Foreign Trade Zone – Opportunity Austin

Overview

A Foreign Trade Zone (FTZ) is an area within the United States that is designated by the federal government as outside of U.S. Customs territory. FTZs encourage investment in the U.S. and the creation of American jobs by allowing U.S. businesses to operate with equivalent customs treatment to business conducted off-shore. Businesses using FTZs can reduce customs duties and fees, and achieve logistics benefits for the import and export of goods. FTZs can be an effective part of a community economic development program.

The Austin region is served by FTZ 183 which was established in the 1990s to capitalize on the growth of the high-tech industry and to provide local businesses with a tool to help them compete in the global economy. The Foreign Trade Zone of Central Texas, Inc., is the grantee of FTZ 183 and is run by a board of directors appointed by the cities and economic development organizations in the Austin metropolitan area.

In July 2012, the Foreign Trade Zone of Central Texas received approval from the federal government to operate under new streamlined procedures designed to make U.S. business more competitive. Under the new approval, all of the five-county metropolitan statistical area (MSA) has been pre-approved by the federal government as eligible FTZ property. With the concurrence of local officials, the federal government will provide any eligible business in the Austin MSA FTZ designation on an expedited and simplified basis. A previously expensive process that historically lasted over a year to accomplish now takes less time with modest expense.

FTZ and Freeport

There is quite a bit of overlap between the FTZ and freeport exemptions. Freeport exempts inventory which is held in Texas for less than 175 days from local property tax. The FTZ exempts any item imported from outside the U.S., regardless of the ultimate destination, and there is no time restriction. For example, inventory that is held in Austin for 90 days and then goes to Arkansas would be exempt under freeport, but not FTZ. Inventory imported into an Austin FTZ from Japan which is sold to a customer in Fort Worth is exempt under FTZ, but not freeport. Practically speaking, for jurisdictions that have a freeport exemption, the incremental effect of the FTZ is to exempt inventory that has been imported from outside the U.S. and is destined for a Texas customer. All other inventory that might be exempt under the FTZ exemption is already exempt under freeport. And, of course, the freeport exemption applies to all property within the jurisdiction, while the FTZ exemption is site-specific, applying only to inventory in activated FTZ space.