Bonded Warehouses and FTZs: Differences and Benefits
Bonded warehouses and foreign-trade zones (FTZs) are often times confused. Let’s take a look at the important differences and benefits of each.
What is a bonded warehouse?
According to the U.S. Customs and Border Protection (CBP), bonded warehouses are buildings or other secured areas in which imported dutiable merchandise may be housed or manipulated, and companies can assume manufacturing operations without the payment of duty.
What is a FTZ?
FTZs are secure areas in or adjacent to a U.S. port of entry where commercial merchandise, both domestic and foreign, receive the same treatment by CBP as if it were outside the commerce of the United States. FTZs are the U.S. version of what are known internationally as free-trade zones.
Ingram Micro’s network
Throughout the Ingram Micro network, a mix of FTZs and bonded warehouses offer merchants the benefits of cost savings, increased cash flow and greater supply chain flexibility. These locations include:
- Asia: Bonded warehouse in Shenzhen, China within the Qianhai free-trade zone
- European Union: Bonded warehouse in Tilburg, Netherlands with Ingram Micro WMS (IM First) supported
- North America: FTZs in Miami, Harrisburg, Pa., and Plainfield, Ind.
Note the two main differences between bonded warehouses and FTZs in the U.S.
- The time frame in a FTZ is unlimited; however, inventory can only be stored for up to five years in a bonded warehouse.
- FTZs receive the benefit of the Merchandise Processing Fee (MPF). There is a .3464% on shipments; however, this amount cannot exceed $485. Companies only pay the MPF for a consolidated entry. If you have 10 shipments that week by multiple modes, that would be $4,850. With an FTZ, that amount decreases to $485.
Advantages | U.S. Bonded Warehouse | U.S. Foreign-Trade Zone |
Tax and duty exemption from paying when the shipment arrives | X | X |
No duties paid on re-exported goods (which eliminates the duty drawback process) | X | X |
Increased cash flow, because you don’t have money held up in duties and taxes | X | X |
Manufacturing is allowed within an FTZ, and if widget 1 and widget 2 are combined to make widget 3 – you will only pay duties and taxes on widget 3. | X | X |
Cost savings due to consolidated Merchandise Processing Fee (MPF) | X |
While potentially significant cost savings exist with FTZs, there’s a lot to consider: additional customs paperwork, getting the zone activated and software management.
One of the best resources on FTZs is the Annual FTZ Report. For information about bonded warehouses, check out the CBP Bonded Warehouse Manual.