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Manufacturing in an FTZ
Donnie Bailey Barnes
Vice President
Barnes Consulting, LLC
Topics for Discussion
• General
• Receiving
• Processing
• Shipping
• Other considerations
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First FTZ job
• 26 years ago
• Columbia Metropolitan Airport, Columbia, SC
• Mama’s comment
• Jobs
• Questions received
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1
Pineapple in FTZ
• US Product?!!
• Can material from JP
• “one‐time‐use” packaging value becomes part of product value
• No duty on US product
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Application vs Activation
• Application = building permit – FTZB
• Activation = occupancy permit – CBP– Turn lights on and off as needed
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Manufacturing in FTZ
• First allowed in 1950
• Not much growth– US Customs “Service” thought should collect duties on “zone value”
• NAFTZ worked to define “dutiable value”– Approved in 1980
– Then manufacturing zone growth
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Manufacturing in FTZ
• 1970 – 10 GPZ
• 1976 – FTZ 21 approved in Charleston, SC
• 1986 – 127 approved in Columbia
• 2011 – 277 GPZs and 677 SZ
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Free‐Trade Agreements
• FTZ still “under Customs’ control”
• Goods still qualify under FTA
• MX/EU FTA
• NAFTA into Canada
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Importers also export (some through JAXPort)• Foreign = 10 billion
• Domestic = 10 billion
• LOP = 10 billion
• 70% exported
• Only $3.3 billion of foreign actually goes into US
• And $12.6 billion domestic value added to the export
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• 6.3 exported
• 6.3 billion exported
• 6.3 billion exported
Suppliers in FTZ
• Your place or mine?
• BMW 38A
• Benteler 38F
• Faurecia 38D
• Production equipment
• Tires
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Receiving
But first, CBP Form 216
• Blanket, covers up to full year
• Must be approved and returned by CBP before you can do anything more than receive, store, ship
• Should reflect what’s approved in FTZ grant
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Direct delivery
• Reason enough for manufacturer to be in FTZ ‐ keeps freight moving
• Inspections, if there are inspections, usually occur at FTZ
• Goods arrive, received into inventory, taken straight to line, used in manufacturing, shipped
• CBP informed of receipt following business day
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Cumulative e214
• All shipments for day reported on one e214
• If not using e214, separate CBP Form 214 for each shipment
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First Inventory
• It’s already here!– Existing inventory
– Domestic status
– Duty “holiday” while domestic status depleted
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Status of receipts
• Domestic– From the US– From other countries when duty/fees/ taxes to US have been paid
• Same parts, different status– From FTA country (PF)– From other than FTZ country (NPF)– Already had US duty/fees paid– From bonded warehouse, ZR
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Positive inventory adjustments
• Find 110 when records show 100 –what to do?
• Assume inventory correct until last receipt– Use value, country of origin, etc. of last receipt
• Include on e214 (or CBP Form 214)
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Returns
• Admit into FTZ
• Returns from abroad admitted in foreign status
• Returns from US admitted in domestic status
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Zone‐to‐zone receipts
• Reported on e214 as zone‐to‐zone so no reporting goes to Census
• Status designated by sending zone must be used by receiving zone– PF must stay PF
– NPF can be changed upon okay from CBP
– ZR must stay ZR and must be stored, exported or destroyed
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Hand‐carried receipts
• NO . . . NO . . . NO
• But if they don’t listen . . .– Tell them to carry pro‐forma invoice along with the parts
– Tell them to declare to US CBP upon arrival in the US
– Worst that can happen – pay duty (maybe 10%) and report on expense report
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Processing
Temporary removals
• Why? Rework, repair, testing, . . .
• Requested on CBP Form 216
• When CBP approves, goods can be removed from FTZ– No in‐bond documents required
• When task has been accomplished, goods are returned (1 for 1)
• CBP notified of return on same 216
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TIB cancellation
• Time up for the temporary import
• Not ready to send out of country
• Don’t want to destroy
• Admission to FTZ in zone‐restricted status is the same as export
• TIB can be cancelled by CBP
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“Made” parts
• Usually found when one part is received and inventory level keeps increasing
• Using a part that was never received
• Example:– Receive a roll of tubing (PN 123)
– Cut into 2” length of tubing (PN 456)
• Must be reflected in inventory records
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Shipments
Weekly entry
• Weekly entry for import into US
• Weekly transportation for exports
• Weekly zone‐to‐zone transfers
• Estimates before week begins
• Reconciliation of actual shipments at end of week
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“Normal” imports and exports
• In manufacturing operation, automated to extent possible
• Volume is usually only stressor
• Processes in place and well known
• Problems arise when– New carrier
– New broker
– CBP changes
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Sampling
• Usually for testing in small quantities
• Show clearly in inventory records
• If remaining in FTZ, simply decrement inventory
• If removing from FTZ (including hand‐carried shipment), include on entry and pay duty
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Scrap and waste, recycling
• Scrap is scrap!
• No duty on scrap and waste
• If recycled, must be included on entry– Use value received from recycler
– Scrap duty rate is “Free”
• Must have letter from recycler on file
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Negative adjustments
• Find 90 when records show 100 –what to do?
• Treat as a shipment– Decrement FIFO
• Include on entry
• IF 10% of receipts of that good AND$100 or more in duty owed, formal notification to CBP of discrepancy
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Returns to suppliers
• Domestic into US, just send it back
• Foreign into US, include on entry– Or send in‐bond if to another FTZ
• Domestic for export, follow all export rules
• Foreign for export, send in‐bond to port of export, follow all export rules
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Zone‐to‐zone shipments
• Estimate at beginning of week to CBP
• Ship during week – Use CBP Form 7512 if going to a different port
– Use “local control” agreed to by CBP if transferring in same port
• PTT, blanket PTT
• Identifying number for shipment
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Other considerations
Drawback
• “WAIT!,” you say. “Drawback not needed if operating in an FTZ!!”
• But being in FTZ does not preclude using drawback program
• Musical instrument example
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Supplier drawback
• Supplier imports and makes a part sent to another FTZ
• Part used in manufacturing goods for export
• Only exporter can file for drawback but import info required
• Partnership with supplier on data• Use of 3rd party drawback broker for confidentiality
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Fat‐finger Freddie
• One at every place where inventory is maintained
• How do you correct errors?
• Consider all information and handle in best possible way
• Errors are all different!!
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Recordkeeping
• Keep everything!
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Establish reputation with CBP
• Cooperative, law‐abiding, “good” company and people
• Training records, etc.
• Join in other CBP programs –CTPAT, ISA, etc.
• CBP better understands your business
• If problem does arise, CBP more understanding
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Questions?
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Barnes Consulting, LLCwww.BarnesConsultingLLC.com864‐979‐6000