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"The FTZ is an integral part of Palmdale's economic development efforts. The potential for duty savings, state Enterprise Zone tax credits, local incentives, and a highly skilled and available workforce create an ideal environment for business relocation and expansion."
Danny R. Roberts
Assistant Executive Director
Palmdale Community Redevelopment Agency
FTZ Duty Deferral Savings Example
Importers may realize an improved cash flow while providing faster response to customers' needs by warehousing goods in Palmdale's FTZ prior to paying duties. Duty owed on goods may be deferred indefinitely until the product leaves the FTZ for U.S. consumption. If the product is exported from the FTZ no duty is owed to U.S. Customs.
| Article Description: | Toaster | |
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| Annual Dollar Volume: | $ | 10,000,000 |
| Duty Rate: | 5% | |
| Annual Duty Liability: | $ | 500,000 |
| Cost of Money (estimate): | 10% | |
| Annual Savings if Article does not enter US: | $ | 50,000 |
| /365 days per year: | $ | 137 |
| Average number of days article remains in inventory: | 90 | |
| FTZ Savings on article through duty deferral: | $ | 12,330 |
FTZ Duty Elimination Savings Example
Manufacturers may realize significant savings on imported component parts, which are destined for foreign markets. An example of the FTZ Duty Elimination Savings is the importation of speakers and headsets, which, when combined with other imported and U.S. component parts, will be manufactured into a computer and trans-shipped to foreign markets.
| Article Description: | Speakers and headsets | |
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| Annual Dollar Volume: | $ | 5,000,000 |
| Duty Rate: | 4.9% | |
| Annual Duty Liability: | $ | 245,000 |
| Duty Rate of Computers | 0.0% | |
| FTZ Savings on imported component parts through duty elimination: | $ | 245,000 |
FTZ Duty Reduction Savings Example
Importers may manufacture or process imported products within the FTZ and choose to pay the duty rate for either the component parts or the finished goods, whichever is less.
An example of the Duty Reduction Savings is the importation of a foreign automobile, which has a duty rate of 2.5 percent. Unfinished automobiles are imported into FTZs where final assembly occurs, including the addition of such items as glass mirrors, air conditioners, radios and bumpers.
| Article Description: | Glass mirrors, including rear view mirrors | |
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| Annual Dollar Volume: | $ | 1,000,000 |
| Duty Rate: | 7.8% | |
| Annual Duty Liability: | $ | 78,000 |
| Annual Duty Liability if claimed as a Finished Good (automobile) (2.5%): | $ | 25,000 |
| FTZ Savings on item through duty reduction: | $ | 53,000 |
FTZ Savings on Defective Goods, Damaged Goods, and Waste
Duties may be avoided on defective or damaged goods by inspecting and testing imported goods within a FTZ.
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| Total dutiable imported goods: | $ | 10,000,000 |
| Percentage of defective merchandise: | 5% | |
| Value of dutiable goods that became defective, etc. | $ | 500,000 |
| Average duty rate: | 5% | |
| Annual Savings (estimated): | $ | 25,000 |
Spare Parts
In order to service many products, spare parts must be kept on hand in the United States for prompt shipment. However, it is impossible for most firms to know the requirements for spare parts, especially with new products. Spare parts may be held in the FTZ without U.S. Customs duty payment, thereby generating cash flow savings. Obsolete parts may be destroyed without duty payment.
Quota Restrictions Avoidance
Imported quota merchandise may be warehoused in a FTZ duty free until the next quota period opens.
Temporary Removal
Imported goods may be removed from the FTZ for 120 days while under bond for exhibition or repair.
Weekly Entry Savings
Importers of high volume and high value merchandise may consolidate their Customs entries in a Zone to one per week, thereby allowing for a significant amount of savings in the Merchandise Processing Fee (MPF), Customs House Brokerage fees and significantly reduced paperwork burden.
| Example of Weekly Entry Savings: | ||
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| 250 Entries per year at $485 MPF for each (not utilizing FTZ): | $ | 121,250 |
| 52 entries per year at $485 MPF for each (using FTZ): | $ | 25,220 |
| Annual FTZ weekly entry savings: | $ | 96,030 |
Reducing Inventory Taxes
Goods imported and warehoused in the FTZ and tangible personal property produced in the U.S. and held in the Zone for exportation are not subject to state and local value-added taxes. Most state and county tax authorities exempt all merchandise in an FTZ from inventory taxation.
For more information on the Foreign-Trade Zone, please contact City's economic development department at 661/267-5125.
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