U.S. foreign trade zones, recommendations in GAO report | KPMG | GLOBAL

U.S. foreign trade zones, recommendations in GAO report

U.S. foreign trade zones, recommendations in GAO report

The U.S. Government Accountability Office (GAO) released a report that examined the U.S. foreign trade zone (FTZ) program and that included recommendations for U.S. Customs and Border Protection.

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The GAO report is: CBP Should Strengthen Its Ability to Assess and Respond to Compliance Risks across the Program, GAO-17-649 (published July 27, 2017, and publicly released August 28, 2017).

The GAO found the FTZ program provides a range of financial benefits to companies operating FTZs by allowing them to reduce, eliminate, or defer duty payments on goods manufactured or stored in FTZs before they enter U.S. commerce or are exported. FTZs are secure areas located throughout the United States that are treated as outside U.S. customs territory for duty assessments and other customs entry procedures. Companies using FTZs may be warehouse distributors or manufacturers. A manufacturer, for example, that admits foreign components into the FTZ can pay the duty rate on either the foreign components or the final product, whichever is lower—resulting in reduced or eliminated duty payments. Distributors can also benefit by storing goods in FTZs indefinitely and thereby deferring duty payments until the goods enter U.S. commerce. 

In 2016, U.S. Customs and Border Protection (CBP) collected about $3 billion in duties from FTZs.

GAO recommendations

The GAO report includes the following recommendations to strengthen CBP's ability to assess and respond to compliance risks across the FTZ program:

  • CBP would centrally compile information from FTZ compliance reviews and associated enforcement actions so that standardized data are available for assessing compliance and internal control risks across the FTZ program.
  • CBP would conduct a risk analysis of the FTZ program using data across FTZs, including an analysis of the likelihood and significance of compliance violations and enforcement actions.
  • CBP would utilize the results of the program-wide risk analysis to respond to identified risks, such as updating risk assessment tools and developing best practices for CBP's FTZ compliance review and risk categorization system.

 

Read more in the GAO report.

 

For more information, contact a professional with KPMG’s Trade & Customs practice:

Douglas Zuvich | +1 (312) 665-1022 | dzuvich@kpmg.com

Andrew Siciliano | +1 (631) 425-6057 | asiciliano@kpmg.com

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