Indiana’s Foreign-Trade Zone program is administered by the Ports of Indiana. Foreign-trade zones (FTZs) are designated locations in the United States where companies can use special procedures to reduce, delay or eliminate duty payments on foreign merchandise. Regulated by the U.S. Foreign-Trade Zone Board and U.S. Customs and Border Protection, FTZs are designed to help local companies compete in global markets while creating, attracting and retaining American jobs. Indiana’s FTZ users represent a wide range of industries including manufacturing, warehousing, automotive, pharmaceuticals, electronics, furniture, petroleum, London Metals Exchange facilities and many others.
Companies can use foreign-trade zones to:
- Conduct processing and assembly operations while deferring the payment of import duties until the product formally enters U.S. Customs Territory
- Combine foreign and domestic components in order to qualify for lower duties
- Avoid payment of duties on materials lost in manufacturing
- Inspect goods for quality, breakage, and loss before import duties are paid
- Exhibit or market goods prior to making duty payments
- Schedule Customs entries around inventory turnover or sales cycles
- Store goods while awaiting a favorable exchange rate
Here are some questions that can help assess whether foreign-trade zones could benefit your company. If the answer to any of these questions is ‘yes’ then foreign-trade zones might be able to create some cost savings for your company.
- Does your company pay duties on imported materials or merchandise?
- Would it be important for your company’s cash flow to delay or spread out the payment of duties?
- Does your company eventually export some of your imported products?
- Does your company manufacture, assemble, kit or process imported items into other products?
- If your company manufactures or assembles a product using foreign parts or materials, do you eventually export some of the finished products?
- Does your company do any repackaging or relabeling of imported products?
- Does your company do any testing or repairing of goods previously exported?
- Does your company experience substantial losses from damaged or defective imports?
- Does your company’s use of imported materials produce substantial scrap or waste?
- Does your company import items for display or exhibition?
- Are some of your imported items not in compliance with federal agencies such as the FDA, DOT, EPA or USDA?
- Does your company purchase parts or materials domestically that may be imported by your vendors?
- Are any of your customers or suppliers located in a foreign-trade zone?
- Does your company make multiple Customs entries in one week?
Indiana is a leader in the U.S. foreign-trade zone (FTZ) program and regularly ranks near the top of all states for foreign-trade zone activity, including exports, imports, employment and number of firms.
In 2011, the Ports of Indiana became the first grantee in the country to receive approval for use of a new streamlined FTZ designation on multiple zones. The new “Alternative Site Framework” (ASF) designation was created by the U.S. Foreign-Trade Zone Board to reduce the time and paperwork required to establish an FTZ, in some cases reducing the timeframe from a year to 30 days. By 2014, 99 percent of the state had received ASF designation, clearing the way for Indiana companies to access FTZs in less time and at a lower cost than ever before.
As a statewide administrator of foreign-trade zones, the Ports of Indiana serves as a grantee for FTZ applications in counties surrounding its three ports and authorizes additional grantees to sponsor FTZs in other areas of the state. The U.S. FTZ program is administered like a public utility with the mission to facilitate international trade and create economic development by providing benefits and services for companies looking to compete in a global marketplace.
In order to acquire an FTZ designation, companies must qualify and obtain sponsorship of their application from the appropriate Indiana grantee organization prior to applying to the U.S. Foreign-Trade Zones Board. The counties that lie within each jurisdiction are outlined in Indiana’s Foreign-Trade Zone Grantees section.
The map shows FTZ grantees for Indiana counties under the new Alternative Site Framework (ASF) designations:
Grantee: Ports of Indiana
- FTZ #152 – Burns Harbor
- FTZ #170 – Clark County
- FTZ #177 – Evansville
Contact: Andrea L. Hermer (317) 232-9203
150 W. Market St., Suite 100, Indianapolis, IN 46204
Grantee: Indianapolis Airport Authority
- FTZ #72 – Indianapolis
Contact: Kent Ebbing (317) 487-7200
P.O. Box 51681, Indianapolis, IN 46251
Grantee: St. Joseph County Airport Authority
- FTZ #125 – South Bend
Operator: K.A.K. LLC
Contact: Mike Guljas (574) 233-2185, ext 223
1507 South Olive, P.O. Box 3559, South Bend, IN 46619
Grantee: City of Fort Wayne
- FTZ #182 – Fort Wayne
Contact: Elissa McGauley (260) 427-2162
200 East Berry St., Fort Wayne, IN 46802
Companies should inquire with the appropriate grantee for information about applying for an FTZ designation. The new ASF designation generally offers the most streamlined activation process for obtaining a zone status, but subzones are also still available.
