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FTZ Exports Again Hit Record High; Zone Activity Dominated by Oil and Autos

Wednesday, September 09, 2015
Sandler, Travis & Rosenberg Trade Report

The Foreign-Trade Zones Board’s annual report on FTZ activities shows that in 2014 zone activity and especially exports saw a substantial increase.

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 2014 report (with comparisons to 2013, where applicable) include the following.

- There were 258 approved FTZs (up from 257) and 179 active (up from 177), with a total of 311 active production operations (up from 289). Approximately 420,000 persons (up from 390,000) were employed at some 2,700 firms that used FTZs (down from 3,050).

- The FTZ Board approved the creation of two new FTZs (down from four), the reorganization of 18 zones under the alternative site framework (down from 23), and 57 applications and notifications for new or expanded manufacturing authority (down from 65). The Board also processed an additional 167 requests (down from 180) that included minor boundary modifications and scope determinations.

- Exports from facilities operating under FTZ procedures amounted to $99.2 billion, the fourth straight record high and a 24.8 percent increase from 2013. 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 4.5 percent to $798.1 billion. Of these shipments, 71 percent ($563.6 billion) were used for production operations while 29 percent ($234.5 billion) went to warehouse and distribution operations.

- About 64 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 65 percent in 2013 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 ($30.4 billion, up from $24.1 billion), oil and petroleum ($19.6 billion, up from $19.1 billion), consumer electronics ($19.0 billion, up from $5.8 billion), textiles and footwear ($8.9 billion, up from 8.0 billion), and consumer products ($5.0 billion, up from $4.2 billion).

- The main foreign-origin products received in FTZs for production operations included oil and petroleum ($128.2 billion, down from $163.6 billion), vehicle parts ($12.4 billion, up from $9.3 billion), machinery and equipment ($6.4 billion, up from $5.6 billion), consumer electronics ($6.0 billion, up from $5.2 billion), and pharmaceuticals ($5.6 billion, up from $3.5 billion).

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