgia Ports Authority Media Kit