Foreign Trade Zone (FTZ)
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Foreign (Not Free) Trade Zones (FTZs) are secured
areas under U.S. Customs supervision located in or
near a U.S. Customs port of entry. Customs’ entry
procedures do not apply to the goods inside a FTZ until
they are withdrawn for entry within the territory and
jurisdiction of the United States, exported, or destroyed
under Customs supervision
FTZ - Overview
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• Savings from Broker fees as you file entries weekly
and not on every shipment
• Merchandise Processing Fee (MPF) savings as a
result of filing fewer entries
• A one-time duty deferral that increased RUSA’s free
cash flow on the first inventory turn
• Tighter inventory controls and compliance as required
by the FTZ regulations
• Transit time reductions to the FTZ under direct delivery
FTZ - Benefits
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• FTZ initiation started April 2009
• FTZ phase I rollout in June 2009 at 1-2 containers/day
and capacity increased to 7-8 containers/day when
phased out in May 2010
• After 6 months of internal programming and 3 months
of testing, phase II with full FTZ benefits utilizing RUSA
facilities was rolled out on May 5, 2010
• Transit time savings of 1-2 days
FTZ - Initialization
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FTZ - Logistics Model
GPZ- Alternate Site Framework (ASF)(Full Cash Flow Improvement & Full Processing)
Southeastern & Plainfield
Fulfillment Center
(GPZ- ASF)-Receipts & Withdrawals
filed w/ Customs daily
Domestic Courier
Customer
Foreign Supplier
U.S. Customs-Processes release on
a weekly basis
U.S. Customs
Broker-Broker files weekly estimate/entry
and sends releases to FTZ
Physical goods move. Paperwork flow.
Integration Point
Software Inventory
FTZ System
FTZ Overview & Transaction Flow
FTZ - FIFO Processing
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• OSP uses a First In / First Out (FIFO) (Customs Modified)
Inventory System for processing FTZ entries
• The FTZ FIFO Inventory resides in a third party system
(Integration Point or IP) that is independent from OSP’s
mainframe and is reconciled with OSP daily
• The FTZ FIFO system does not control our inventory or dictate
how inventory is pulled
• The FTZ system supports daily filings of all admissions,
shipments and adjustments made to our FIRS system
• Duty is not paid until a foreign item is shipped to a customer
FTZ - FIFO Processing
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Payment Comparison- Free Cash Flow Impact
Today’s Payment Model
Payment Liability
at Import to Indy
(7 days)
Tomorrow’s Payment Model
Shipment FOB Shanghai
(25 days)
Shipment FOB Shanghai
(25 days)
Payment Liability Occurs
At Customer Shipment
(1 day to 4 months)
Payment Due on 22nd
Of Next Month After
Import Clearance
(Total 32 Days +
Days Left in Month+
22 days)
Payment Due on 22nd
Of Next Month After
Shipment
(Total 33 days +
Days in Month Post
Shipment + Avg. Inv.
Turn 1 day – 4 mo.+ 22 days)
Accrual Booked Upon
Receipt in FC
(7 days)
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• Communication from with ALL areas of the supply
chain:
Accounting, IT, Finance, Legal, Operations, Customer Service,
Sourcing, Logistics, Buyers, Human Resources, Carriers,
Forwarders, Brokers and Customs.
• Ongoing FTZ process review teams
• Test, Test, Test, Test and Test
• Plan for the unexpected
• Acquire qualified Legal professionals
• Use your local FTZ (GIFTZ) facilitator as a resource
FTZ - Looking Back
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• International exports without duty around the world
• In-house Customs estimate/entry filing
• Expansion to other divisions where it is cost effective
FTZ - Looking Forward
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Questions?