Foreign Trade Zone 286

The Foreign Trade Zone (FTZ) program was created by the Federal Government in the 1930’s, and continues to thrive today. The purpose of the FTZ program is to facilitate trade and increase the global competitiveness of U.S.-based companies.

Legally, a Foreign Trade Zone (FTZ) is an area within the United States that the Government considers outside the country, or at least, outside of the U.S. Customs territory. Certain types of merchandise can be imported into a Zone without going through formal Customs entry procedures or paying import duties.

Some of the benefits of operating within an FTZ are obvious. At the very least an FTZ can help a business defer paying duties. More often, the company pays lower costs, not only to U.S. Customs, but to its bank, insurance company, and other vendors.

Permitted Activities in a Foreign-Trade Zone
Assembling, Repackaging, Cleaning, Testing, Destroying,  Storing, Sampling, Mixing, Salvaging, Re-labeling, Manipulating, Processing, Manufacturing*

*The user must receive special approval from the FTZ Board for manufacturing

 Advantages of Using an FTZ
1. Imports may be admitted and held without paying U.S. Customs duties.
2. Users can pay the duty rate on component material or merchandise produced from component material, whichever is lower.
3. Customs duties are never paid on merchandise exported.
4. Duties are reduced or eliminated on materials subject to defect, damage, obsolescence, waste or scrap.
5. Merchandise may be exported or returned to an FTZ without duty payment.
6. Spare parts may be stored, returned, or destroyed without duty payment.
7. Delays in Customs clearances and duty drawback are eliminated.
8. Duties are not owed on labor, overhead, or profit attributed to FTZ production operations.
9. Quality control inspections can identify sub-standard goods to be destroyed or returned without duty
payment.
10. No duty is owed on in-bond, zone-to-zone transfer of FTZ merchandise.

FTZ #286 provides businesses with an opportunity to lower costs and boost profits through the following three duty savings benefits:

  • Reduce – In many cases duties are higher for parts than for finished products. Therefore, many companies enter a Foreign Trade Zone in order to import parts duty-free, assemble a product and then be required to only pay duty on the final product.
  • Eliminate – Customs duties are never paid on goods that are brought into a zone and then re-exported or scrapped. No formal entry with Customs is filed and the goods never enter the U.S. stream of commerce.
  • Defer – Since FTZs are outside the Customs territory of the U.S., goods are not considered to be imported until they leave the zone and enter the U.S. stream of commerce. This allows a company to defer Customs duties until merchandise leaves the zone, instead of having substantial monies tied up in inventory customs duties.

Other benefits that can be realized by using a Foreign Trade Zone include the following:

  • Weekly Entry – FTZ Weekly Entry procedures can help zone users save time and money. Under Weekly Entry procedures, the zone user files only one Customs Entry per week rather than filing one Customs Entry per shipment. Customs no longer has to process an entry for each and every shipment being imported into the zone, and the zone user no longer has to pay for processing each and every entry.
  • Logistical Flexibility – Goods may be transferred from U.S. ports of arrival directly to a Foreign Trade Zone or between zones duty free. Products made overseas may be brought into a zone for storage or consolidation with other products, allowing distribution of complete shipments to customers. This not only provides flexibility, but can improve supply chain velocity.
  • Supply Chain Security – FTZs can help a company achieve “best practices” when it comes to supply chain security.

General information about Foreign Trade Zones

Cost Savings Calculator

Foreign Trade Zone 286 Schedule

Magnet Site 2 Lyndon St J Industrial Park

Fabricated Metals & Machinery Industry

Biomedical/Biomechanical Industry Cluster

For additional information, please contact David Snedeker, Director of the Northern Vermont Development Association, at 748-8303 or dsnedeker@nvda.net.