Your company is contemplating to use a Free Trade Zone (FTZ) in your area for good that will be arriving from China. Explain the potential benefits for using FTZ? What advantages or disadvantageswould your company experience?
Free trade allows countries with particular advantages in producing a given commodity or service to export that and compete on a more or less equal footing with foreigncompetitors, both in the competitors home country and in the country's of third parties. This could take the form of superior quality, cheaper production costs (usually due to cheaper labor), or both.The consumers win because they have access to better goods at a cheaper price, and the economy as a whole wins because it is freed to re-task resources to focusing on its strengths, or comparativeadvantages.
The advantages of using FTZ are several such as:
Creates local employment. Every job in an FTZ creates two additional jobs through multiplier in the region
FTZs attract foreigninvestments of companies that wish to operate in this region and will not come there in the absence of FTZ
Cash Flow - Customs duties are paid only when imported merchandise is shipped into the U.S.Customs territory. Merchandise may be held in inventory in the FTZ without Customs duty payment.
Merchandise Processing Fee - Fees are owed only when and if merchandise is transferred to the U.S.Customs territory.
Harbor Maintenance Fee - Fees are paid quarterly on merchandise received in the FTZ.
Defects/Damage/Obsolescence/Waste/Scrap - Customs duties are significantly reduced or eliminated onmerchandise subject to these accountable losses.
Inverted Customs Duty Savings - In a FTZ, uniquely, the FTZ user may elect to pay the duty rate applicable to either component materials or thefinished merchandise produced from the component material, depending upon which is lower.
Non-dutiability of Labor, Overhead and Profit - Customs duties are not owed on labor, overhead and profit...
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