Click on any question below for more information.
Q. What is the Application/Activation Process?
- A prospective site or company must be located (or looking to locate) within the GMFTZ Service Area.
- The prospective company should contact the city’s/town’s Economic Development Office to determine if there are Sites available and request information regarding local tax policy.
- The prospective landowner and/or Zone user will need to contact the Grantee/WESTMARC regarding their desire to be part of the Zone project.
- The major taxing entities must all submit letters for inclusion within the Zone application, reflecting their support of the proposed FTZ site. This may take time and require meetings and formal agreements, while in other cases it may simply require a pre-approved letter.
- An application must be submitted to the FTZ Board for review and approval along with the proper corresponding fee, depending on Zone application type.
The Grantee has created 2 simple step-by-step procedural documents for Applying for an FTZ and Activation of a Zone, which explains all of the necessary steps required, along with the timeline and chronology of those steps for any company wanting to become an FTZ site/user.
Q. Can we manufacture products within an FTZ?
Yes, products can be manufactured within an FTZ.
FTZs are considered to be outside “Customs territory” for the purpose of entering goods into US commerce, which allows the operator the ability to choose whether to pay the duty rate on the finished product or the part, whichever is lower. This means that if a company manufactures or assembles within an FTZ, they do not pay duty on the “value-added” to the product and duty is not paid at all until the product is removed from the Zone for consumption. All exported products are removed from the FTZ without duty liability. In an FTZ, companies can be granted special privileges including “direct delivery” and “weekly entry”, which can substantially reduce the costs of importation and increase supply-chain efficiency.
In addition, if a company needs to import capital equipment when setting up the Zone facility, no duty payments will be required on that equipment until the factory is in production. FTZs were developed to assist businesses in the US compete with foreign manufacturers and suppliers. Because the US system of tariffs is full of parts duty rates that are higher than most finished goods duty rates, “inverted tariff benefits” (those opportunities that allow the use of FTZ procedures) are being used in almost all types of US manufacturing. Cell phones, oil refineries, appliances, pharmaceuticals, solar panels, automotive, steel, pipe and tubes and many other manufacturers are currently using the FTZ program, annually saving hundreds of thousands of dollars!
Q. What will the corporate responsibilities be in order to remain compliant and designated as an FTZ?
To remain designated as an FTZ, a company must conduct “bona-fide Customs business” inside the Zone. FTZs must be monitored for accuracy of inventory, goods received and goods shipped. Customs has become much more user friendly in the last decade and fully electronic filing of forms is now standard. A combination of the company’s customs broker, their internal accounting systems and the integration of one of several fully authorized “bolt-on” FTZ software systems work together to maintain the required records and documents for transmitting to Customs. Annual reporting to the FTZ Board and Customs is also required.
Q. Is an FTZ program a good fit for our company?
If either of these statements matches your company’s operation, you may likely benefit from an FTZ:
- Your company is conducting manufacturing or assembly using imported components (plus domestic if applicable), or
- Your company utilizes a warehouse/distribution center that is larger than 300,000 square feet, as the base for your regional/national distribution hub.
GMFTZ, Inc. offers a FREE Cost Benefit Analysis to determine how much an FTZ can impact your bottom-line. (Cost Benefit Analysis)
Q. How can WESTMARC and the Grantee (GMFTZ, Inc.) help me with my Zone?
GMFTZ, Inc. and WESTMARC act as advocates for the FTZ, having a committed and thorough marketing agenda to promote and market the use of Zone No. 277 (the West Valley Zone). Furthermore, GMFTZ, Inc. retains a full-time Zone marketing consultant, IMS, to answer any and all technical marketing and Zone operational questions regarding whether firms qualify under the Federal and State laws and regulations. IMS personnel can assist any of the WESTMARC City/Town Economic Development leaders with “project leads” who are looking to locate in the West Valley. These services from IMS are all paid for by the Grantee through Zone Grantee fees. These services include:
- Technical Zone marketing via conference calls, on-site meetings, Webex presentations, etc. to prospective Zone users (prospects) and/or their site location consultants.
- Assistance with whether or not a certain prospect could qualify under the Federal and State requirements.
- Understanding the relationship between the prospect, US Customs (CBP) and the local taxing authorities.
- Providing Cost-Benefit Analysis to any prospect.
- Answering operational questions that are posed by the prospect.
- All of these services are paid for by the Grantee, and are available to all West Valley communities and their EDC or city staff.
Q. What are the costs/benefits associated with an FTZ?
Benefits from locating within a Zone include: improved cash flow, reduced paperwork and expenses, reduction in Arizona real and personal property taxes by 75% on land, new buildings and equipment, as well as increased security and increased supply chain speed.
The costs from the Grantee include a one-time application and activation fee, and an annual Zone fee to the Grantee. There may also be internal costs associated with the implementation of the FTZ to maintain the security and IT systems required to track FTZ status goods within your company. Some internal systems can be modified to meet these requirements, and bolt-on FTZ solution systems are available and adaptable to most corporate systems. The majority of companies use an outside consultant to assist them in the application and activation processes (the local Customs process necessary to “operate” officially as a Zone-status company).
Cost/Benefit Analysis Examples
Q. What types of businesses utilize an FTZ?
The Zone program is utilized by many different industries including: importers, exporters, manufacturers (both large and small), distributors, and retailers in the following industry sectors; footwear, apparel, tile and stone, solar panel producers, refrigerated warehouses and environmental manufacturing, to name a few. FTZs were developed to assist businesses in the US compete with foreign manufacturers and suppliers. Because our US system of tariffs is full of parts duty rates that are higher than most finished goods duty rates, “inverted tariff benefits” (those opportunities that allow the use of FTZ procedures) are being used in almost all types of US manufacturing. Cell phones, oil refineries, plastics manufacturing, appliances, pharmaceuticals, automotive, steel, pipe and tubes and many other manufacturers are currently using the FTZ program, saving hundreds of thousands each year!