How to Calculate Foreign Trade Zone Savings
What is Foreign Trade Zone Savings?
The Foreign Trade Zone (FTZ) Savings Calculator estimates duty savings from operating within a US FTZ, where importers can defer, reduce, or eliminate customs duties through inverted tariff benefits, duty deferral, and re-export privileges.
Formula
FTZ Savings = Inverted Tariff Savings + Duty Deferral Value + Re-Export Duty Elimination + Reduced MPF
- CV
- Component Value ($) — Value of imported components entering the FTZ
- CR
- Component Duty Rate (%) — Duty rate on individual imported components
- FR
- Finished Goods Rate (%) — Duty rate on the finished manufactured product
- RE
- Re-Export Percentage (%) — Percentage of goods exported without entering US commerce
Step-by-Step Guide
- 1Calculate inverted tariff benefit: if finished goods have a lower duty rate than components, elect the finished goods rate
- 2Estimate duty deferral value using your cost of capital and average storage time
- 3Add savings from merchandise processing fee (MPF) reduction through weekly entries
- 4Include full duty elimination on any goods re-exported from the FTZ
Worked Examples
Input
Component duty 6%, finished product duty 2%, $50M in components, $80M finished value
Result
Without FTZ: $3M duty on components. With FTZ: $1.6M duty on finished goods. Savings = $1.4M/year
Common Mistakes to Avoid
- ✕Not electing privileged foreign status (PF) vs non-privileged foreign status (NPF) optimally
- ✕Ignoring the annual FTZ activation and compliance costs when calculating net savings
- ✕Assuming FTZ benefits apply automatically without proper zone activation and procedures
Frequently Asked Questions
How many FTZs are there in the US?
There are approximately 195 general-purpose FTZs and over 500 subzones across all 50 states and Puerto Rico. Almost every major port and manufacturing region has an active FTZ.
What is an inverted tariff and how does the FTZ help?
An inverted tariff occurs when imported components have a higher duty rate than the finished product. In an FTZ, manufacturers can elect to pay the lower finished-goods rate on the final product instead of higher rates on each component.
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