Post A: Free Trade Zone in the US
In the US, FTZs (free-trade zones) are known as foreign-trade zones where they offer customs-related benefits and exemptions from local as well as state inventory taxes. American government runs about 293 FTZs in its 50 states. Products considered dangerous to the general public, such as tobacco products, alcohol, and firearms, are not permitted into FTZs. Also, the selling of foreign commodities is not permitted within an FTZ. Texas, South Carolina, and Louisiana run the most famous FTZs within the US, which are determined on the basis manufacturing or production of exports per year. Don't use plagiarised sources.Get your custom essay just from $11/page
Texas City runs an FTZ (#199) according to the FTZ (Foreign Trade Zone) Act. In this trade zone, every form of merchandise may be kept without incurring any custom duties as well as other ad valorem taxes. The Texas FTZ has the mission of providing the local petrochemical companies and other businesses that engage in international business with a competitive worldwide marketing advantage that encourages the growth of their services and promotes the local, state, as well as national economies. A US-based producer/manufacturer can import foreign-sourced parts/materials into the FTZ, incur no duty, combine the parts/materials to come up with a finished product utilizing US parts as well as labour (Tiefenbrun, 2012). If the final commodity enters US commerce, duty is only paid on the worth of the foreign non-duty-paid content.
The FTZ offers various benefits to businesses including exemption of duty on re-exports, alleviation of inverted tariffs, duty deferral, duty exemption on rejected, defective, wastes, and scrap. Also, there is duty deferral which means that no duty is incurred on goods while In the FTZ and no restriction on the period goods can be stored there. Duty deferral lets a business transfer capital to more significant needs. Finally, duty is exempted for sales made to the US military, domestic content, NASA, or added value to products (Tiefenbrun, 2013).
Post B: International Company that can benefit from the FTZ
Being part of an FTZ can help a firm save a lot of money in duties and processing fees for merchandise, among other benefits. As mentioned earlier, in Post A, FTZs let businesses to legitimately evade incurring duties and MPF (merchandise processing fees), defer the payments, and incur lower duty rates. Companies may also make a choice to incur import duties on either the finished products or raw materials, and this depends on which of the two is lower. Generally, FTZs let firms to run their supply chains with more efficiency (Tiefenbrun, 2013).
Many companies involved in importing and exporting of goods or materials can benefit from being part of FTZs. One international business in the US that can benefit from the Texas FTZ is GM (General Motors). Since GM deals mostly with vehicle parts, which it either imports or exports to other countries, participating in an FTZ like Texas #199 could benefit by avoiding or delaying duties. Using this FTZ can help the company plan more effectively and use money only when necessary. The company can also keep their products or materials within the FTZ for long periods until when they are needed without the risk of incurring duty. In a nutshell, GM is one of those companies that need to be part of an FTZ to save on taxes and operate more effectively (Fourie, 2016).
References
Fourie, L. F. (2016). On a Global Mission: The Automobiles of General Motors International Volume 3 (Vol. 3). FriesenPress.
Tiefenbrun, S. (2013). US Foreign-Trade Zones, Tax-Free Trade Zones of the World, and Their Impact on the US Economy. J. Int’l Bus. & L., 12, 149.
Tiefenbrun, S. (Ed.). (2012). Tax-free trade zones of the world and in the United States. Edward Elgar Publishing.