The foreign trade zones program was established by the FTZ Act of 1934 to provide a competitive advantage, by way of savings on Customs duties, for companies with locations on US soil. By providing this cost savings, companies were encouraged to maintain and grow their businesses here in the US rather than setting up shop off-shore where labor and operating costs were lower. A property that has been given designation as a foreign trade zone is treated as being outside US Customs territory for purposes of tariff laws and Customs entry procedures. Duties on merchandise admitted into a zone may be deferred, reduced, or eliminated. When merchandise that has entered the FTZ is removed from the zone, customs duties may be eliminated if the goods are re-exported from the US. If the merchandise is transferred into US commerce, duties and taxes are due only at the time of transfer from the zone. If re-exported, duty is never paid. Approval for designation of zone status is given by the FTZ Board, an independent agency within the Department of Commerce.
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