Leveraging FTZs and Customs Bonded Warehousing
NXTPoint Logistics provides companies with the opportunity to more cost-effectively manage their international shipments to reduce some of the cost and complexity of today’s rapidly shifting supply chain requirements.
NXTPoint offers foreign trade zone (FTZ) and customs bonded warehousing space in multiple locations to provide companies with flexibility to navigate many of these challenges while streamlining their operations. By combining FTZs and customs bonded warehousing, NXTPoint defers duties, streamlines customs, stabilizes costs, moves inventory without long-term commitments and supports fast e-commerce shipping. We operate activated FTZ capacity and customs bonded spaces with strict controls and Tier-1 WMS visibility. Some of our other offerings include:
- 320,000 sq. ft. of activated FTZ capacity
- Customs-bonded warehousing (multiple classes)
- Duty deferral until domestic entry or re-export
- Weekly entry and shipment consolidation to reduce Merchandise Processing Fees (MPFs)
- Light assembly, kitting and postponement (offered for many items, as eligible)
- Avoid state and local inventory taxes on foreign and domestic goods stored in an FTZ for export
- Inventory visibility via Tier-1 WMS
- Partnerships with zone administrators and CBP
- Scalable import/export programs aligned to your supply chain needs and financial objectives
- Inventory management and visibility technology for end-to-end supply chain support
Reach out to our team of experts today to assess your organization’s eligibility for FTZ or bonded warehousing space and determine if these solutions could be right for you.
What Is a Foreign Trade Zone?
The Benefits of FTZs and Customs Bonded Warehousing
FTZs — sometimes referred to as free trade zones — are designated areas within existing warehouse spaces that are often located near ports of entry for U.S. Customs and Border Protection but are exempt from their oversight, processes, procedures and associated duties. When a company elects to store their goods or materials in an FTZ, they are still subject to the laws and regulations of the U.S. and the states where they are located, but duties are not required to be paid on the goods until they leave the warehouse for distribution to the end customer. Furthermore, if the goods are re-exported internationally, they remain exempt from U.S. customs duties and tariffs and can avoid them altogether.
FTZs Fall Into Two Categories
FTZs — sometimes referred to as free trade zones — are designated areas within existing warehouse spaces that are often located near ports of entry for U.S. Customs and Border Protection but are exempt from their oversight, processes, procedures and associated duties. When a company elects to store their goods or materials in an FTZ, they are still subject to the laws and regulations of the U.S. and the states where they are located, but duties are not required to be paid on the goods until they leave the warehouse for distribution to the end customer. Furthermore, if the goods are re-exported internationally, they remain exempt from U.S. customs duties and tariffs and can avoid them altogether.
General Purpose
These FTZs can be utilized by many different types of companies and for a number of reasons in line with trade warehouse services.. While generally located at ports or industrial parks, they can be used by multiple companies at the same time and are ideal for business that require warehousing, distribution or low-level manufacturing or assembly. General-purpose FTZs allow companies to avoid or defer duty payments on goods while they are stored, handled or processed.
Special Purpose
Commonly referred to as subzones, special-purpose FTZs tend to be designated for companies with unique operational requirements that are not able to be accommodated by general-purpose FTZs. These zones must be built, maintained and secured by the companies that utilize them, making them more suitable for larger manufacturers, oil refineries or distributors.
Benefits of Using FTZs
FTZs can be used by companies of all sizes to gain better financial and operational control of their supply chains. The primary benefits include:
- Duties are not required to be paid on re-exported items: For goods that are stored in an FTZ but will ultimately be re-exported to another country, companies are not required to pay U.S. customs duties or tariffs.
- Deferred payments: For products or materials that are stored in an FTZ, duties are not required to be paid until they leave the FTZ to be distributed for commerce, allowing companies to have some degree of flexibility around cash flow, which can be beneficial for financial planning purposes and allow companies to frontload and store items for distribution later rather than having to pay the tariffs upfront.
- Tariff exemptions: For any goods that become damaged or destroyed while they are stored in an FTZ, duties are no longer required to be paid. This can be particularly beneficial for companies that transport fragile goods.
- Streamlined processes and shipment consolidation: When companies consolidate multiple shipments, it can significantly reduce the amount of paperwork and fees that may be required as opposed to having to process each shipment individually.
- Reduced merchandise processing fees: Companies that utilize FTZs are able to create a single customs entry per week rather than having to file a separate entry for each individual shipment. This results in reduced administrative costs, more efficient customs clearance and lower brokerage fees.
