Foreign Trade Zone - Free Trade Zone Winnipeg

CentrePort Canada is the only inland port in Canada offering business single-window access to Foreign Trade Zone benefits. FTZ programs can be advantageous in helping companies manage imported inventories by offering immediate cash-flow benefits. FTZ programs include: Duty deferral – duties are waived up front or rebated later. Sales tax relief – exemption from federal and provincial sales taxes. Customs bonded warehouse – sales tax and duty-free storage/distribution facilities.

Foreign trade zones (FTZ) or export processing zones (EPZ) are designated regions within a country where trade barriers such as tariffs are reduced or eliminated, and bureaucratic requirements are lowered for the purpose of attracting foreign investments and international business. Canada’s foreign trade zone will allow companies to defer duty and GST payments on imported goods that are not sold into the domestic market, but are instead warehoused or distributed at a later date to the international market as part of a value-added product or a non-processed product.  A letter to the Canadian Government  from the Canadian Airport Council, Canadian Manufacturers & Exporters and Canadian Chamber of Commerce. Read PDF

What is a Foreign Trade Zone?

Foreign Trade Zones (FTZs) were created in the United States to provide special customs procedures to U.S. plants engaged in international trade-related activities. Duty-free treatment is accorded items that are processed in FTZs and then reexported, and duty payment is deferred on items until they are brought out of the FTZ for sale in the U.S. market. This helps to offset customs advantages available to overseas producers who compete with domestic industry. The Foreign-Trade Zones (FTZ) Board (composed of representatives from the U.S. Departments of Commerce and Treasury) has its operational staff in the International Trade Administration's Import Administration.

Considerations for Using a Foreign Trade Zone
Imported merchandise is to be stored for an uncertain or prolonged period of time, destined for various locations and may be exhibited for potential buyers:
• Cash flow and interest expense savings.

• Sufficient quantity of merchandise available for market and potential buyers to examine in U.S.

• Current examples in zones include autos, electronic products, plastic bags, semi-precious stones, aircraft engines, trucks, wall covering material, heavy machinery, food additives, Christmas tree lights, motorcycles and related parts, etc.
Imported merchandise is subject to a U.S. Quota restriction:
• Many U.S. quota restrictions do not apply to merchandise entered into a zone though quotas do apply to merchandise leaving a zone to enter U.S. Customs territory.

• Parts subject to a quota may be manipulated or processed in such a manner as to create a product not subject to a quota.

• Special regulations on textiles, apparel, and steel.

• Examples in zones include electronics.
Imported merchandise is to be inspected, repaired, destroyed, repackaged and marked or relabeled before entering the U.S. marker:
• Inspection, repair or destruction of merchandise prior to payment of customs duty.

• Repackaging from heavy ocean master cartons into attractive, smaller, lighter weight packaging specially designed for the U.S. marketplace and creates substantial transportation savings.

• Marking and labeling requirements vary for each country and change frequently. Errors in invoicing are not unusual. Care can be taken to insure importation of properly marked, labeled, and invoiced merchandise.

• Examples in zones include electronic components, dinnerware and glassware, miscellaneous consumer goods, automotive parts, furniture, cosmetics, watches and apparel.
Assembly, manipulation, processing or manufacturing of a product using imported and domestic parts:
• Unique advantage of choosing classification of parts or finished product for Customs duty purposes.

• Customs duty paid only on value of foreign non-duty paid components.

• Potential qualifications for ‘Assembled’ or ‘Made’ in USA label.

• Examples in zones include pharmaceuticals, oil refining, automobiles, etc.

How can companies benefit from using FTZs?

FTZs are considered to be outside of U.S. Customs Territory for the purpose of customs duty payment. Therefore, goods entering FTZs are not subject to customs tariffs until the goods leave the zone and are formally entered into U.S. Customs Territory. Merchandise that is shipped to foreign countries from FTZs is exempt from duty payments. This provision is especially useful to firms that import components in order to manufacture finished products for export.
There is no time limit on goods stored inside a FTZ and certain foreign and domestic merchandise held in FTZs may be exempted from state and local inventory taxes. This allows firms to minimize their costs while their products are waiting to be shipped. In addition, quota restrictions are in some cases waived for items entering an FTZ; however, the restrictions would apply if the items were to enter the U.S. market.
A variety of activities can be conducted in a zone, including assembling, packaging, destroying, storing, cleaning, exhibiting, re-packing, distributing, sorting, grading, testing, labeling, repairing, combining with foreign or domestic content, or processing. Manufacturing and processing require specific FTZ Board approval, however.

Cash Flow
Merchandise may be held in a Foreign Trade Zone without customs duty payment. Customs duties are paid only when merchandise is withdrawn from the FTZ, resulting in cash conservation.

Duty Reduction
Goods imported and stored in a Foreign Trade Zone may be re-exported without incurring customs duties. Time consuming and expensive duty drawback filings are avoided. Customers pay the rate on either component material or finished material, whichever is lower. Products can be assembled or manufactured duty-free.

Inventory Tax Exemption
By federal statute, tangible personal property imported from outside the U.S. and held in our FTZ is not subject to state and local ad valorem taxes. State and county tax authorities exempt all merchandise in a FTZ from inventory taxation.

FTZ Glossary