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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! 

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 a fully authorized set of “bolt-on” FTZ software systems are available to keep tabs on the information required by Customs.  Annual reporting to the FTZ Board and Customs is also required. 

If either of these statements matches your customer’s operation, you may likely benefit from an FTZ:

• Your customer is conducting manufacturing or assembly using imported components (plus domestic if applicable), or
• Your customer utilizes a warehouse/distribution center that is larger than 300,000 square feet, as the base for their 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)

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

• Manufacturing Example
• Distribution Center Example

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! 

All of the currently designated FTZ Sites offer prospective users 100% of the benefits available within an FTZ location in the State of Arizona.  This includes the State of Arizona’s benefit of reclassification of the property to Class 6, along with the federal benefits.   These benefits are listed below:

• State Tax Re-Classification on Real and Personal Property:  From Class 1 to Class 6, which is a reduction of 75% (in 2012) on the “normal” commercial real and personal property taxes.  On a typical 500,000 sq ft building (new) with $30 Million in personal property, this “benefit” would yield approximately $.80-$.95 reduction in Gross Rental Rates. 
• Federal weekly entry benefits, on the same size example facility above (500,000 sq ft) would normally yield the average import/retailer with a federal savings in the $250,000 to $450,000 range annually.
• For manufacturers, inverted tariff benefits can reduce upwards of $2.00 to $3.65 per foot of benefit to a typical Zone User (i.e. reduces occupational costs by this much). 
• Taken together, the FTZ status on a “new location” in FTZ No. 277 is the most beneficial incentive in the Western USA.   Arizona Commerce Authority uses the FTZ benefit in Arizona as the most available and worthwhile incentive (to firms that qualify) in their arsenal of statewide incentives. 

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! 

It is the stated policy of GMFTZ, Inc. and WESTMARC to protect all potential customers and to give sponsorship approval and even “tax support letters” under the name of “Project X” instead of the corporate name.  All best practices are employed by the Grantee and WESTMARC to protect corporate identity.  In the last four relocations to the West Valley, where the FTZ was involved (up to Q 2, 2012), the Grantee and WESTMARC have maintained 100% confidentiality. 

Site 1 is preparing to build (summer of 2012) a “spec” building inside the designated Zone.  Approximately 600,000 to 800,000 ft. is being planned now. 

Proposed Site 5 – Goodyear Crossing Industrial Park (applied for but not yet approved) has immediately available space for FTZ users (smaller space in the 20,000-60,000 ft range)

Site 1 – Goodyear Gateway South – www.airportgateway.com

Site 3 – Goodyear Palm Valley 303 – www.palmvalley303.com

Proposed Site 5 – Goodyear Crossing Industrial Park  (Can be served by Union Pacific Rail)) - http://goodyearaz.gov/home/showdocument?id=248

Proposed Site 7 – Buckeye Industrial Park (Served by Union Pacific Rail) - http://meritpartnersinc.com/property/buckeye-industrial-park/

Site 1 – Goodyear Gateway South – www.airportgateway.com

Site 3 – Goodyear Palm Valley 303 – www.palmvalley303.com

Proposed Site 5 – Goodyear Crossing Industrial Park - http://goodyearaz.gov/home/showdocument?id=248

Proposed Site 7 – Buckeye Industrial Park = http://meritpartnersinc.com/property/buckeye-industrial-park/

Usage-Driven Site is a location that is designated as an FTZ for a specific company within the GMFTZ Service Area.  The company applying for FTZ status must commit to activating and utilizing the FTZ within 3 years or the site will become de-zoned.  This application process is fast-tracked, but will require that each major taxing jurisdiction provide a letter of support.   There are typically 4-5 letters needed:  city/town, county, community college district, and the school district(s).   Having an established tax policy within a community can provide companies without Magnet Sites with the ability to utilize a Usage-Driven site.  An existing company can apply for Usage- Driven site status at its location, or it request designation for a build-to-suit relocation.  The tax process usually takes three months and then once the application is received by the Grantee, two to three months are required for local and Federal approval.

A Magnet Site is a piece of land (industrial park) within a community that is designated with FTZ status for the purpose of attracting business and accommodating demand for Zone designation.  The FTZ Board is now only approving Magnet Sites that have a current user willing to commit, or an existing building for lease, and space for future Zone users.  A Magnet Site is often an industrial park or larger tract of land which can provide opportunities for multiple companies to utilize the Zone program.  In addition to tax jurisdiction support, the Magnet Site approval process requires a longer application process with a much more robust justification section and approval timeframe ranges from 1- months to a year once it is formally docketed by the FTZ Board. 

NOTE: Only companies that qualify federally and locate within an FTZ Magnet Site may activate and take advantage of the state tax benefits.  Other firms may locate within a Magnet Site, but unless qualified federally, they cannot activate and take advantage of the Zone.  As of September of 2012, the US FTZ Board is making it very difficult to add Magnet Sites in AZ and therefore only certain, specific fact-situations can be approved.  Contact WESTMARC or IMS for more details. 

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, IMSOS, 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.