Indiana’s Subzones include:
72B – Eli Lilly & Co.
72F – DaimlerChrysler
72G – DaimlerChrysler
72H – Subaru of Indiana Automotive Inc.
72I – Alpine Electronics Manufacturing
72J – Endress & Hauser Flowtec AG
72K – Onkyo America Inc.
72L – Thomson Multimedia Inc.
72M – Fujitsu Ten Corporation of America
72N – Alfa Laval Distribution Inc.
72O – Tetra Pak Parts Americas LLC
72P – SMC Corporation of America
72Q – Rolls-Royce Corporation
72S – Brightpoint North America LLP
72T – GEA Bloomington Production Operations LLC
125D – ASA Electronics LLC
125E – Thor Industries Inc.
152B – BP Products North America
170A – Lexmark International
170B – Kremers Urban Pharmaceuticals
177A – Bristol Myers Squibb Company
177B – Toyota Motor Manufacturing
177C – Pfizer Inc.
177D – Mead Johnson & Co.
Here are some examples of cost savings that can be experienced in foreign-trade zones.
Cash Flow – The postponement of Customs duty payments on imported merchandise in an FTZ can result in significant savings for companies. There are two ways to look at the cash flow benefits:
- “FTZ Borrowing Reduction Savings” – Many companies would count the delayed cash outlay as savings. If a company has $25 million in inventory that would normally be subject to a 6% Customs duty, the FTZ creates a Borrowing Reduction Savings of $1.5 million ($25 million x 6% Customs duty rate).
- “FTZ Interest Savings” – Another more conservative approach to measure cash flow savings is to multiply the amount of Custom duties ($1.5 million in the previous example) by a suggested interest rate (5%). This equals $75,000 in Interest Savings.
Inverted Duty – Inverted duties may be the most significant benefit of FTZs. For companies that perform manufacturing or processing, imported parts often have higher Customs duty rates than finished products.
For example, a company may import materials with a 6% Customs duty but during the process of manufacturing or “kitting” (placing multiple items together in one kit) various parts are transformed into a completely different finished product with a 0% Customs duty rate in some cases. If the process is conducted inside an FTZ, the company would save $6 million for every $100 million of imported parts ($100 million x 6% Customs duty).
Inverted duties help create a level playing field for American manufacturers by placing U.S. production facilities in the same financial position in regard to U.S. Customs duties as foreign production facilities.
Processing and Broker Fees – Under zone procedures, individual or daily Customs entries can be replaced by one Customs entry per week (two for NAFTA countries). The reduction in paperwork, Customs Merchandise Processing Fee, and brokerage expense can be significant.
A sample Customs broker fee is $125 per entry and the Merchandise Processing Fee is 0.21% (maximum $485 per entry). If a company averages 20 entries per week, or 1,040 entries per year, there are significant savings by reducing this to 52 weekly entries per year.
Here is a sample cost comparison using weekly entries in an FTZ:
|Cost without FTZ||Cost in FTZ with Weekly Entries||FTZ Savings|
|Merchandise Processing Fees||$504,400||$25,220||$479,180|
|Customs Broker Fees||$130,000||$6,500||$123,500|
Waste – FTZ status can enable companies to avoid paying Customs duties on imported merchandise that becomes scrap, waste or obsolete during receiving, manufacturing, processing, storing or shipping.
If a company imports $100 million of materials with a 6% Customs duty, and 3% of the materials are scrapped or wasted in the zone, the company could avoid paying $180,000 in Custom duties on the imported material ($100 million x 3% waste x 6% duty).
Exports – A company can generate significant financial savings by avoiding Customs duty payments, merchandise processing fees, and the significant complexity and expense of trying to claim duty drawbacks on exported products.
If a company imports $100 million in materials with a 2% Customs duty rate and then exports $20 million of those products, an FTZ would provide $400,000 in savings ($20 million x 2% Customs duty).
