An increase in the use of Free Trade Zones around the world is playing a role in the rise of countries using Foreign-Trade Zones (FTZ). The continued growth of the global economy is also responsible for expanding FTZ use.

In 2017, the greatest challenges to FTZs will be compliance related, exacerbated by the expected increase of activity within these zones. Within the past three years, a record-high $99.2 billion in merchandise was exported from United States FTZs, according to data from the Foreign-Trade Zones Board. The figure also represents a threefold growth of FTZ exports from 2009 to 2014.

U.S. Customs and Border Protection use Foreign-Trade Zone (FTZ) regulatory audits to determine whether FTZ operator declarations, procedures and recordkeeping systems are in conformity with rules and regulations. It is important to be proactive rather having to react when CBP does an audit – which can be lengthy and costly. Automation is the best answer to follow compliance within the supply chain.

In a recent presentation hosted by Integration Point, Michael D’Aoust, president and CEO of PointTrade Services, Inc. (www.pointtradeservices.com) identified specific risk areas and included improving compliance within a supply chain.

There are three classes of FTZ audits: Focused Assessments, Referral & Enforcement Audits and Audit Surveys. From 2008 to 2010, 1,053 Regulatory Audits took place, resulting in collecting $152.4 million in revenue for the CBP. On average, FTZ Audits take 10 to 11 months from entry to close.

Remain Vigilant

Certain industries and transactions within FTZ global trade are viewed as risk factors:

  • Company size/complexity
  • Nature & volume of import activity
  • Anti-Dumping/Countervailing Duties
  • Intellectual property rights
  • Textiles
  • Trade preference programs
  • Import safety
  • Partnered Government Agencies (PGAs)
  • Valuation
  • Classification

Within inventory management, pitfalls include:

  • Inventory control/systems interface
  • Post entry audit process
  • Formal instructions/directions documented with trade partners
  • Insufficient desktop procedures
  • Insufficient trade compliance manuals and SOP’s
  • Inadequate recordkeeping
  • Lack of communication
  • Valuation
  • Country of Origin
  • Failing to track and report variances to CBP
  • Formal customs training
  • No internal/external compliance monitoring program
  • Inventory adjustments
  • Anti-Dumping case number tracking
  • 9801, 9802, 9808, 9813
  • HTS misclassifications

 

Be Prepared Internally

Coordinate internally on who will be responsible for responding to Custom’s Request for information. Build a trade compliance team with internal & internal legal counsel, consultants, brokers, finance, IT and procurement. Run reports throughout the year to ensure balances are maintained. Do not wait until year-end to start conducting research. Monthly or quarterly runs are also recommended.

Be Prepared using Integration Point Solutions

Integration Point, already a leader in global trade management solutions, offers Foreign-Trade Zone (FTZ) solutions with robust functionality designed to enhance compliance, along with providing companies with necessary tools they need to manage and optimize zone operations throughout all industries.