Post on 29-Nov-2014
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Presented by:
Jim Chester J.D., LL.M, CHB, CCS
About Jim Chester Managing Attorney, CHESTER pllc Of Counsel, Klemchuk Kubasta, LLP
Adjunct Professor, Baylor University School of Law
I advise entrepreneurs, start-ups and privately-held companies of all sizes in a variety of industries regarding trademark, copyright, and trade secret protection, licensing & enforcement in the US and abroad. In addition, I assist companies in international business transactions and joint ventures. To date, I have advised clients on business deals involving almost 100 countries. I also coordinate with foreign counsel on legal projects around the world on behalf of U.S. clients, and serve as legal advisor to foreign companies doing business with or in the U.S. Of course, to be an effective international business attorney, I must also have significant experience and expertise handling domestic business matters, including entity formations, transactions, acquisitions, contracts and other legal issues commonly faced by my clients. MY international practice also involves advising clients regarding international trade regulations, including compliance and enforcement issues involving Customs/import and export laws, ITAR, and the FCPA. I have represented numerous clients before US Customs & Border Protection, US Department of Commerce, US Department of Defense Trade Controls, the Office of Foreign Asset Controls, the US International Trade Administration, and other state, federal and foreign governing bodies and agencies. In addition to being admitted to practice law in Texas and Washington, DC., I am a licensed US Customs Broker. In addition to my work at the firm, I am an adjunct professor of law at Baylor University Law School, teaching courses on International Trade Law and International Business Transactions. I also previously served as an adjunct professor of Business Law at the University of Dallas.
HONORS “Super Lawyers - Rising Stars Edition,” Law & Politics Magazine published in Texas Monthly & Texas Rising Stars (2008, 2009, 2011) “AV® Preeminent” Peer Review Rating by Martindale Hubbell®
EDUCATION LL.M., International Economic Law, University of Houston School of Law, 2000 J.D., South Texas College of Law (Law Journal, Varsity Mock trial), 1997 B.S., Economics/Political Science (Double major), magna cum laude, Texas A&M University, Commerce, 1994
CREDENTIALS Licensed U.S. Customs Broker Certified Customs Specialist (NCBFAA) Admitted to practice in Texas & Washington, DC
Foreign-Trade Zones (FTZs)
Areas located in the United States, but designated by the federal government as lying outside the U.S. Customs territory
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Foreign-Trade Zones (FTZs)
Created by FTZ Act of 1934
FTZs are in all 50 states, plus Puerto Rico
FTZ received $180 billion in merchandise - 87% into Subzones Employment at zone sites is approx. 350,000
Exports from FTZs = $18 billion
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Foreign-Trade Zones (FTZs)
Currently about 250 general purpose FTZs have been granted Plus over 500 special purpose
“Subzones”
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Types of Industries Using FTZs
Automotive
Oil Refining
Pharmaceuticals
Computers
Telecommunications
Other High-Tech
Chemicals
Shipbuilding
Apparel
Aerospace
Medical
Other Consumer Products
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General Purpose FTZs
Granted to a public, non-profit entity
Many possible users and uses
Must be within 60 miles (or 90 minutes drive) of Customs Port of Entry
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Dallas Area FTZs
General Purpose FTZs
D/FW Airport (39)
Midlothian (113)
Dallas (168)
Alliance Airport (196)
Durant, OK (227)
Waco (246)
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FTZ Subzones
Cannot be accommodated within existing General Purpose FTZ
Attached to General Purpose FTZ
Typically designated for a single company’s operations
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Dallas Area FTZs
Subzones
General Motors (Arlington)
Sanden International (Wylie)
Pier 1 Imports (Mansfield)
Fossil Partners (Richardson)
Zale Corp. (Irving)
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FTZ Benefits - Domestic Economy
Job creation/preservation
Economic Growth
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FTZ Benefits - Private Industry
No duties are owed until goods are shipped from FTZ into Customs territory
No duties incurred for goods exported
Duties reduced or eliminated on materials subject to defect, damage, obsolescence, waste and scrap
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Choice of paying duty on raw materials or on final products, whichever is lower
Can hold quota merchandise in FTZ until window opens (limited)
No hassle of Customs clearance and duty drawback
Materials consumed in FTZs not subject to duties
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FTZ Benefits - Private Industry
Most FTZ merchandise exempt from local and state ad valorem taxes
Can transfer goods to other zones without paying duty
Ability to take advantage of special Customs programs (e.g., weekly entry procedure)
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FTZ Administration: FTZ Board
Agency within the Department of Commerce
Comprised of the Secretary of Commerce and Secretary of the Treasury.
Day-to-day administration by Executive Secretary
Issues and administers FTZ grants pursuant to its regulations (15 CFR Part 400)
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FTZ Administration: Customs
Customs & Border Protection (CBP/Customs)
Part of Department of Homeland Security
Local representative of FTZ Board
Supervise FTZ operational activities pursuant to Customs’ FTZ regulations (19 CFR Part 146)
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Establishing an FTZ
Application to FTZ Board Must show “public benefit” from FTZ
Approval often takes approximately 1 year
“Grantee” receives the grant of authority to establish the FTZ
Grant defines FTZ scope and activity
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Establishing an FTZ
Activation by CBP
“Operator” activates the zone by getting Customs approval of procedures
Operator must post a special “FTZ Operating Bond” in addition to the import bond, if applicable
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FTZ Operations: Terminology
Entry Customs Entry
Goods are imported and duties are assessed
vs.
Admission Goods brought onto FTZ
No Customs entry
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FTZ Operations: Admissions
Customs Form 214
Declare status of the goods
Domestic Privileged Foreign
Non-Privileged Foreign
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FTZ Operations: Domestic Goods
U.S. origin goods, or goods that have already been entered into U.S. Customs territory and duty (if any) has been paid.
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FTZ Operations: Privileged Foreign (PF) Goods
Locks-in the duty on the raw materials on the date they are admitted into the zone
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FTZ Operations: PF Duty Savings Example
ABC, Inc., admits three components into an FTZ
If duties were assessed on the components, they would total $200
Once the components are assembled into the final product, they are imported into the U.S.
Duties on the final product total $1,000
ABC, Inc., pay only $200 in duties
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FTZ Operations: Non Privileged Foreign (NPF) Goods
Duty will be assessed on the finished products as a whole, not on the raw materials A.k.a. “Inverted tariff ”
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FTZ Operations: Inverted Tariff (NPF)
Example
ABC, Inc., admits three components into an FTZ
If duties were assessed on the components, they would total $1,000
Once the components are assembled into the final product, they are imported into the U.S.
The final product qualifies for duty-free entry
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FTZ Operations: Zone Restricted Goods
Goods admitted onto the FTZ for use only in the FTZ
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Activity in the FTZ
Mixing
Assembly
Display
Storage
Testing
Repairing
Processing
Salvage
Labeling
Destruction
Repackaging
Cleaning
Sampling
Manufacturing (1949)
Refining
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Activities Prohibited in FTZs
Retail Trade
Living in the FTZ
Any other activities prohibited by US law
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General Purpose Zones Little Up-front cost Ongoing (mostly out-source)
E.g., Document and storage costs of FTZ operator
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Subzones Up-front cost (application, activation, software)
$100k - $200k (some savings if more than one zone at a time)
Ongoing -- depends on in-house v. outsource
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Contact Us
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Email info@chester-law.com 214.988.9248
Toll Free 877-34-WORLD