Zone-to-Zone Transfers – Merchandise can be transferred in bond to between zones and subzones without a Customs entry, which could create considerable savings. This is difficult to quantify, but it is significant because it can attract business from new customers or suppliers located in other zones.
Companies must qualify and obtain sponsorship of applications for FTZ designation within areas under the Ports of Indiana jurisdiction prior to submitting them to the U.S. Foreign-Trade Zones Board.
The Ports of Indiana services the following counties surrounding its three ports in the northwest and southern parts of the state: Lake, Porter, LaPorte, Starke, Newton, Jasper, Pulaski, Fulton, Sullivan, Knox, Daviess, Martin, Orange, Gibson, Pike, Dubois, Crawford, Posey, Vanderburgh, Warrick, Spencer, Perry, Brown, Jackson, Ripley, Dearborn, Ohio, Washington, Scott, Jefferson, Switzerland, Harrison, Floyd and Clark.
Here is a general outline of the process for obtaining foreign-trade zone status from the U.S. Foreign-Trade Zones Board:
- 1. Contact the Ports of Indiana to request an FTZ Packet.
- 2. Conduct internal review to determine viability of FTZ use.
- 3. Submit Letter of Intent and Project Description to Ports of Indiana.
- 4a. Negotiate Operating Agreement with Ports of Indiana.
- 4b. Begin preparing application to U.S. FTZ Board.
- 5. Submit final Operating Agreement and FTZ Application to Ports of Indiana for approval.
- 6. Submit final application to U.S. FTZ Board with Ports of Indiana letter of sponsorship.
- 7. Secure Concurrence letter from U.S. Customs and Border Protection
Cost considerations for establishing and maintaining foreign-trade zones will vary greatly depending on the type of operations conducted in a zone. The following estimates are intended to provide companies with a general idea about the costs involved in obtaining a zone designation.
Consultant Fees – It is the responsibility of the company seeking an FTZ to perform its own due diligence in determining if the program is a good fit and preparing the required applications and filings. This work is generally done by an experienced FTZ lawyer or a national accounting firm. These fees vary greatly; however, the Ports of Indiana has encountered consultant fees in these ranges:
- Site Application or Boundary Modification: $5,000 (likely to be less)
- Production Application: $5,000-$10,000 (could be less depending on specifications)
- Activation Fee: $15,000-$60,000 (varies greatly depending on inventory management systems and complexity of operations)
Inventory Management System – The company will likely have to adopt an inventory control and accounting system that is compatible with operating within an FTZ. Costs are completely dependent upon the company’s system needs.
Filing Fees – The Ports of Indiana became the first grantee in the country to have multiple zones approved for the new “Alternative Site Framework” (ASF) designation, which can eliminate the need for filing fees with the U.S. Foreign-Trade Zone Board. One-time filing fees are required for other types of zones designations, including:
- General-Purpose Zones: $3,200
- Special-Purpose Subzone – Non-manufacturing (or less than three products): $4,000
- Special-Purpose Subzone – Manufacturing/Processing (three or more products): $6,500
- Expansions: $1,600
Operating Fees – As a grantee, the Ports of Indiana provides a first level of approval for applications being submitted to the U.S. Foreign-Trade Zone Board, but it does not collect any fees in connection with the application or due diligence process. Once the application process is underway, the company or its operator will enter into an Operating Agreement with the Ports of Indiana, with an annual administrative fee as follows:
- Non-Manufacturing Zone: $10,000
- Manufacturing Zone: $20,000
Fees are subject to change. Please refer to the U.S. Foreign-Trade Zone Board’s website at http://ia.ita.doc.gov/ftzpage for current filing fees, and the Ports of Indiana’s current Zone Schedules.
What is a Foreign-Trade Zone?
A foreign-trade zone is a designated location in the United States where companies can use special procedures that help encourage U.S. activity and value added – in competition with foreign alternatives – by allowing delayed or reduced duty payments on foreign merchandise, as well as other savings.
A site which has been granted zone status may not be used for zone activity until the site has been separately approved for FTZ activation by local U.S. Customs and Border Protection (CBP) officials, and the zone activity remains under the supervision of CBP. FTZ sites and facilities remain within the jurisdiction of local, state or federal governments or agencies.
What is the ASF?
