Foreign trade zone
A foreign-trade zone (FTZ) in the United States is a geographical area, in (or adjacent to) United States Ports of Entry Ports of Entry, where commercial merchandise, both domestic and foreign receives the same Customs treatment it would if it were outside the commerce of the United States. Merchandise of every description may be held in the Zone without being subject to Customs duties and other ad valorem taxes . This tariff and tax relief is designed to lower the costs of U.S.-based operations engaged in international trade and thereby create and retain the employment and capital investment opportunities that result from those operations. These special geographic areas – Foreign-Trade Zones – are established "in or adjacent to" U.S. Ports of Entry and are under the supervision of the U.S. Customs & Border Protection under the U.S. Homeland Security. Since 1986, U.S. Customs' oversight of FTZ operations has been conducted on an audit-inspection basis known as Compliance Reviews, whereby compliance is assured through audits and spot checks under a surety bond, rather than through on-site supervision by Customs personnel.[1]
Today there are over 230 Foreign-Trade Zone projects and nearly 400 Subzones in the United States.[2]
[edit] History
The U.S. Foreign-Trade Zones program was created by the Foreign-Trade Zones Act of 1934. The Foreign-Trade Zones Act was one of two key pieces of legislation passed in 1934 in an attempt to mitigate some of the destructive effects of the Smoot-Hawley Tariffs, which had been imposed in 1930. The Foreign-Trade Zones Act was created to "expedite and encourage foreign commerce" in the United States.
Through World War II, manufacturing activity was allowed only on a very limited basis. In 1950, the original act was amended to open up FTZs to manufacturing, but it had little impact until 1980. In that year, Congress again amended the act so that products manufactured in the zones would not be assessed on U.S. value-added. This ensured that the only tariffs a producer inside the zone selling to U.S. customers would pay, would be on the raw materials imported into the zone. This "integrated" model, which replaced the previous "island" model, spurred growth in the U.S. Foreign-Trade Zones program. [3]
[edit] References
- ^ Foreign Trade Zone Board
- ^ "History". Foreign Trade Zone Resource Center. Foreign Trade Zone Corporation. http://www.foreign-trade-zone.com/history.htm#. Retrieved 23 September 2011.
- ^ "History". Foreign Trade Zone Resource Center. Foreign Trade Zone Corporation. http://www.foreign-trade-zone.com/history.htm#. Retrieved 23 September 2011.
