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Foreign Trade Zone
The City of Texas City operates a Foreign Trade Zone (#199) in accordance with the Foreign Trade Zone Act. The Foreign-Trade Zones Act was created to "expedite and encourage foreign commerce" in the United States. This is accomplished through the designation of geographical areas, in or adjacent to Customs Ports of Entry, where commercial merchandise receives the same Customs treatment it would if it were outside the commerce of the United States. Merchandise of every description may be held in the Zone without being subject to Customs duties and other ad valorem taxes. This tariff and tax relief is designed to lower the costs of U.S.-based operations engaged in international trade and thereby create and retain the employment and capital investment opportunities that result from those operations.

These special geographic areas — Foreign-Trade Zones — are established "in or adjacent to" U.S. Ports of Entry and are under the supervision of the U.S. Customs Service. The primary mission of Foreign Trade Zone #199 is to provide the local petrochemical industries and other enterprises engaging in international commerce with a competitive global marketing advantage that stimulates expansion of their operations and enhances the local, state, and national economies. A U.S.-based manufacturer can bring foreign-sourced parts or materials into the Zone, pay no duty, incorporate those parts or materials into a finished product using U.S. parts and labor, and, if the finished product entered the U.S. commerce, pay duty on the value of the foreign non-duty-paid content only.

The City of Texas City oversees Foreign Trade Zone #199, and allows interested parties to create a subzone that is then operated by the business and then provides reports to the City. There are a number of consultants and sources with information as to how the ability of a company to create a subzone for a Foreign Trade Zone is available. The City of Texas City will work with the company after an agreement is prepared. Local Ad Valorem taxes are still paid under the agreement, but all other benefits of the Foreign Trade Zone are provided to the business. A brief summary follows:

  • DUTY EXEMPTION ON RE-EXPORTS: If merchandise is re-exported after being placed in a FTZ or shipped to another FTZ and then re-exported, then no duty is ever paid.
  • RELIEF FROM INVERTED TARIFFS: Generally, if foreign merchandise is brought into a FTZ or Subzone and manufactured into a product that carries a lower duty rate, then the lower rate applies.
  • DUTY ELIMINATION ON WASTE AND SCRAP: No duty is charged on most waste and scrap from production in FTZs.
  • NO DUTY ON REJECTED OR DEFECTIVE PARTS: Merchandise found to be defective or faulty may be returned to the country of origin for repair or simply destroyed. Whichever choice is taken, no duty is paid. Many companies suffer from the "double duty crunch." That is, they pay duty on imported merchandise, find it to be faulty and return it to the country of origin for repair, and then pay duty again when the merchandise reenters the United States. If you are a FTZ user or Subzone, the "double duty crunch" is never a problem, because your merchandise never enters the commerce of the United States.
  • DUTY DEFERRAL: No duty is ever charged on merchandise while it is in a FTZ, and there is no limit on the length of time merchandise may be kept in a FTZ. By deferring the duty, capital is freed for more important needs.
  • NO DUTY ON DOMESTIC CONTENT OR VALUE ADDED: The "value added" to a product in a FTZ (including manufacture using domestic parts, cost of labor, overhead and profit) is not included in its dutiable value when the final product leaves the Zone. Final duties are assessed on foreign content only.
  • NO DUTY ON SALES TO THE U.S. MILITARY OR NASA: No duty is charged on merchandise sold from a FTZ to the U.S. Military or NASA, returned to the country of origin for repair or simply destroyed. Whichever choice is taken, no duty is paid.

Links to sources on the Foreign Trade Zone:

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