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V O L . X X I I I N O. X V I 52 FA C T BO O K / D O I N G B U S I N E S S I N M A I N E SE IT Services Where technology and business unite. 888.624.6737 syseng.com/ITME Benefit from foreign trade zones M aine importers looking to reduce costs could benefi t from being part of a Foreign Trade Zone. Import duty reduction or elimination of duties may be possible within a zone. A foreign trade zone is a secure area under the supervision of Customs and Border Protection and is not considered part of U.S. Department of Commerce jurisdiction. Foreign-sourced goods may be admitted into the zone not subjected to customs import entry formalities. Let's look at two zone benefi ts: 1. Duty exemption: Neither duties, nor quota charges, are assessed on zone admitted foreign-sourced items utilized as components in exported fi nished goods. 2. Inverted tariff: When approved zone production results in a fi n- ished product with a lower duty rate than the rate on its foreign-sourced component(s), the fi nished product may be entered at the duty rate that applies to its condition as it leaves the zone and enters the jurisdiction of the Department of Commerce. When some think of foreign trade zones, they may think of the traditional site framework that is geographically limited. In 2009, the Foreign-Trade Zone Board created the so-called alternative site framework, streamlin- ing the process. In Maine, Auburn, Waterville and Bangor zones have the designation. e Lewiston Auburn Economic Growth Council received grant of authority from the Foreign-Trade Zone Board to establish, maintain and oper- ate the Auburn foreign trade zone. Under traditional approval, the zone was limited to the area adjacent to the Auburn Airport. Under alternative site framework, the airport is considered the magnet site and remote sites, referred to as usage-driven sites, can be approved throughout Androscoggin, Sagadahoc and Cumberland counties. How does a zone eliminate import duty? Say a Scarborough manufac- turer, Company A, has been importing titanium in bar stock form at a duty rate of 15.5% to manufacture Widget Z for a customer in Sweden. Company A, through Auburn's grantee, the Lewiston Auburn Economic Growth Council, has been approved and receives production authority for a usage-driven site. Company A opts to include its manufacturing fl oor, but not its administrative offi ces or warehouse. Company A now admits the titanium bar stock into its usage-driven site, not subjected to import formalities or duty. Widget Z is manufactured from the titanium within the site complete, and exported directly from the site. No import duty on the titanium is assessed, as it never entered Department of Commerce jurisdiction. Import duty is commonly used to balance trade and, in some cases, there's the unintended eff ect of cre- ated an inverted duty, which is when the import duty of a fi nished good's foreign-sourced components is greater than the import duty of the fi nished good if imported complete. How does a zone provide relief from inverted duty? Back to Company A. It lands a contract with Boeing to manufac- ture titanium landing gear components. It continues to admit titanium bar stock into its usage-driven site, again, not sub- jected to import formalities or duty. e landing gear components are manufac- tured from the titanium within the site complete. e point at which the fi nished components exit the site and are moved to warehouse becomes the point of importation. Customs entry is made, but duty is not payable on titanium bar stock at 15.5%, but on "civilian aircraft undercar- riage and parts thereof," with a 0% duty. Maine importers can save thou- sands of dollars by using zone regu- lations to reduce and/or eliminate import duties. M D , a S a c o - ba s e d l i c e n s e d c u s to m s h o u s e broker, runs Michael Doyon Co. He can be reached at - or @ . H OW TO B Y M I C H A E L D O Y O N Maine importers can Maine importers can Maine importers can Maine importers can Maine importers can Maine importers can Maine importers can Maine importers can Maine importers can Maine importers can Maine importers can Maine importers can Maine importers can save thousands of save thousands of save thousands of save thousands of save thousands of save thousands of save thousands of save thousands of save thousands of save thousands of save thousands of save thousands of dollars by using zone regulations to reduce and/or eliminate import duties.

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