New London's Foreign Trade Zone

Foreign or Free trade zones are secured areas legally outside a nation’s custom’s territory. Their purpose is to attract and promote international trade and commerce. Zones are operated as public utilities by states, political subdivisions, or corporations chartered for this purpose.

Foreign exporters planning to expand or open up new American outlets may forward their goods to a foreign-trade zone in the United States to be held for an unlimited period while awaiting a favorable market in the United States or nearby countries without being subject to customs entry, payment of duty or tax, or bond.

Merchandise lawfully brought into these zones may be stored, sold, exhibited, broken up, repacked, assembled, distributed, sorted, graded, cleaned, mixed with foreign or domestic merchandise, or otherwise manipulated or be manufactured. The resulting merchandise may thereafter be either directly exported or transferred into U.S. customs territory. If entered for consumption, duties and taxes will be assessed on the entered articles according to the condition of the foreign merchandise at the time of entry into the zone.

An important feature of foreign-trade zones for foreign merchants entering the American market is that the goods may be brought to the threshold of the market, making immediate delivery certain, and avoiding possible cancellation of orders due to shipping delays after a favorable market has closed.

Savings

Savings may result from manipulation and manufacture in a zone which can be directly exported in its manipulated state or imported directly to the U.S. Custom territory. Additionally, savings in shipping charges, duties, and taxes may result from such operations as shipping unassembled or dissembled furniture, machinery, etc., to the zone and assembling or reassembling from there.

A manufacturer can sometimes take special advantage of an FTZ to reduce tariff exposure. If the manufacturer is producing a final product which, if imported, would be subject to a lower duty rate than the rate(s) currently being paid on the imported components, then the imported-component rates can be reduced to the final product rate upon making entry of the final product from Zone into the U.S. If other components are assessed rates lower than that of the final product, the importer has the option of fixing those rates at their lower levels.

If a distribution facility is importing in large quantities, holding inventory for long periods of time, or is facing high duty rates, by using a Zone that facility can improve its cash-flow and money management by deferring payment of duties until the time they are removed from the Zone – much closer to the time of actual sale.

Subzones

A subzone is a special purpose site for operations such as manufacturing which cannot be accommodated within an existing Zone. THIS IS AN EXTREMELY IMPORTANT FACT FOR BUYERS AND SELLERS OF REAL ESTATE, SINCE ANY GIVEN PROPERTY CAN BE DESIGNATED A FOREIGN TRADE ZONE.

Please contact Ken Bondi for an explanation of subzones and for information regarding available properties in the foreign trade zone.