Manufacturing in an FTZ - Jacksonville Port · PDF fileManufacturing in an FTZ Donnie Bailey Barnes Vice President. Barnes Consulting, LLC. Topics for Discussion • General • Receiving

Manufacturing in an FTZ

Donnie Bailey Barnes

Vice President

Barnes Consulting, LLC

Topics for Discussion

• General

• Receiving

• Processing

• Shipping

• Other considerations

August 23, 2011 Barnes Consulting, LLC 2

First FTZ job

• 26 years ago

• Columbia Metropolitan Airport, Columbia, SC

• Mama’s comment

• Jobs

• Questions received


1

Pineapple in FTZ

• US Product?!!

• Can material from JP

• “one‐time‐use” packaging value becomes part of product value

• No duty on US product


Application vs Activation

• Application = building permit – FTZB

• Activation = occupancy permit – CBP– Turn lights on and off as needed


Manufacturing in FTZ

• First allowed in 1950

• Not much growth– US Customs “Service” thought should collect duties on “zone value”

• NAFTZ worked to define “dutiable value”– Approved in 1980

– Then manufacturing zone growth


Manufacturing in FTZ

• 1970 – 10 GPZ

• 1976 – FTZ 21 approved in Charleston, SC

• 1986 – 127 approved in Columbia

• 2011 – 277 GPZs and 677 SZ


Free‐Trade Agreements

• FTZ still “under Customs’ control”

• Goods still qualify under FTA

• MX/EU FTA

• NAFTA into Canada


Importers also export (some through JAXPort)• Foreign = 10 billion

• Domestic = 10 billion

• LOP = 10 billion

• 70% exported

• Only $3.3 billion of foreign actually goes into US

• And $12.6 billion domestic value added to the export


• 6.3 exported

• 6.3 billion exported

• 6.3 billion exported

Suppliers in FTZ

• Your place or mine?

• BMW 38A

• Benteler 38F

• Faurecia 38D

• Production equipment

• Tires


Receiving

But first, CBP Form 216

• Blanket, covers up to full year

• Must be approved and returned by CBP before you can do anything more than receive, store, ship

• Should reflect what’s approved in FTZ grant


Direct delivery

• Reason enough for manufacturer to be in FTZ ‐ keeps freight moving

• Inspections, if there are inspections, usually occur at FTZ

• Goods arrive, received into inventory, taken straight to line, used in manufacturing, shipped

• CBP informed of receipt following business day


Cumulative e214

• All shipments for day reported on one e214

• If not using e214, separate CBP Form 214 for each shipment


First Inventory

• It’s already here!– Existing inventory

– Domestic status

– Duty “holiday” while domestic status depleted


Status of receipts

• Domestic– From the US– From other countries when duty/fees/ taxes to US have been paid

• Same parts, different status– From FTA country (PF)– From other than FTZ country (NPF)– Already had US duty/fees paid– From bonded warehouse, ZR


Positive inventory adjustments

• Find 110 when records show 100 –what to do?

• Assume inventory correct until last receipt– Use value, country of origin, etc. of last receipt

• Include on e214 (or CBP Form 214)


Returns

• Admit into FTZ

• Returns from abroad admitted in foreign status

• Returns from US admitted in domestic status


Zone‐to‐zone receipts

• Reported on e214 as zone‐to‐zone so no reporting goes to Census

• Status designated by sending zone must be used by receiving zone– PF must stay PF

– NPF can be changed upon okay from CBP

– ZR must stay ZR and must be stored, exported or destroyed


Hand‐carried receipts

• NO . . . NO . . . NO

• But if they don’t listen . . .– Tell them to carry pro‐forma invoice along with the parts

– Tell them to declare to US CBP upon arrival in the US

– Worst that can happen – pay duty (maybe 10%) and report on expense report


Processing

Temporary removals

• Why? Rework, repair, testing, . . .

• Requested on CBP Form 216

• When CBP approves, goods can be removed from FTZ– No in‐bond documents required

• When task has been accomplished, goods are returned (1 for 1)

• CBP notified of return on same 216


TIB cancellation

• Time up for the temporary import

• Not ready to send out of country

• Don’t want to destroy

• Admission to FTZ in zone‐restricted status is the same as export

• TIB can be cancelled by CBP


“Made” parts

• Usually found when one part is received and inventory level keeps increasing

• Using a part that was never received

• Example:– Receive a roll of tubing (PN 123)

– Cut into 2” length of tubing (PN 456)

• Must be reflected in inventory records


Shipments

Weekly entry

• Weekly entry for import into US

• Weekly transportation for exports

• Weekly zone‐to‐zone transfers

• Estimates before week begins

• Reconciliation of actual shipments at end of week


“Normal” imports and exports

• In manufacturing operation, automated to extent possible

• Volume is usually only stressor

• Processes in place and well known

• Problems arise when– New carrier

– New broker

– CBP changes


Sampling

• Usually for testing in small quantities

• Show clearly in inventory records

• If remaining in FTZ, simply decrement inventory

• If removing from FTZ (including hand‐carried shipment), include on entry and pay duty


Scrap and waste, recycling

• Scrap is scrap!

• No duty on scrap and waste

• If recycled, must be included on entry– Use value received from recycler

– Scrap duty rate is “Free”

• Must have letter from recycler on file


Negative adjustments

• Find 90 when records show 100 –what to do?

• Treat as a shipment– Decrement FIFO

• Include on entry

• IF 10% of receipts of that good AND$100 or more in duty owed, formal notification to CBP of discrepancy


Returns to suppliers

• Domestic into US, just send it back

• Foreign into US, include on entry– Or send in‐bond if to another FTZ

• Domestic for export, follow all export rules

• Foreign for export, send in‐bond to port of export, follow all export rules


Zone‐to‐zone shipments

• Estimate at beginning of week to CBP

• Ship during week – Use CBP Form 7512 if going to a different port

– Use “local control” agreed to by CBP if transferring in same port

• PTT, blanket PTT

• Identifying number for shipment


Other considerations

Drawback

• “WAIT!,” you say. “Drawback not needed if operating in an FTZ!!”

• But being in FTZ does not preclude using drawback program

• Musical instrument example


Supplier drawback

• Supplier imports and makes a part sent to another FTZ

• Part used in manufacturing goods for export

• Only exporter can file for drawback but import info required

• Partnership with supplier on data• Use of 3rd party drawback broker for confidentiality


Fat‐finger Freddie

• One at every place where inventory is maintained

• How do you correct errors?

• Consider all information and handle in best possible way

• Errors are all different!!


Recordkeeping

• Keep everything!


Establish reputation with CBP

• Cooperative, law‐abiding, “good” company and people

• Training records, etc.

• Join in other CBP programs –CTPAT, ISA, etc.

• CBP better understands your business

• If problem does arise, CBP more understanding


Questions?


Barnes Consulting, LLCwww.BarnesConsultingLLC.com864‐979‐6000

http://www.barnesconsultingllc.com/

Manufacturing in an FTZ - Jacksonville Port · PDF fileManufacturing in an FTZ Donnie Bailey Barnes Vice President. Barnes Consulting, LLC. Topics for Discussion • General • Receiving

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