- Loophole for annual quota limits: For countries or shipments that are exposed to annual limitations or quantity restrictions, utilizing FTZs allows them to store more than the annual limit. Once a new quota period begins, those products can then enter the domestic market for sale and consumption.
What Is Customs Bonded Warehousing?
Unlike FTZs — which are not under the purview of U.S. Customs and Border Protection (CBP) — customs bonded warehouses (or bonded storage warehouses) are under the authority of CBP. Products or materials that are stored in bonded warehouse space remain under the control of CBP but do not require duty payment until the goods are exported. These facilities are designed to help facilitate international trade by allowing storage for finished goods or for materials that are manufactured or assembled into finished products to be exported at a later date (up to five years from the date of import).
There are many types or classes of customs bonded warehouses — including public and private — with each having a unique purpose or use case. Some of the more common types include:
- Class 1: Government-owned warehouse — These locations are owned or leased by the government and store imported goods that are subject to duties, processing or examination before they are released to be distributed.
- Class 2: Importers’ private bonded warehouse — These warehouses are privately owned be individual companies and are used to store only goods or merchandise of the owner until they are ready to be distributed for sale.
- Class 3: Public bonded warehouse — These locations are available to the public and have shared access by multiple companies to store imported merchandise at a given facility.
- Class 4: Bonded yards or sheds — Heavy and bulky goods or bulk liquid merchandise to be stored in tanks may be assigned to bonded yards. Goods stored may also include enclosures for imported animals, such as stables or corrals.
- Class 5: Bonded bins or elevators — These facilities are used exclusively to store agricultural products, such as grain.
- Class 6: Container freight station (CFS) bonded warehouse — These locations are under CBP authority and are used for deconsolidating ocean or air freight, particularly less-than-container load (LCL) shipments. However, goods may only be stored for a limited period (10 days) before they must be shipped.
- Class 7: In-bond export consolidation (IBEC) warehouse — IBEC warehouses are controlled by CBP and store freight for consolidation before shipment for up to 30 days.
Benefits of Customs Bonded Warehousing
How Do FTZs Differ From Customs Bonded Warehousing?
The benefits of customs bonded warehousing are similar in nature to those of FTZs, although bonded warehousing often comes with greater limitations because they are licensed and regulated by CBP. Generally speaking, companies can benefit from deferring payment of duties until goods are ready to distribute for commerce, giving them more financial control of when duties are paid. Bonded warehouses also give companies the ability to store goods for up to five years, which aids in managing inventory based on market demand. Companies can also re-export goods outside of the U.S. without paying duties, which is helpful in creating more cost-efficient international shipping strategies. Additionally, goods in a bonded warehouse undergo quality control inspections by CBP, and companies are not liable for duties on goods that are damaged while being stored in a bonded warehouse.
In summary, while foreign trade zones may offer a more flexible solution and greater savings for some companies, they may also come with greater compliance requirements and more complex initial setup, whereas customs bonded warehouses may be ideal for short-term storage and re-exports that do not require additional manufacturing, in line with public bonded warehouses.
Find a NXTPoint Logistics Facility Near You
Case Study
Consolidation Project for McDonald’s
The project aimed to implement real-time trackable inbound and outbound transportation, storage, consolidation, and final delivery adhering to a strict construction schedule.
Foreign Trade Zone and Customs Bonded Warehousing FAQs
Both FTZs and customs bonded warehouses are used for international trade and allow companies to store goods while deferring duties until they leave the facility to enter U.S. commerce, in line with bonded warehouse types under US customs. However, FTZs are not considered part of U.S. commerce until they leave the FTZ and are not subject to normal customs regulations. On the other hand, bonded storage warehouses offer many of the same benefits but are regulated by U.S. Customs and Border Protection.
Goods that are stored in an FTZ are able to remain there indefinitely, giving companies the flexibility to defer goods on items until they leave the FTZ for U.S. commerce, in line with the general bonded warehouse. Goods that are stored in customs bonded warehouses are limited to five years of storage from the date of import.
Yes! Duties are only paid on items stored in an FTZ or bonded storage warehouse if they leave the facility for U.S. commerce. Goods that are re-exported are not subject to duties.
Absolutely! In fact, many manufacturers and e-commerce businesses use FTZ and bonded warehouses to store goods until market demand or order fulfillment requires them. These facilities are excellent for e-commerce fulfillment operations, offering cost savings on duties and efficient distribution. The best choice will depend on your business model, the scale of your operations, and the complexity of your import strategy.
While both FTZs and bonded warehouses require a thorough application and approval process, it can be more complex for companies seeking to utilize FTZs. Companies may be required to undergo inspections/audits, maintain certification and comply with strict regulations and security protocol.
