Foreign-Trade Zones Overview Presented by: Greg Jones FTZ Corporation

Purpose of Foreign-Trade Zones Foreign-Trade Zones are established: To encourage and expedite U.S. participation in international trade To foster trade in foreign goods imported not only for export, but also for domestic consumption after combining with domestic goods To capture domestic economic activity which might otherwise be more cost-effectively conducted outside the United States

What is a Foreign-Trade Zone? Secure area located in or near a Port of Entry For tariff and tax purposes, goods treated as legally outside U.S. Customs territory In a zone, merchandise may be: Stored Manipulated Used in Production (typically manufacturing)* Repackaged Destroyed * With Foreign-Trade Zones Board Approval

Types of Foreign-Trade Zone Sites General-Purpose Zone Often an industrial park or port complex whose facilities are available for use by the general public Subzone Normally special-purpose sites when the operations cannot feasibly be moved to, or accommodated in a general-purpose zone

Zone Program Key Organizations Foreign-Trade Zones Board (FTZB) Grantee Operator/user Administrator Bureau of Customs and Border Protection

Why do U.S.-based Businesses Use Foreign-Trade Zones? Answer: To lower Customs-related costs within their supply chains

Zone Benefits to Users Duty Deferral Duty is not paid unless or until goods enter the commerce of the U.S. Duty Avoidance on “Re-exports” Duty is not paid on goods that do not enter U.S. commerce Relief from “Inverted” duty rate relationships With FTZ manufacturing authority, imported materials included in items manufactured for domestic consumption may be entered into U.S. commerce at the lower finished product duty rate Streamlined Logistics (e.g. Weekly Entry, Direct Delivery)

Zone Benefits to Users Relief from State aviation fuel taxes on qualifying international flights 2013 Mississippi Code, Title 27 - TAXATION AND FINANCE Chapter 55 - GASOLINE AND MOTOR FUEL TAXES Article 7 - SPECIAL FUEL TAX § 27-55-527 - Special fuel taxes; exemptions and allowances State fuel tax is not paid on fuel “Sold or delivered in bond, or sold or delivered, to any person within a foreign-trade zone within this state and sold, used, consumed, distributed, stored or withdrawn from storage and used to propel aircraft on an international flight including any interim stops within the United States so long as the origin or ultimate destination of the aircraft is outside the United States and District of Columbia. As used in this paragraph, "foreign-trade zone" means a foreign-trade zone operated and maintained by a public or private corporation under the provisions of Sections 59-3-31 through 59-3-37.”

Steps Required for Practical Implementation Feasibility Analysis Application Activation 9

Application Application is required for: Manufacturing within the general-purpose zone or a subzone Manufacturer may submit Production Notification directly to the FTZ Board or, alternatively, Production Notification may be submitted by the Grantee 10

Application Application is required for: Establishment of a subzone Subzone application may only be formally submitted by the Grantee Operator Agreement between the Grantee and FTZ user is generally required prior to submission Grant of authority is issued to the Grantee on behalf of FTZ user 11

Activation Activation is required for conducting operations under zone procedures, AND for receiving zone benefits. Activation requires the approval of: Zone Grantee Local office of Customs and Border Protection 12

A Snapshot of Zone Activity in Mississippi for 2016 4 Zone projects with 7 active subzones Total value of FTZ production activity: $18 Billion Value of exports from FTZ users: $900 Million 12,000 people employed by FTZ users Major uses include: Oil refining Automotive production Shipbuilding Furniture manufacturing Apparel distribution 13

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