Foreign Trade Zones Why this makes sense now.

Transcription

1 Foreign Trade Zones Why this makes sense now. Curtis D. Spencer IMS Worldwide, Inc. 2017

2 Our Agenda Today Why are we (IMSW) here? Who is IMSW? What is an FTZ, and why does it matter to Importers and US Manufacturers? What are the basic Value Propositions in play with the FTZ? Is it worth it?

3 About IMS Worldwide Inc. IMSW has completed over 345 FTZ Projects during 39+ years. We have conducted 36 Logistics/Drayage studies for Industrial RE firms, RRs and land owners. We work with Large Gateway Zones (Houston, LA, Miami, Dallas, Chicago, PHX, El Paso and NJ) We work with Fortune 1000 companies: Target, The Limited, Dell, Home Depot, Abbott Labs, TJX, Dicks Sporting Goods, We work with the TOP Ten 3PLs, including Crane WW, FedEx, UPS, OHL, Exel Logistics, Yusen, NFI, Nippon Express, etc. We work with the largest REITs in the USA: Prologis, Duke, Majestic, Clarion, USAA, Div Capital/IIT, etc. Foreign Trade Zone, Logistics and Supply Chain Consulting

4 IMSW s FTZ Users total = Foreign Trade Zone, Logistics and Supply Chain Consulting

5 IMS Worldwide 40 Years of FTZ Services throughout the USA NEW IMSW CLIENTS 2016

6 What is an FTZ? A Foreign Trade Zone (or Free Trade Zone) is a Federal Program, started in 1934 and in use in all 50 states today. The FTZ allows Federal Taxes and Fees to be lowered, eliminated, or exempt from payment. State taxes are lowered in TX and AZ. Anyone any business who qualifies can get it.

7 FTZ Authority Structure Secretary Of Commerce U.S. Foreign-Trade Zones Board Secretary of Treasury/DHS Local Grantee Local Customs Port Director Site 1 Grantee/Operator Agreement(s) Customs Regulations Usage Driven Site Operator Sub-Zone Operator Zone Operator (Single or Multiple) Site 2 (Industrial Park) Zone User Zone User Zone User Customs Broker Customs Broker Customs Broker

8 Value Proposition: FTZs Cut Costs MPF Fees went up 60% in 2012.not reducing. 35% of Top 100 Importers Using FTZs Now! Customers need Cost Cutting Solutions inside the Supply Chain. Most 3PLs and FF s are rolling out FTZ services at their Gateway Sites Who knows what Trump will do.but duties (CVD/AD) are guaranteed to go UP! Foreign Trade Zone, Logistics and Supply Chain Consulting

9 FTZ Key Value Propositions Key Value Proposition #1 = The ability to receive goods faster = Direct Delivery Key Value Proposition #2 = Weekly Entry, Lowering MPF the easy way. Key Value Proposition #3 = Inverted Tariff Benefit, lowering COGS for manufacturers. Key Special Cases = No Drawback on AD/CVD, but with FTZ, no worry! This is very Important in Houston, LA, Chicago as there are many Oil Field products with AD/CVD duty attached. Foreign Trade Zone, Logistics and Supply Chain Consulting

10 FTZ Key Value Propositions DIRECT DELIVERY: This Zone procedure allows for 1 2 days improvement in the in bound supply chain time! Black and Decker Skechers Huffy, all get 1 day faster Container Delivery!! CONSOLIDATES TIME AND FORMS: This procedure allows for 1 Form per day, not a form per BL. MUCH FASTER + EASIER Foreign Trade Zone, Logistics and Supply Chain Consulting

11 Value Proposition #2 MPF Fees Cut by 90% CBP charges Fees to process Entry paperwork. Like the PFC you pay on all Flights, the MPF fee is charged per ENTRY. An entry is equal to 1 Bill of Lading (BL). A BL = 1 Container/Air Cargo Shipment These MPF fees Customs charges are approx $200 $500 per Entry = $10,000 s per week typically. FTZ Weekly Entry reduces this to 500/WEEK!!

