When I first explored importing custom steel parts, one of the biggest challenges was the immediate capital lock-up due to tariffs and customs fees. As soon as the shipment hit the port, duties were due—even if the parts sat in inventory for weeks. Discovering duty deferral programs like FTZs and TIBs gave me the flexibility to manage cash flow and align payments more closely with sales cycles.
Importers of custom steel parts can improve cash flow by using duty deferral programs such as Foreign-Trade Zones (FTZs), Temporary Importation under Bond (TIB), bonded warehouses, and the drawback program. These tools allow businesses to delay or recover duties based on how and when the goods enter U.S. commerce or are re-exported.
What Are the Benefits of Using an FTZ for Steel Parts Imports?
Foreign-Trade Zones (FTZs) offer the ability to defer duty payments until goods are withdrawn for U.S. consumption, and in some cases, eliminate duties entirely for re-exports. FTZs are secure areas near U.S. ports that are considered outside of U.S. customs territory for duty purposes 1.
Cash Flow and Operational Benefits
- Duty Deferral: Postpone tariff payments until goods enter U.S. commerce.
- Duty Elimination: No duties owed if steel parts are re-exported or scrapped within the FTZ.
- MPF Reduction: Weekly entry filings allow one Merchandise Processing Fee instead of many.
- Waste Exemption: No duty on scrap or waste generated during production inside the FTZ.
- Improved Inventory Management: Track steel parts precisely, pay duties only on items sold domestically.
| FTZ Benefit | Financial Impact |
|---|---|
| Deferred Tariffs | Preserves working capital |
| Export Duty Elimination | Avoids unnecessary costs on non-U.S. goods |
| MPF Consolidation | Reduces customs filing expenses |
| Waste Exemption | Saves on unused or defective goods |
| Real-Time Inventory Control | Aligns duty payment with revenue timing |
How Does the Inverted Tariff Benefit Apply to Steel Components?
The inverted tariff benefit allows manufacturers within an FTZ to pay the duty rate on the finished product rather than the usually higher duty on imported components like steel parts 2.
Example Use Case
- Imported Part: Steel shaft (HTS 7326.90.8688, duty 5%)
- Finished Product: Electric motor (HTS 8501.10.4060, duty 2%)
- FTZ Benefit: Duty paid at 2%, not 5%, saving 3% on each unit sold in the U.S.
Savings Calculation Example
| Item | Without FTZ (5% Duty) | With FTZ (2% Finished Goods Duty) |
|---|---|---|
| CIF Value per Motor Assembly | $10,000 | $10,000 |
| Duty Paid | $500 | $200 |
| Savings per Unit | — | $300 |
What Are the Steps to Activate FTZ Status for My Facility?
Activating FTZ status involves applying to the local FTZ Board, receiving customs approval, and implementing compliant operational procedures and systems 3.
Step-by-Step FTZ Activation Process
- Identify FTZ Availability: Contact your local FTZ grantee or port authority.
- Apply for FTZ Designation: Submit an application to the FTZ Board, including a site plan and business justification.
- Customs Activation: Once approved, apply to CBP for operational clearance.
- Set Up Compliance Systems: Install inventory tracking, zone security, and filing systems.
- Train Staff or Hire Brokers: Ensure all staff understand FTZ operations or contract with FTZ service providers.
| Step | Task Description |
|---|---|
| Grantee Coordination | Find FTZ in your region and apply |
| Board Approval | File formal application with documentation |
| CBP Activation | Prepare compliance procedures and inspection |
| Tech Setup | Implement software for tracking and reporting |
| Ongoing Compliance | Schedule regular audits and maintain records |
How Can FTZ Usage Impact Overall Import Cost and Cash Flow?
Using an FTZ can reduce total import costs through deferred duty payments, duty elimination on exports, and lower administrative fees. This directly improves cash flow by reducing upfront tax obligations and allowing better alignment between expenses and sales 4.
Cost Structure Comparison: With vs. Without FTZ
| Cost Item | Without FTZ | With FTZ (Export or Delay) |
|---|---|---|
| Import Duty | $10,000 | $0–$5,000 (if deferred or reduced) |
| MPF (10 entries/month) | $2,000 | $200 (1 weekly entry) |
| Section 232 Tariff | $2,500 | $0 (if re-exported) |
| Waste/Scrap Duty | $1,000 | $0 |
| Total First Month Cash | $15,500 | $5,200–$7,700 |
Additional Duty Deferral Tools
| Program/Tool | Description |
|---|---|
| TIB (Temporary Importation) | Import for testing/trade shows with no duty if re-exported 5 |
| Duty Drawback | Reclaim 99% of duties if goods are exported or destroyed 6 |
| Bonded Warehouse | Similar to FTZ, allows delayed payment for stored goods 7 |
| First Sale Rule | Declare duty based on first transaction (lower base value) |
Conclusion
Importers of custom steel parts can optimize cash flow using FTZs and other duty deferral programs that delay, reduce, or eliminate duty payments. These tools allow for more flexible payment timing, reduced overhead, and strategic tariff management. By combining FTZ usage with programs like TIB and duty drawback, importers can maintain strong cash positions while remaining competitive in a global supply chain.
Footnotes
Crowley guide to Foreign-Trade Zones and their benefits for duty deferral. ↩
Explanation of inverted tariff structures and how they apply in FTZs. ↩
U.S. FTZ Board process for applying and activating zone designation. ↩
Overview of cost reductions and cash flow improvements using FTZ programs. ↩
CBP resource on Temporary Importation under Bond and duty-free provisions. ↩
Guide to duty drawback eligibility and how to claim 99% duty refunds. ↩
Bonded warehouse advantages for storing goods without paying immediate duties. ↩
