Greater Knoxville Foreign Trade Zone

Boost Your Business

Discover how an FTZ can help your business become more competitive or help a community to expand and recruit businesses.

Download PDF

What is a Foreign Trade Zone?

A Foreign Trade Zone (FTZ) is a place designated by the Department of Commerce and U.S. Customs and Border Protection agencies as a location where goods are admitted and are considered outside the stream of international commerce or trade.

Payment of duties and excise taxes on foreign merchandise admitted to a Foreign Trade Zone are deferred until the goods are transferred from the zone to U.S. commerce for consumption. Foreign Trade Zones (FTZ) are a federal economic incentive program to enhance the ability of local companies to compete successfully in international trade. An FTZ is a geographic location in or adjacent to a U.S. Port of Entry. It can be housed in a single room, building, land site, or industrial park.

The federal government created this program in 1934 to help retain jobs in the United States. FTZs are overseen by the U.S. Customs and Border Protection under the United States Homeland Security Council.

What Are the Benefits?

Businesses located in an FTZ service area receive customs-related benefits that help them compete more efficiently with offshore companies.

Duty Deferral

Delay payment of duty until goods enter U.S. market

Duty Exemption

No duties on imported goods that are re-exported, destroyed, or scrapped

Inverted Tariff

Choose to pay tariff either on components or on finished product

Reduced Processing Fees

File a single customs entry per week rather than multiple entries

Additional Benefits Include:

Businesses located at any fixed site in the 16 counties can become part of the FTZ program.
Businesses can be approved by U.S. Customs and Border Protection and Department of Commerce in 30 – 45 days.
Businesses can benefit from increased cash flow and inventory control.
An FTZ designation will allow a business to operate warehouses as a means to reduce operating costs, improve supply chain velocity and manage security at distribution facilities.
Users can defer, delay or eliminate payment of some duties and taxes on goods manufactured or processed within the FTZ.

What Counties Does Our FTZ Serve?

The Industrial Development Board of Blount County and the Cities of Alcoa and Maryville, TN are the grantees of the Greater Knoxville Foreign Trade Zone, or FTZTN 148, with a 16-county service area. FTZ benefits are available to businesses located at the Knoxville Metropolitan Airport or can be extended to a business’ fixed site anywhere in the 16-county region.

The 16-county zone is more flexible than many other FTZs. It is organized under the Alternative Site Framework program. This designation allows businesses to activate anywhere within zone.

Is a Foreign Trade Zone Right for Your Business?

Any company can apply to be part of an FTZ, regardless of industry. However, industries that often benefit from becoming a zone user or operator include manufacturing, distribution, retail, and research and development firms. The commonality is that many of these industries are involved in international trade, receive imported products, manufacture, assemble, or test and scrap products before they are sold to consumers in the U.S. or exported to global consumers.

If any of the following apply to your business, the FTZ may be a good fit:

You need to store imported goods, or show them to prospective buyers.
Your merchandise may be processed, cleaned, tested, relabeled, repackaged, scrapped or otherwise manipulated before it is released into the U.S. or exported.
Your domestic goods will be sold abroad and carry a high excise tax burden.
Some of your imported goods are damaged or destroyed, or some of the raw material you import is destroyed in the finishing process. In an FTZ, you only pay fees on products that enter U.S. commerce.
Your final product is taxed at a lower rate than the imported materials used in production.
Your finished product is subject to U.S. quota restrictions.
You have a fixed site within the 16-county service area.

Contact Bruce Kerr at the Blount Partnership to help you understand the advantages you can gain through this program.

Let’s Look at the Facts

There are many myths about FTZs and how they work. The FTZ Program provides communities and companies a way to increase cash flow, remain competitive with foreign markets, and grow the job base within a region.

FTZs are expensive.

False.

Costs for activating a location within the FTZ vary depending on the security and inventory controls in place at the facility. The initial long-term duty deferral benefit to the business often exceeds the activation costs. The business also realizes ongoing benefits through delayed payment of duties and inverted tariffs. In addition, no duties are paid on re-exported products, waste, scrap, and rejected or defective products.

FTZs are complicated and require a lot of new paperwork.

False.

FTZ users are often able to file a single customs entry per week rather than making multiple entries during the course of the week.

FTZs are only for international companies.

False.

FTZs are for companies that either buy or receive imported products from foreign or domestic vendors or have merchandise that is processed, cleaned, tested, relabeled, repackaged, scrapped or otherwise manipulated before it is released into the U.S. or re-exported; or have domestic goods to be sold abroad that carry a high excise tax burden (such as beer, wine or spirits).

FTZs are only allowed at port locations.

False.

This FTZ is organized under the Alternative Site Framework program. This means that companies can activate at any fixed site with the 16-county service area.

FTZs only work for manufacturing companies.

False.

Companies in FTZs receive imported products, manufacture, assemble, test and scrap products before they are sold to consumers in the U.S. or exported to global consumers. The retail consumer goods industry is now operating warehouse facilities within FTZs.

FTZs slow down commerce.

False.

FTZs allow businesses to keep production costs closer to the market while still receiving the reduced costs comparable to moving to a foreign market. The FTZ helps businesses reduce production, transaction, and logistics-related costs by lowering the effective duty rates and allowing special entry procedures. Goods that have a U.S. quota restriction may be stored onsite for quicker release into the stream of commerce.

FTZs take work away from America.

False.

By reducing costs, FTZs level the playing field and improve U.S. competitiveness. The benefits of the FTZ program may be the competitive advantage companies need to keep their manufacturing or distribution operations in the U.S. By helping local employers remain competitive, zones can contribute to maintaining or boosting employment opportunities. The lower FTZ-based production costs encourage increased investment in U.S. facilities.

FTZs have a negative impact on a company’s cash flow.

False.

FTZs allow businesses to manage cash flow by delaying, deferring, or eliminating duties and certain taxes on goods. Goods can be stored indefinitely at the FTZ site.

FTZ Glossary

Foreign Trade Zone Board

Comprised of the Secretary of Commerce and the Secretary of the Treasury. The Board is chaired by the Secretary of Commerce. The Commissioner of U.S. Customs and Border Protection also plays a key role, even with the recent move from Treasury to the Department of Homeland Security, providing a position during the FTZ Board voting process with respect to customs security, control, and resource matters. Grants authorization to establish, operate, maintain or expand zones

General Purpose Zone

An industrial park or airport or water port complex whose facilities are available for use by the general public.

Subzone

Fixed locations sponsored by the General Purpose Zone and are normally single purpose sites for operations that cannot be feasibly moved to, or accommodated in a General Purpose Zone.

Grantee

A private entity organized for the purpose of establishing a zone; the Industrial Development Board of Blount County and Cities of Maryville and Alcoa is the grantee for the Greater Knoxville FTZ #148. Responsible for maintaining public utility access to the zone for all users.

Operator

A company that performs or operates the zone and performs zone activities such as receipt, storage, handling, shipment, record keeping, reporting and marketing of the zone.

U.S. Customs and Border Protection

Responsible for the control of merchandise in a zone. Controls admission, activity and release of goods from a zone. Oversees procedures and compliance with all appropriate federal laws and regulations.

User

A person or firm using a zone for storage, handling, manufacturing or assembly of merchandise.