12 30 receipts inbound per week. MPF $15,204 Shipments into Site In a single week an FTZ importer can save $15,204/week in MPF Fees, or $790,647/YR Pre-Foreign-Trade Zone 75 shipments out per week; one entry filed at End of week. MPF $485 Shipments into commerce with weekly entry Foreign-Trade Zone

13 An FTZ Allows Me to Alter Duty Rates! Value Prop #3 If my parts (imported) carry ANY duty at all: AND my finished product -- which I manufacture or assemble can be imported by a competitor directly---at 0% Duty--- I CAN GET THE SAME BENEFIT! Whether it s electric motors, lighting, satellite parts, solar panels, refrigerators, rolling machines, WHATEVER!! Some Restrictions Apply!!

14 Example Manufacturing using a 3PL Circuit City Import DC (could be LG, Panasonic, Pioneer, Denon, etc, etc) Speakers in from Korea, DVD Players in from China. 3PL, FTZ operation packs speaker set into the DVD set to make Home Theater Master Carton Savings on $10 Million in import Speakers.

15 Benefit to the Client Pick and Pack Customer Assumptions Annual Value of Goods $250,000, Average Duty Rate-Components 4.90% Containers per Year 5000 Containers per Entry 7 Entries per Year 714

16 Benefit to the Client Non-FTZ FTZ Duty $7,500, $7,500, MPF $552, $25, Xtra cost - Speakers 4.9% $490, $0.00 Broker Entry Fees $71, $ 13, Broker Admission Fees $0.00 $ 35, FTZ Admin Fees $0.00 $ 61, Total Costs $8,613, $7,635, Client Net FTZ Savings $0.00 $978,008.57

17 How 3PL s (Air Cross Dock) Fast Deployment Whse Works NO Change in basic process It is still a Cross Dock Same Transloading Process, but now, an FTZ. NO change in the out bound transportation process. NO change in cleared goods received at factory or distribution center. This process simply captures the MPF exactly the same as your customer s supply chain today. We call this a Fast Deployment Warehouse. Foreign Trade Zone, Logistics and Supply Chain Consulting

18 Operational Benefits Consolidation of shipments (same as is done today via a cross dock) One set of Entry docs per week per importer, instead of per Bill of Lading A single process flow for all suppliers A centralized CBP clearance process Limited interaction with inspections Foreign Trade Zone, Logistics and Supply Chain Consulting

19 Airport or Ocean Existing Import Process Incoming Cargo Multiple Entries De-Consol Center DC or Factory Domestic Delivery Factory or Stores J-I-T Delivery

20 Proposed Process All cargo is brought to the Zone and received via manifest quantity. Any damaged product is segregated. All cargo is consolidated onto trucks for transport. A Weekly Entry is filed for all the cargo. By importer of record (Customer)

21 Proposed FTZ Cross Dock Operations Airport or Ocean Incoming Cargo FTZ De- Consolidation Center Weekly Single Entry DC or Factory SAME Domestic Delivery! Factory or Stores J-I-T Delivery

22 Benefits Vendors/Importers save an average of $300,000 $1,000,000 per year in MPF, net of Zone Operator Fees. This amount of savings allows the cross dock service provider to rebate up to 50% 75% of the costs of their core service! For cross dock operations, the MPF is found $$, NET OF ALL COSTS!! These $$ are from the US Gov!

23 Key Drivers for Sr. Management FTZs are real Supply Chain cost reducers: They can take $300,000 to $Millions out of logistics costs. FTZs are more easy to manage now: Software has become simpler, all forms are electronic, Brokerage is protected. Multiple locations operated from HQ! FTZs are CTPAT Best Practice. It used to be all about transaction costs not duties, but with Trump s rhetoric, it will be BOTH, again. Weekly Entry is HUUUUGGGE! Foreign Trade Zone, Logistics and Supply Chain Consulting

24 Conclusion FTZ Take away The only functional difference under FTZ transload, or DC which is different than today s import customer operation, is that the entry is pushed to weekly, instead of 5 days prior to arrival. The importer shifts the Broker into filing the E 214, instead of an Entry, and the FTZ collects the MPF for the importer Scale = 100 FEUs cross docked per week = approx. $9,500 (gross) MPF saved WEEKLY This = a Gross of approx. $494,000/year Net to Client = $300,000/year!

25 Curtis D. Spencer IMS Worldwide, Inc. Spring 2017 QUESTIONS?