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Activation is Customs official authorization for a designated zone operator to operate the zone. Activation allows the zone user, under the supervision of a zone operator to bring merchandise into the foreign trade zone (FTZ) without the payment of duty, store it and if authorized, manufacture it, and then transfer it either into the commerce of the U.S., to another FTZ or to export it. For a zone site to become activated, the following requirements must be met:
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A foreign-trade zone (FTZ) is a physical location that has been designated by the FTZ Board as an area where a user can gain access to the benefits of the FTZ Program. The foreign-trade zone site while located within the United States is considered outside the Customs Territory of the U.S. It is the distinction of being considered outside the Customs Territory of the U.S. that affords the opportunity for FTZ benefits.
Merchandise located in a FTZ is still considered to be part of international commerce. It is only once the merchandise leaves the FTZ (either in the same condition as imported or further manufactured), that normal tariff and Customs regulations pertaining to the entry of goods are applied.
Congress under the Foreign Trade Zone (FTZ) Act of 1934 established the Foreign-Trade Zone Program. Its purpose is to “expedite and encourage foreign commerce” with the intent to stimulate international trade while creating jobs and investment in the United States. It is a trade program, overseen by the Foreign-Trade Zone Board which is comprised of the Secretary of Commerce and the Secretary of the Treasury.
The FTZ Program is administered by the Executive Secretary and his staff who ensure that the designation of foreign-trade zone sites (both multi user and for individual companies) and their use is consistent with U.S. trade policy and provides a positive net benefit to the U.S. in terms of economic development. In essence, approval for participation in the Foreign-Trade Zone Program affords the user an exemption to the tariff schedule of the Unites States, allowing the deferral, reduction or elimination of duties paid on imported materials and goods in exchange for sustained or increased jobs and investment in the U.S. This in turn provides a benefit to the U.S. in terms of increased economic activity in the U.S. that might otherwise move offshore.
General Purpose Zones are multi user sites that can store any type of merchandise allowed to be imported into the U.S. They are most often warehouses, industrial parks with multiple tenants or acreage associated with either an ocean or air port. Multiple general purpose zone sites may exist within a foreign-trade zone project. In Orange County, there are seven different general purpose zone sites including acreage associated with the Stewart Airport and Port Newburgh as well as other sites located around Orange, Dutchess and Rockland Counties.
Companies who are not manufacturing imported materials into a different article of commerce and who are willing to locate their operations in any of these sites can gain relatively quick access to Foreign Trade Zones (FTZ) benefits by gaining the approval of the Bureau of Customs and Border Protection through the activation process.
A subzone is a single user foreign-trade zone site which is authorized for the sole use of a specific company. Merchandise that can be processed through the subzone is limited in scope and is specifically approved by the Foreign-Trade Zone Board. Generally, a subzone designation is sought by a private company who cannot relocate their operations into an area designated as a general purpose zone site. The Orange County FTZ has two sites designated as subzones. However, neither is currently active.
There are several basic questions that need to be answered before use of the foreign-trade zone program is even considered. They are:
If the answer to any of the above questions is yes, use of the foreign-trade zone program may provide a benefit to the company.