The benefits of foreign trade zones

The leaders of the Cowlitz Economic Development Council (CEDC) created Foreign Trade Zone (FTZ) No. 120 over 40 years ago as an innovative way to assist local business and recruit new business into Cowlitz County. FTZs are designated areas within a country’s borders where imported goods can be stored, processed, and re-exported without being subject to the country’s customs duties and taxes. If you have ever considered applying for FTZ status, the following are the top four reasons why businesses may choose to utilize a foreign trade zone. Duty and Tax Benefits: One of the primary reasons for using an FTZ is to take advantage of duty and tax benefits. When goods are imported into an FTZ, customs duties and taxes are suspended until the goods leave the zone for consumption within the domestic market. If the goods are re-exported from the FTZ, no duties or taxes are paid. This can result in significant cost savings for businesses, making them more competitive in both domestic and international markets.

Improved Customs Procedures: FTZs streamline customs procedures and allow businesses to defer customs duties and formal entry processes until the goods are shipped into the domestic market. This provides greater flexibility in managing inventory and cash flow, as companies can hold goods in the FTZ for an extended period without incurring customs costs.

Supply Chain Efficiency: Utilizing an FTZ can enhance supply chain efficiency. Companies can bring in raw materials and components duty-free, process them into finished goods within the FTZ, and then distribute them both domestically and internationally. This process reduces transportation costs and can lead to shorter lead times, making businesses more agile and responsive to market demands.

Trade Facilitation and Inverted Tariffs: FTZs can be particularly beneficial for industries that face inverted tariffs, where raw materials have higher import duties than the finished products. By importing raw materials into an FTZ and processing them into finished goods, businesses can avoid paying higher duties on the raw materials.

The existing FTZ No. 120 is limited in its acreage within Cowlitz County. As administrator of the FTZ the CEDC is reviewing the benefits of altering the existing FTZ so it can increase acreage area and flexibility. If you are interested in learning more, please give us a call – 360-423-9921.

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