The “Alternative Site Framework” (ASF) is an optional framework for organizing and designating sites that allows zones to use quicker and less complex procedures to obtain FTZ designation for eligible facilities.
To reorganize under the ASF, each zone grantee will propose a “service area”. Once approved by the FTZ Board, a subzone or usage-driven site can be designated anywhere in the service area within 30-days using a simple application form. The ASF allows zone designation to be brought to any company that needs it, eliminating the need for zone grantees to predict where the zone will be needed and pre-designate sites.
Who is on the Foreign-Trade Zones Board?
The Foreign-Trade Zones Board is comprised of the Secretary of Commerce and the Secretary of the Treasury. The Board is chaired by the Secretary of Commerce. The Commissioner of U.S. Customs and Border Protection also plays a key role, as it did prior to its recent move from Treasury to the Department of Homeland Security, providing a position during the FTZ Board voting process with respect to customs security, control, and resource matters. The Board has delegated action authority on most matters to a Committee of Alternates, which is composed of the Assistant Secretary of Commerce for Enforcement and Compliance and the Deputy Assistant Secretary of the Treasury for Tax, Trade, and Tariff Policy.
What are the benefits to a zone user?
- Duty Exemption. No duties on or quota charges on re-exports.
- Duty Deferral. Customs duties and federal excise tax deferred on imports.
- Inverted Tariff. In situations where zone production results in a finished product that has a lower duty rate than the rates on foreign inputs (inverted tariff), the finished products may be entered at the duty rate that applies to its condition as it leaves the zone (requires prior authorization from the U.S. Foreign-Trade Zones Board).
- Logistical Benefits. Companies using FTZ procedures may have access to streamlined customs procedures (e.g. “weekly entry” or “direct delivery”).
- Other Benefits. Foreign goods and domestic goods held for export are exempt from state/local inventory taxes. FTZ status may also make a site eligible for state/local benefits which are unrelated to the FTZ Act.
What are the public benefits?
- Help facilitate and expedite international trade.
- Provide special customs procedures as a public service to help firms conduct international trade related operations in competition with foreign plants.
- Encourage and facilitate exports.
- Help attract offshore activity and encourage retention of domestic activity.
- Assist state/local economic development efforts.
- Help create employment opportunities.
What activity is permitted in zones?
- Merchandise in a zone may be assembled, exhibited, cleaned, manipulated, manufactured, mixed, processed, relabeled, repackaged, repaired, salvaged, sampled, stored, tested, displayed and destroyed.
- Production activity must be specifically authorized by the FTZ Board. (Production activity is defined as activity involving the substantial transformation of a foreign article or activity involving a change in the condition of the article which results in a change in the customs classification of the article or in its eligibility for entry for consumption.)
- Retail trade is prohibited in zones.
What products can be placed in a zone?
- Any merchandise that is not prohibited from entry into the territory of the U.S. may be admitted to a zone.
- If applicable, import licenses or permits from other government agencies may still be required to bring the merchandise into the zone.
Where can a zone be located? are available on the U.S. Foreign-Trade Zone Board website.
- U.S. Foreign Trade Zone Board
- FTZ #152 Zone Schedule (Port of Indiana-Burns Harbor)
- FTZ #170 Zone Schedule (Port of Indiana-Jeffersonville)
- FTZ #177 Zone Schedule (Port of Indiana-Mount Vernon)
- National Association of Foreign-Trade Zones
- Export Assistance Centers
- International Trade Commission – Information on duty rates and HTSUS numbers
- U.S. Census Bureau – for information on foreign trade statistics
- US Customs and Border Protection
Foreign-Trade Zones Board – U.S. Department of Commerce
1401 Constitution Ave., NW, Room 21013 Washington, DC 20230
U.S. Customs – Regional Offices
101 N.W. Martin Luther King, Jr. Blvd.
Winfield K. Denton Federal Bldg–Rm 116
Evansville, IN 47708
Indianapolis International Airport
6801 Pierson Drive
Indianapolis, IN 46241
12602 Global Drive
Yoder, IN 46798
5600 Pearl St.
Rosemont, IL 60018
Louisville International Airport
650 Administration Drive
Louisville, KY 40209
4243 Olympic Blvd., Ste. 210
Erlanger, KY 41018
Foreign Trade Zone Schedules and Calculator