Foreign Trade Zone (FTZ) Number 199
The City of Texas City operates Foreign Trade Zone (FTZ) Number 199. The administration of the Texas City Foreign Trade Zone Commission is conducted by a board of directors and a general manager, also known as the Harbour Foreign Trade Zone. Read on to learn more about the purpose/powers of Foreign Trade Zones, key benefits, local participation and more.
What is a Foreign Trade Zone?
Foreign Trade Zone (FTZ) are federally-designated areas secured under U.S. Customs and Border Protection (CBP) that have the special legal status of being outside of a nation's Customs territory. The purpose of the zones is to attract and promote international trade and commerce. Foreign Trade Zones are usually located in or near Customs’ ports of entry, industrial parks or terminal warehouse facilities.
A Foreign Trade Zone (FTZ) in the United States operates as a public utility according to a grant from the Foreign Trade Zones Board. FTZs are designed to increase the use of American labor and increase capital investment in the United States by allowing activity to occur in the United States prior to the application of U.S. customs laws. The intent is to equalize the customs treatment of the activity with similar activities occurring offshore or overseas.
What are the key benefits of a Foreign Trade Zone?
FTZs provide sites where a broad range of commercial activities involving foreign and domestic merchandise, which otherwise might have occurred abroad for tariff or trade reasons, can take place. Within an FTZ, merchandise may be stored, inspected, sampled, tested, displayed, relabeled, repackaged, distributed, repaired, mixed, cleaned, salvaged, recycled, processed, assembled or manufactured (requires special permission) without being subject to the US customs laws governing the entry of goods or the payment of duties.
This means that, while in the zone, merchandise is not subject to U.S. duty or excise tax. Duty may also be deferred or reduced.
As well, the FTZ provides an opportunity for Merchandise Processing Fee (MPF) reduction, quota avoidance and even property tax savings.
The FTZ also supports regional employment. According to the 2021 Annual Report of the Foreign Trade Zones Board compiled by the City of Texas City, FTZ 199 boast FTZ-related employment of between 7,001 and 8,000.
Which sectors can benefit from the use of a Foreign Trade Zone?
FTZ 199 has six approved sites or subzones located in Galveston, Brazoria and Chambers Counties. Subzones are special purpose Foreign Trade Zone sites created for use by one company and for a specified, limited purpose -- usually for manufacturing or processing activities. They are typically located within or overlay the user’s facility.
Currently, four of the six subzones of FTZ 199 are available for new users.
FTZs will prove most useful to companies that:
1. Import products and pay U.S. Customs duties
2. Import large numbers of shipments – whether or not duties are paid
3. Export domestic products on which federal excise taxes are paid
4. Maintain large dollar value inventories subject to State and local ad valorem (property) taxes
According to a recent report from FTI Consulting, sectors including consumer electronics, machinery/equipment, and other electronics have seen an increase in FTZ usage in recent years.
The City of Texas City is open to diversifying the membership of the FTZ and increasing the number of active sites.
Zone Schedule for FTZ 199
ANNUAL USER/OPERATOR FEE:
The Annual User/Operator Fee is a flat fee by tier plus $50 per acre of activated zone.
Flat Fee Tiers Acres Flat Fee
Tier 1 0 < 500 $6,000
Tier 2 500 < 900 $9,000
Tier 3 900 < $12,000
Fees are calculated based on the maximum area occupied at any point by the operator during the calendar year of the billing cycle (January 1 – December 31).
Tier Fee + (Acres) x ($50) = Total Annual Fee
ACTIVATION, DEACTIVATION AND BOUNDARY MODIFICATIONS
A flat fee of $5,000 will be accessed to the operator per instance of activation, deactivation or boundary modification.