HOMESTEAD FOREIGN TRADE ZONE (FTZ #166)
The Homestead Foreign Trade Zone (FTZ #166) is a General Purpose zone located in east Homestead. It is the southernmost free trade zone in the continental United States and provides a unique opportunity for Latin American operations. Comprised of approximately 1,000 acres, the FTZ encompasses the Homestead Park of Commerce, portions of the Homestead-Miami Speedway, the Homestead Baseball Complex and adjacent lands to the south. Vision Foreign Trade Zone, Inc. is the FTZ grantee. Latam FTZ serves as the “Operator” of FTZ #166.
The Homestead FTZ lies approximately one mile from the Florida’s Turnpike — which in turn provides access to Interstates 75 and 95. Miami International Airport is 30 miles to the north, while the Port of Miami is 35.5 miles away.
Present development activity is focused on the 280 acre Park of Commerce. This site features a state of the art spine road, utilities and a high-speed fiber optic network. The City of Homestead is currently building an electrical sub station in the Park, and the county is constructing a Fire-Rescue Station.
There is currently one active company located in the Park — Contender Boats (a manufacturer of high performance, recreational boats). Construction has begun on an office building for the federal Drug Enforcement Agency (DEA). Although there are no “Spec” buildings in place, the site provides a wide selection of “Build to Suit” opportunities. The former Silver Eagle Distributor building is currently vacant and the owner is looking for a potential tenant. It offers approximately 60,000 square feet of warehouse space on a ten acre site.
Miami-Dade County, the City of Homestead and five private firms own the remaining vacant land. One of those firms is discussing a project that would provide two 62,000 square feet warehouse buildings – one with dock height loading ramps, the other with street level access. This facility could be available as early as 2008. The City is negotiating with A & H Commerce Park LLC to sell a 100 acre parcel that represents most of its remaining interest in the Park of Commerce. Their proposed project would create 953,000 sq ft of industrial space and 550,000 sq ft of office/retail.
Adjacent to the southeast corner of the Park of Commerce, Anaga, Inc. has constructed a 25,000 square foot “Smart Park” office/warehouse complex within FTZ coverage on a 3.5 acre parcel. They are planning a 31,000 sq ft expansion.
The building hosts:
- Latam FTZ. The “Operator” of FTZ #166.
- NWD USA Inc., a manufacturer of automobile accessories.
As the grantee, Vision Foreign Trade Zone, Inc. also has the capability to create Sub Zones within South Miami-Dade County (generally, south of SW 152nd Street). Sub zones are special purpose Foreign Trade Zone sites created for use by one company and for a specified, limited purpose — usually for manufacturing or processing activities. They are typically located within or overlay the user’s facility. No retail activity is allowed within a designated sub-zone; however, borders can be drawn to segregate FTZ operations from other portions of the facility.
Sub Zones must meet the “Public Interest” test imposed on all FTZs. They are established as adjuncts to the nearest existing general-purpose zone, however they do not need to be adjacent to the existing General Purpose Zone. Sub Zones must receive the concurrence of the zone grantee. Typically, a sub zone can be approved if the company is unable to physically relocate existing facilities into the general-purpose zone site or if such a move would not be financially feasible..
WHAT IS A FOREIGN TRADE ZONE?
Foreign or “free” trade zones (FTZ) are federally designated secured areas that have the special legal status of being outside of a nation’s Customs territory. The purpose of the zones is to attract and promote international trade and commerce. Foreign trade zones are usually located in or near Customs’ ports of entry, industrial parks or terminal warehouse facilities.
A Foreign Trade Zone (FTZ) in the United States operates as a public utility according to a grant from the Foreign Trade Zones Board. FTZs are designed to increase the use of American labor and increase capital investment in the United States by allowing activity to occur in the United States prior to the application of U.S. customs laws. The intent is to equalize the customs treatment of the activity with similar activities occurring offshore or overseas.
Over the years, two types of Foreign Trade Zones have developed:
- General Purpose Zones: A general-purpose zone is a designated area established for multiple activities by multiple users.
- Sub Zones: A special purpose sub zone established for a limited purpose that cannot be accommodated within an existing general purpose zone. For example, sub zone status may be granted to existing manufacturing facilities. Sub zones must be sponsored by the grantee of an existing general purpose zone.
Foreign trade zones operate under the Foreign Trade Zone Act of 1934, which has been codified in the U.S. Code as Title 19, Sections 81a through 81u. The Foreign Trade Act is administered through two sets of regulations; the Foreign Trade Zone Regulations (15 CFR Part 400) and U.S. Customs and Border Protection Regulations. It is important to note that although FTZs are legally outside the Customs territory of the United States, other federal laws, such as the Federal Food, Drug, and Cosmetics Act are applied to products and establishments within such zones.
The zones provide sites where a broad range of commercial activities involving foreign and domestic merchandise — which otherwise might have occurred abroad for tariff or trade reasons — can take place. Within an FTZ, merchandise may be…
|Stored Inspected Sampled Tested Displayed Relabeled|
|Repackaged Distributed Repaired Mixed Cleaned Salvaged|
|Recycled Processed Assembled or Manufactured (requires special permission)|
without being subject to the United States customs laws governing the entry of goods or the payment of duties.
During Fiscal Year 2005, there were 158 authorized general-purpose U.S. Foreign Trade Zones in the United States. Similarly, there were 256 authorized and active sub zones. There were some 2,500 firms engaged in zone activities and nearly 340,000 people whose jobs were associated with zone activities. The combined value of shipments into U.S. foreign-trade zones totaled $410 billion in FY 2005 — a 34.4% increase over 2004. Approximately 83 percent of zone activity took place in sub-zones. Sixty-two percent of the goods entering zones are from the United States.
