A multi-billion dollar copier manufacturer is improving its total landing cost while retaining or reshoring operations in the United States. How are they doing this? By operating foreign trade zones (FTZ) at seven of its facilities.
The company operated several overseas divisions that produced competing products, a practice that evolved due to the specialized exemptions and tariff-free shipments that exist for copiers being imported to the U.S. However, the company struggled with how to optimize production, transport, and trade costs within its offshore operations.
“Our only way to compete with other internal divisions and competitors shipping finished goods from overseas was to somehow import all the components without the delays and cost of customs or tariffs,” said the company’s head of customs compliance.
For example, the company has three foreign trade zones tied to a port in Long Beach, California. The Port of Long Beach allows these facilities to exist as a subzone to the port, and the company pays an annual fee for this service. In return, the Port of Long Beach submits federal information regarding activities and partnership to Congress. The port also makes the proper foreign trade zone board and Congressional filings required to keep the FTZ permit active. The company’s remaining FTZ facilities reside in Georgia and operate as sub-zones of the Port of Savanna. By adding FTZs, the company was able to gain a provision called an ‘inverted tariff.’
“The inverted tariff allows us to import all components that will comprise our finished products and bring them into our FTZ. This also allows for a delayed import declaration, until they are consumed into the finished products,” he added. “Once the product is complete, we can declare the imports once they ship from our FTZ as a finished good. Since copiers are duty-free, we avoid import tariffs completely on the components.”
The FTZ helps keep a cap on operating costs by aggregating all the filings, enabling the company to submit a group filing, a move that allows the company to take all declared components and finished products and submit them to customs under a group with a cap of $485. An internal system tracks and reports on all inventory, tariff declarations, and properly manages the foreign trade zone.
Best-in-Class companies have been shown to balance trade and transport costs in their FTZ. This includes their inbound strategy assessment and, like the Global Copier in this example, integrating tightly to the systems of record to strategically manage total landed costs under various reshoring and restructuring options for an improved bottom line.
For the full copier manufacturer case-in-point, read the full report.