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What advantages does a foreign trade zone represent for an importer/exporter?

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What advantages does a foreign trade zone represent for an importer/exporter?

Foreign trade zones (FTZ) are designated geographic areas that are mostly close to the United States borders (Port of Entry). In the zones, commercial merchandise, either foreign or domestic, undergoes the same customs charges. In other terms, foreign goods do not experience import duties.

From big businesses to a sole proprietor, any size of traders can take advantage of foreign Trade.

The following are some of the advantages of foreign trade zones:

  1. Exemption from inverted taxes

Raw materials in the US have a higher tax rate than finished products. Therefore, it becomes too expensive for imports manufacturer. With FTZ, however, tariffs for manufactured goods are as low as zero, and hence eliminate charges associated with raw materials importation.

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  1. Limitless storage of items

There is no quota restriction on the FTZs. A company can freely have its products stored indefinitely in an FTZ before a port opens.

  1. Weekly entry savings

As opposed to regular entry filling when cargo enters the country, an importer operating at Foreign Trade Zone files customs entry once in a week, regardless of the number of entries within the week. Therefore, they save huge merchandise processing fees.

What factors influence a company’s entry strategy into a foreign market?

Some of the factors that influence foreign market entry are as follows:

  1. Physical infrastructure

Countries with developed infrastructure, both physical and institutional, become international business hubs. Infrastructure has influenced traders in committing to countries like Singapore, China, Dubai, etc. in Asia.

  1. Market growth

Most of the large markets in places like Europe, the US, and Japan have a surplus supply of products. Therefore, companies in these regions look for high growth potential in foreign markets.

  1. Market size

Countries with large markets attract investors from overseas

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