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FTZ Frequently Asked Questions

What are foreign-trade zones?
FTZs are secure areas located in or near U.S. Customs' ports of entry, but are legally considered to be outside the Customs territory for the purpose of tariff laws and Customs entry procedures.

Why do foreign-trade zones exist?
FTZs were established under the Foreign-Trade Zones act of 1934 to create and maintain employment and investment in the US. In FY 2008, 2,509 firms were served by FTZs, 350,282 people were employed in FTZs across the country. In 2010 there were 8,681 people employed in South Carolina FTZs. The value of imports into SC FTZs was $ 6.21 billion.   The value of exports from SC FTZs was $6.13 billion, making South Carolina the largest non-oil exporter in the entire United States and Puerto Rico!

What are the types of foreign-trade zones?
There are two types of foreign-trade zones: general-purpose zones and subzones. General- purpose zones are usually an industrial park (magnet sites) with facilities that may be available for use by the general public. Subzones are single-purpose sites for operations that cannot be feasibly moved to or accommodated in a general-purpose zone. Usage-driven sites may be available to several users (a public warehouse) or a single user.

How long does it take to establish an FTZ site?
In general, since FTZ # 38 (Upstate South Carolina) is operated under the Alternative Site Management Framework (ASF) companies have a lot more flexibility in applying for FTZ status.  However, this time can vary depending on the circumstances for individual applications. You can eliminate approval time by locating in one of the existing FTZ magnet sites.  Since these sites are already approved, you would only need to apply for manufacturing authority (if needed).  If a company wishes to apply for FTZ status as a “usage driven site” the Grantee would submit a “Minor Boundary Modification” This application approval takes from 30-45 days for approval for General Purpose Zone status.   Once approved the company would be required to activate the site with the U.S. Customs Service upon the Ports Authority's consent.

FTZ # 21 (Coastal South Carolina) is operated under the “Traditional Site Framework” (an ASF reorganization application is pending submission).  The traditional site framework differs from the ASF since it requires “swapping” acreage from an existing site to create a new site.   You can eliminate approval time by locating in one of the existing FTZ # 21 sites.  Since these sites are already approved, you would only need to apply for manufacturing authority (if needed).  If a company wishes to apply for FTZ status as a “usage driven site” the Grantee would submit a “Minor Boundary Modification”.  This application approval takes from 45-60 days for approval for General Purpose Zone status.   Once approved the company would be required to activate the site with the U.S. Customs Service upon the Ports Authority's consent.

Where are the existing FTZ sites located?  
The SC State Ports Authority is the Grantee in charge of administering the FTZ program for FTZ # 38 in the upstate.  There are sites located throughout the upstate. The Ports Authority has tried to have a variety of parks ranging in acreage and classifications that will appeal to many different companies. The location and a description of each is available at the FTZ page http://www.scspa.com/charleston/inland/ftzs/ftz.asp

How do FTZs differ from other programs administered by Customs? With FTZs, there is generally no time restraints on merchandise remaining in a zone, unlike other similar programs (bonded warehouses, drawback, and temporary importing under bond) administered by Customs. Domestic and foreign goods may be admitted to a zone without being subject to Customs' duties or certain excise taxes. Goods may be exported from a zone free of duty and tax. For more information on bonded warehouses, drawback, or temporary importation bonds contact your local US Customs Service Port Director. Information on FTZs can be obtained by contacting the Ports Authority.

How can my company benefit from locating in an FTZ?
There are many potential benefits to locating in a FTZ. Before a company invests too much time and money on FTZ status, it should conduct a FTZ savings analysis to determine a value of what may be saved. The purpose of the savings analysis is to make sure the benefits received are greater than the expenses. Some companies can benefit from FTZ status, others will not. When doing a savings analysis, companies should compare the savings that would be received by using other Customs programs like bonded warehouses, drawback, and temporary importation under bond to the FTZ savings to see which option is most favorable. A FTZ user should annually conduct a FTZ savings analysis to see if the company is still benefiting from using FTZ status.

What are some of the costs involved with operating an FTZ?
Please contact the Ports Authority for the current Grantee Fee Schedule and some potential costs that a company may incur by establishing or operating a FTZ.

What can be done to merchandise in an FTZ?
Merchandise admitted into a FTZ may be manufactured, processed, stored, exhibited, repacked, assembled, distributed, sorted, graded, cleaned, tested, labeled, repaired and/or mixed with foreign or domestic merchandise. Merchandise may be manufactured or processed while in the zone, substantially lowering the duties paid on merchandise that is entered into the Customs territory. All manufacturing or processing must have prior approval of the Foreign-Trade Zones Board, a division of the U.S. Department of Commerce.

Will I eventually pay duty on foreign merchandise in an FTZ?
FTZs are part of a duty deferral program. Generally, payment of duties and excise taxes on foreign merchandise admitted to a zone will be deferred until the goods are transferred from the zone to the Customs territory for consumption. Merchandise may be permanently stored, destroyed, or exported, eliminating the need to pay duties and excise taxes in most cases.

Will I have to pay duty on the value added in an FTZ?
No, a company is only responsible for paying duties on the foreign content that is entered into US Customs territory. Domestic content for materials, labor, overhead, profit, etc. is not subject to duties.

Does using an FTZ add administrative work?
It is reasonable to expect additional administrative responsibilities will occur as a result of using a FTZ. However, you may be able to simplify the administrative burden by having a good FTZ inventory system. By visiting the US Customs Service's FTZ Homepage, you can get an idea of the additional recordkeeping and procedure requirements that are necessary.

How can I get more information on FTZs in South Carolina?
You may contact the Ports Authority for information on establishing, maintaining and operating FTZs. To contact the Suzan Carroll-Ramsey, Foreign-Trade Zones # 21 and # 38 Manager, directly, please call (843)577-8144 or e-mail to:  scarroll-ramsey@scspa.com.