Free Trade Zones: Miami vs Panama

Nelson CabreraExports, Imports, WarehousingLeave a Comment

Bonded Warehouse vs. FTZ

Comparing bonded warehouses to foreign trade zones can get a bit complicated. In terms of customs entry, a foreign trade zone does not fall within customs territory so the customs entry is filed as soon as the goods are removed from the foreign trade zone. By comparison, a bonded warehouse sits within U.S. customs territory so the customs entry has to be filed for the goods as soon as they enter the warehouse.

In terms of the Customs Bond, a bond is not required for any goods that are inside of a foreign trade zone. Admissions to that foreign trade zone are covered under the operator’s customs bond. In terms of permissible cargo, foreign and domestic goods can be placed inside of a foreign trade zone. Only foreign goods can be housed inside of a bonded warehouse. With regard to payment of duty, duties are required prior to the release of any items from a bonded warehouse but duties are required only upon entry into the US for the foreign trade zones.

All goods are taxed with a bonded warehouse. Foreign goods are not subject to a tax inside of a foreign trade zone and domestic goods are not taxed if they are going to be exported. The storage length of time for a foreign trade zone is unlimited but for a bonded warehouse, it is not to exceed five years. Under Customs supervision items can only be cleaned, repackaged, and sorted inside of a bonded warehouse. Inside of a foreign trade zone, items can be sorted, destroyed, clean, mixed with foreign or domestic items, labeled, assembled, exhibited, manufactured, sold, or repackaged.

Miami FTZ Advantages

In Miami shippers transporting goods to other countries and from other countries will have adequate room to store shipments.  Foreign trade zones are special regions that benefit International shippers. Foreign trade zones are areas not technically considered part of the United States nor are they considered any part of another nation which means that they have some perks for budget-conscious shippers.

Shippers who have goods entering into a foreign trade zone within the United States do not have to undergo a customs inspection upon entry. They only have to be inspected when they leave. Shippers do not have to supply a bond in order to keep their goods stored inside a foreign trade zone. Shippers also do not have to pay duties on the cargo unless that cargo is being distributed within the United States specifically for consumption.

Shippers can store foreign and domestic items within a foreign trade zone and neither shipment will be subject to tax unless they are domestic products intended for distribution within the United States.

Miami FTZ Disadvantages

Anyone who is selling items domestically is not going to benefit from what a foreign trade zone has to offer. To that end, those who are working with domestic sales in the United States are much better off utilizing a bonded warehouse.

Panama FTZ Advantages

Companies with products that require multiple stages of manufacturing and assembly will benefit heavily from these foreign trade zones. Goods can be manufactured within a foreign trade zone without companies having to pay duties on labor, overhead, or waste materials. Companies also avoid paying duties on the imported goods specifically and instead have the option to choose to pay duties on the final product or the imported goods, whichever of the two is cheaper.

Manufacturers can choose to pay tariffs on the goods when they enter the warehouse or when they leave the warehouse. They can pick whichever is cheapest. With a foreign trade zone companies are able to store their goods for an unlimited amount of time and can quite literally take almost an unlimited number of actions with their goods such as exhibiting them, assembling them, labeling them, repackaging them, and anything else.

Panama FTZ Disadvantages

In Panama, shippers might face disadvantages associated with a foreign trade zone if they are trying to work with domestic products alone.

How the FTZ affects shippers

Foreign trade zones will affect shippers because they will have to be cognizant of the changes related to payment of duty, state and local inventory tax, the manufacturing of goods, classifications, appraisals, and limits for domestic goods. Shippers should do their due diligence when planning routes and conducting other business operations so that they can take full advantage of any benefits that may be available.

 

Nelson Cabrera
Nelson leads global business development efforts within LILLY + Associates and has been featured as a logistics expert in numerous publications, including SupplyChainBrain, The Bulletin Panama, Logistics Management, and the Miami Herald.

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