Many business owners and logistics professionals who have imported and/or exported goods have likely explored the benefits of using bonded warehouses and foreign trade zone (FTZ) warehouses.
While both types of facilities offer certain advantages to importers and exporters that are not available in traditional warehouses, choosing to utilize a bonded warehouse or an FTZ warehouse can be profitable for many business owners who are looking for ways to save on duty outlays and a more effective way to manage cash flow.
Understanding the differences between bonded warehouses and FTZ warehouses can help you determine which type of facility fits your business model and meets your unique needs. It can also help you simplify and overcome some of the tough logistics challenges many business owners in the industry face on a daily basis.
Bonded Warehouses
What are the distinguishing features of a bonded warehouse?
• Delaying or avoiding, if reexported, the payment of US Customs duties and taxes until products are moved from the bonded warehouse facility through a consumption entry or inbond
• Duties rates are determined at the time of withdrawal from the bonded warehouse and not at the time of importation
• Cargo can be manipulated with CBP approval, however, manufacturing is prohibited except for export
• Only allowed to keep goods in the bonded warehouse for up to 5 years from the date of importation
• Only foreign merchandise can be placed in a bonded warehouse
• State and local inventory tax still apply
FTZ Warehouses
Meanwhile, FTZ warehouses have been utilized since the 1930s with a primary goal of increasing the trade and competitiveness of companies in the United States. An FTZ warehouse operates in an area within the borders of the United States that the government considers to be outside of U.S. customs territory. Certain types of goods or merchandise can move through FTZ warehouses without traveling through standard customs procedures, which include import duties.
Free trade zones around the world are typically located near areas that are geographically advantageous for trade, as well as major seaports and international airports. These customs-free zones help businesses manage cash flow by paying taxes on goods and products as they are shipped out of the FTZ, or avoiding paying them altogether, rather than when they arrive.
What are the distinguishing features of an FTZ warehouse?
• Delaying or avoiding, if reexported, the payment of US Customs duties and taxes until products are moved from the bonded warehouse facility through a consumption entry or inbond
• Duty rates will be determined by the date of importation if the goods are entered into the zone under Privileged Zone Status (Additional tariff items are considered Privileged Status)
• Cargo can be manipulated and manufactured with CBP approval
• Cargo can stay in the FTZ indefinitely, no time limit
• Foreign and Domestic freight is allowed in the FTZ
• Harbor Maintenance Fee (HMF), on ocean freight ONLY, is paid on a quarterly basis
• Foreign and Domestic merchandise for export is not usually subject to State or Local tax
Additionally, businesses utilizing the FTZ will receive the benefit of savings on the merchandise processing fee, at the time of entry into the FTZ. Companies located outside of FTZ will pay a merchandise processing fee for every formal shipment, but FTZ operators may file weekly consumption entries, which can be especially advantageous for high-volume import distributors.
For many business owners, the main benefits of using an FTZ are cost savings and cash flow management. By correctly utilizing an FTZ warehouse, businesses can avoid paying duties and taxes if they are directly exporting the goods from the FTZ, or defer paying duties and taxes if a consumption entry is made for entering the US commerce. For some businesses, this can lead to savings in the millions.
Additional Considerations
Over the last two years, the Trump Administration has instituted tariffs that have hit importers with additional taxes, particularly importers of products from China. As a result, many businesses are scrambling to find options that will allow them to overcome logistics challenges while saving on costs and managing cash flow. FTZ and bonded warehouses present solutions to these challenges, causing more business owners and logistics professionals to become aware of the cash-saving potential.
“If you would have said anything about an FTZ or bonded warehouse to anybody three or four years ago, besides at the border, majority of importers and exporters probably wouldn’t have known anything about them,” says Shelby Chinyere, Aries Worldwide Logistics Director of Import Services. “That has all changed.”
It is also worth noting that the U.S. Department of Homeland Security, through Customs and Border Protection, has designated the use of FTZ inbound admission procedures a secure supply chain best practice.
Making Tough Logistics Challenges Easy
Aries Worldwide Logistics is a strategic partner committed to helping you engineer your end-to-end supply chain strategy and achieve maximum performance. Aries has built a reputation based on proven expertise in logistics and product flow management by demonstrating the ability to execute reliability in many supply chains, logistics, and information technology models, despite today’s challenging and complex business environment.
One place where Aries excels above and beyond the competition is customer service and availability. This holds true with our warehousing and logistics solutions as well. We are available around the clock. “We give the customer what they want when they want it,” Chinyere says. “This is one of our core values that sets us apart from our competitors.”
To learn more about FTZ and bonded warehouses and discover whether this logistics solution is the right fit for your business, contact Aries today.
Contact Info: Toll-Free: 888-502-7437 Email: info@ariesww.com