- THE MAGAZINE
U.S. Foreign-Trade Zones are an often overlooked option for companies that are importing for manufacturing purposes in the US. As more companies try to gain that “Made in the USA” competitive edge, they have to make sure they are being cost-effective and efficient.
There is no better way to do both than to participate in a U.S. Foreign-Trade Zone (FTZ).
FTZs provide countless benefits for the company and the community, including improved inventory management, reduction and elimination of duties or fees, potential tax reductions, improved cash flow and increased visibility of supply chain.
An added bonus benefit to FTZ participation is reduction in Merchandise Processing Fees, or MPF. This savings can be calculated by looking at the number of entries filed annually before an FTZ at $485 each, and then filing only weekly (52) once participating in an FTZ.
But how can you determine the return-on-investment (ROI) of participating in a zone? First, you will need to know the following information:
- Annual inventory value
- Percentage of inventory that is exports
- Average inventory turns per year
- Average duty per unit
- Interest rate
- Yearly business growth
And, if you are a manufacturer, you will need to add in duty rate of the component and the duty rate of the finished good. Once you have all these numbers you can calculate your total zone savings for years 1 through 3. Click here for an easy to use the FTZ ROI Calculator. All you need is the information noted above, and the website will do the calculations for you.