The importation and exportation of goods is a lucrative business that comes with a number of challenges. Importers always have to grapple in choosing options that won’t jeopardize their businesses. They always look for alternatives that won’t require them to pay instant duty for storing goods. In this article, we'll analyze the differences between a foreign trade zone versus a customs bonded warehouse.
In the United States, there are two options for shippers to keep their goods and avoid paying customs duty immediately. They include customs bonded warehouses and the Foreign Trade Zone (FTZ). In this article, we’ll compare and contrast a foreign trade zone vs. a customs bonded warehouse.
Foreign Trade Zone
A foreign trade zone can be described as a protected area situated close to US ports of entry. Lawfully, FTZs are regarded to be without the customs territory of the United States for assessment of duty and entry. This basically means that the goods being assessed can either be domestic or foreign.
The major advantage of FTZ both to importers and 3PL companies is that these areas are exempted from import and export duty when the goods are received. Besides, manufacturing is also permitted within Free Trade Zones without payment of immediate taxes or duty.
Another reason why most companies prefer FTZ is that they are also able to repackage, store, or destroy their goods until they are able to ship out the goods or get them inside the US commerce territory. There is no limit in terms of the time one can store his or her goods.
Customs Bonded WarehousesSome companies or importers prefer storing their goods in bonded warehouses. Just like the Foreign Trade Zone, bonded warehouses are also under the protection and authority of the U.S. customs. All the goods are required to meet the US regulatory standards.
Services such as repackaging, sorting, or labeling may be done but strictly under the supervision of the U.S. customs officials. The other important thing to note custom bonded warehouses is that manufacturing or manipulation is prohibited.
Additionally, goods can only stay in bonded warehouses for a period not exceeding five years. Whereas importers may not be charged anything for the storage of goods, they are usually required to pay Harbor maintenance fee.
Differences between Bonded Warehouses and FTZsAlthough most of the services offered in a bonded warehouse are very similar to those provided in a Foreign Trade Zone, there are a few differences that can easily be spotted.
They include the following:
Foreign Trade Zone
- It is not considered to be within the customs territory
- There is no requirement for a bond for goods to be allowed in
- Both foreign and domestic goods can be stored
- Import duty is only required when the goods enter in the country for consumption
- Foreign goods are not subject to taxation
- Manufacturing of goods is allowed within the Foreign Trade Zone. Duty can only be paid for components that are imported
- The storage period is not limited
- Domestic goods can be admitted without a permit from the customs and mixed with foreign goods
- Movement of goods in and out of a Foreign Trade zone is somehow not restricted
Custom Bonded Warehouses
- A bonded warehouse is considered to be within the territory of the United States customs
- Custom bonds is a requirement for all goods getting into the warehouse
- Only foreign goods are allowed in bonded warehouses
- Duty must be paid before goods are released from a bonded warehouse
- All goods stored in a bonded warehouse are subject to taxation
- Manufacturing of goods is not permitted in bonded warehouses
- Goods cannot be store for more than five years in a customs bonded warehouse
- Goods may not be admitted without custom permit approval
- Movement of goods is limited
Contact Port City Logistics for Your FTZ Needs
Foreign trade zones are in use all over the world. As one of Savannah's top logistics companies, Port City Logistics leads the way for those who need top-tier customs bonded warehousing. Our experienced team will keep your goods safe, secure, and ready for transport. If you think you may need to learn more about foreign trade zones, please contact us today.