Print PDF

Practice Areas

FTZ Exports Fall Again in 2015, Zone Activity Still Dominated by Oil and Autos

Tuesday, September 20, 2016
Sandler, Travis & Rosenberg Trade Report

The Foreign-Trade Zones Board’s annual report on FTZ activities shows that in 2015 zone activity decreased despite an increase in the number of zones.

FTZs are secure areas under U.S. Customs and Border Protection supervision that are considered outside the U.S. customs territory for purposes of duty payment. Foreign and domestic goods may be moved into zones for operations not otherwise prohibited by law involving storage, exhibition, assembly, manufacturing, and processing. All zone activity is subject to public interest review and all production activity requires a case-by-case review.

Under zone procedures, the usual formal customs entry procedure and payment of duties are not required on the foreign goods unless and until they enter the U.S. customs territory for domestic consumption, in which case the importer may have a choice of paying duties on either the original foreign materials or the finished product. Domestic goods moved into a zone for export are considered exported upon entering the zone for purposes of excise tax rebates and drawback.

Highlights of the findings of the 2015 report (with comparisons to 2014, where applicable) include the following.

- There were 262 approved FTZs (up from 258) and 186 active (up from 179), with a total of 324 active production operations (up from 311). More than 420,000 persons were employed at some 2,900 firms that used FTZs (up from 2,700).

- The FTZ Board approved the creation of four new FTZs (up from two), the reorganization or expansion of 22 zones under the alternative site framework (up from 18), and 54 applications and notifications for new or expanded manufacturing authority (down from 57). The Board also processed an additional 181 requests (up from 167) that included minor boundary modifications and scope determinations.

- Exports from facilities operating under FTZ procedures amounted to $84.6 billion, down 14.7 percent. This figure does not include certain indirect exports involving FTZ merchandise that undergoes further processing in the U.S. at non-FTZ sites prior to export.

- The value of shipments into zones fell 17.3 percent to $659.4 billion, the lowest total since 2011. Of these shipments, 65 percent were used for production operations while about 35 percent went to warehouse and distribution operations.

- About 63 percent of the shipments received in FTZs ($509.7 billion) involved domestic status merchandise, indicating that FTZ activity tends to involve domestic operations that combine foreign inputs with significant domestic inputs. This figure is down from 64 percent in 2014 and lower than the high of about 80 percent in the mid-1990s.

- The largest industries accounting for zone production activity included oil refining, automotive, electronics, pharmaceutical, and machinery and equipment.

- The main foreign-origin products received in FTZs for warehousing and distribution operations included vehicles ($33.3 billion, up 9.5 percent), consumer products ($12.8 billion, up 156 percent), consumer electronics ($11.2 billion, down 41.1 percent), electrical machinery ($11.0 billion), and oil and petroleum ($9.7 billion, down 50.1 percent).  

- The main foreign-origin products received in FTZs for production operations included oil and petroleum (64.8 billion, down 49.4 percent), consumer electronics ($15.9 billion, up 165 percent), vehicle parts ($13.6 billion, up 9.7 percent), pharmaceuticals ($6.4 billion, up 14.3 percent), and machinery and equipment ($6.1 billion, down 4.7 percent).

To get news like this in your inbox daily, subscribe to the Sandler, Travis & Rosenberg Trade Report.

Customs & International Headlines