UPS Inc. (NYSE: UPS) announced on September 5 that it will incorporate foreign trade zone (FTZ) capabilities into a large portion of its operations, and has designated four U.S. gateway airports as FTZs.
The integration of the FTZ program into UPS' transport, warehousing, customs brokerage and logistics services is an outgrowth of a 2017 acquisition of FTZ provider Zone Solutions. The acquisition was designed to bolster UPS' global trade portfolio and to support businesses that were considering an FTZ program.
"This [Zone Solutions] acquisition was in direct response to our customers' growing needs," said Jeff McCorstin, president of UPS Global Brokerage and Customs. "Zone Solutions' talent and expertise means UPS now provides leading FTZ solutions offerings."
An FTZ program allows companies to ship and store goods free of import surcharges. Customs duties and other levies are deferred until the product enters U.S. commerce. In addition, duties are not paid if goods in an FTZ are subsequently exported out of the zone and beyond U.S. commerce. Companies can also use alternative manufacturing techniques within an FTZ to obtain a different tariff classification that results in a lower duty rate than the original.
The four airports that UPS will use as FTZs are Chicago's O'Hare International, Dallas/Fort Worth International, Los Angeles International and New York's JFK.
"Adding FTZs enables customers to streamline compliance validations to mitigate risk and promote savings on their [international airfreight] shipments by leveraging FTZ-designated gateway facilities," McCorstin added.
According to 2017 Census Bureau data, U.S. import duties totaled $33.1 billion – equal to 1.4 percent of the total value of all imported goods, and 4.7 percent of the value of all imports that were subject to duty. Importers in industries like consumer electronics, automotive, apparel and footwear historically pay high duty rates when bringing their products into the U.S.
UPS said it processes nearly 25 million U.S. import clearances each year. This volume alone makes the company one of the world's largest customs brokers, it said.
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