The FTZ program helps American companies improve their competitive position versus their counterparts abroad. FTZs will prove most useful to firms that:
- Import products and pay U.S. Customs duties
- Import large numbers of shipments – whether or not duties are paid
- Export domestic products on which federal excise taxes are paid
- Maintain large dollar value inventories subject to State and local ad valorem taxes
Impact on Duties: The FTZ program al0lows U.S.-based companies to defer, reduce or even eliminate Customs duties on products admitted to the zone.
1. Deferral of Duties: Customs duties are paid only when and if merchandise is transferred into U.S. Customs and Border Protection territory. This benefit equates to a cash flow savings that allows companies to keep critical funds accessible for their operating needs while the merchandise remains in the zone. There is no time limit on the length of time that merchandise can remain in a zone.
2. Reduction of Duties: In a FTZ, with the permission of the Foreign-Trade Zones Board, users are allowed to elect a zone status on merchandise admitted to the zone. This zone status determines the duty rate that will be applied to foreign merchandise if it is eventually entered into U.S. commerce from the FTZ. This process allows users to elect the lower duty rate of that applicable to either the foreign inputs or the finished product manufactured in the zone. If the rate on the foreign inputs admitted to the zone is higher that the rate applied to the finished product, the FTZ user may choose the finished product rate, thereby reducing the amount of duty owed.
3. Elimination of Duties: No duties are paid on merchandise exported from a FTZ. Therefore, duty is eliminated on foreign merchandise admitted to the zone but eventually exported from the FTZ. Generally, duties are also eliminated for merchandise that is scrapped, wasted, destroyed or consumed in a zone.
Direct Delivery. This procedure expedites the movement of cargo out of the Port into an FTZ, thereby supporting just-in-time inventory methodologies.
Elimination of Drawback: In some instances, duties previously paid on exported merchandise may be refunded through a process called drawback. The drawback law has become increasingly complex and expensive to administer. Through the use of a FTZ, the need for drawback may be eliminated allowing these funds to remain in the operating capital of the company.
Labor, Overhead and Profit: In calculating the dutiable value on foreign merchandise removed from a zone, zone users are authorized to exclude zone costs of processing or fabrication, general expenses and profit. Therefore, duties are not owed on labor, overhead and profit attributed to production in a FTZ.
Taxes:By federal statute, 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.
Quotas: U.S. quota restrictions do not apply to merchandise admitted to zones, although quotas will apply if and when the merchandise is subsequently entered into U.S. commerce. Merchandise subject to quota, with the permission of the Foreign-Trade Zones Board, may be substantially transformed in a FTZ to a non-quota article that may then be entered into U.S. Customs and Border Protection territory, free of quota restrictions. Quota merchandise may be stored in a FTZ so that when the quota opens, the merchandise may be immediately shipped into U.S. Customs and Border Protection territory.
Weekly Entry Economies: The savings are generated by reducing the Merchandise Processing Fees (MPF) paid to U.S. Customs. They can be significant for firms that process large number of entries. This fee is not a duty, but a non-refundable user fee assessed on each transaction and is designed to cover the administrative expenses incurred by Customs in processing formal entries for U.S. consumption. The fee is 0.21 percent of the value of the shipment – with a minimum charge of $25.00; a maximum fee of $485. The Weekly Entry program allows FTZ users to consolidate all shipments received in a week into a single report — with a single processing fee for the week.
Zone-to-Zone Transfers: An increasing number of firms are making use of the ability to transfer merchandise from one zone to another. Because the merchandise is transported in-bond, duty may be deferred until the product is removed from the final zone for entry into the U.S. Customs and Border Protection territory.
FTZ users also find that in meeting their FTZ responsibilities to the U.S. government, they may incur additional benefits
Best Business Practice: U.S. Customs and Border Protection has declared “…use of an FTZ to be a C-TPAT [Customs–Trade Partnership Against Terrorism] Supply Chain Security Best Practice”.
Improved Inventory Controls:Many companies in FTZs find that their inventory control systems run more efficiently, thus increasing their competitiveness.
Contrary to popular misconceptions, it is important to know that:
The program isn’t just for exporters. In fact, most financial savings associated with FTZs relate to importing.
Foreign and domestic merchandise do not have to be physically segregated and may be commingled or stored together by SKU within an FTZ.
There is no on-site presence by Customs in an FTZ, although the facility is subject to spot checks that generally occur once per year.
FTZ users are not audited more than importers at large. A company’s volume, value and nature of product dictates whether Customs performs an audit — not FTZ usage.
FTZ users do not have to report to Customs on a lot or specific identity basis. Other approved methods including FIFO make FTZ reporting flexible and workable without disrupting operations.
FTZ users are not required to have a greater reporting accuracy than importers overall. Overages and shortages as a normal part of business operations are acceptable and may be reported periodically based on established FTZ procedures.
Vision Foreign Trade Zone, Inc
Foreign Trade Zones Board
U.S. Department of Commerce,
1401 Constitution Ave., NW
Washington, DC 20230
Florida Export Finance Corporation
10400 N.W. 33rd Street, Suite 200
Miami, FL 33172-5902
Florida Free Trade Association
P.O. Box 267
Cape Canaveral, Florida 32920
3790 SE Alex Muxo Boulevard
Homestead Florida 33035
National Association of Foreign-Trade Zones (NAFTZ)
1000 Connecticut Avenue, NW
Washington, D.C. 20026