What is meant by the terms "manufacturing" and "manipulation"?

The Foreign Trade Zones Board has established definitions for the types of activity that can be done within a Zone. These definitions are generally based on determining the level and type of change that is being done to a good or product. According to the FTZ Board and manual, manipulation and manufacturing are defined as follows:

Manipulation—Processing wherein merchandise is packed, unpacked, repacked, cleaned, sorted, graded or otherwise changed in condition.

Manufacturing—Any process that results in a change in Customs classification of the merchandise. With manufacturing, because of the Customs classification change, prior clearance from the Board is necessary.

There are some basic differences to note. In the case of manufacturing, the merchandise itself is changed, but in manipulation, the condition of the merchandise is changed. For some, this may be a point of disagreement.

If in doubt, feel free to contact the local FTZ office who can help determine if your business activity is closer to "manipulating" or "manufacturing." And, because distinction between manipulation and manufacturing is subject to interpretation and has a long history of case law, don't take these definitions lightly!

What exactly is a Foreign Trade Zone?

A Foreign Trade Zone (FTZ) is the U.S. version of an international Free Trade Zone. An FTZ may be used to store foreign or domestic goods, re-package materials, assemble products, or manufacture. Goods may also be re-exported without paying Customs duties. Participation in an FTZ helps companies gain two major benefits: Duty minimization and ease of distribution.

There are basically two types of FTZs:

General Purpose Zone Always located near a Customs Port of Entry, a General Purpose Zone (GPZ) offers leased storage or distribution space in general warehouse buildings. A GPZ may be used on an occasional or long-term basis.

Single Purpose Zone Many times, distance from a General Purpose Zone prevents a company from participating in the benefits of a GPZ. Individual companies may apply to the U.S. Department of Commerce to designate their facility as a Single Purpose Zone or Subzone.

Why consider an FTZ? Aren't duties going away?

Companies are moving to FTZs in record numbers. Subzone applications have increased by 30% over the last few years. 370,000 people are now employed due to activity in FTZs (six "indirect" jobs are created by every "direct" FTZ job). New products with new duties are arriving on the scene every day. Also, FTZs offer protection from tariff and non-tariff restrictions. Country of Origin marking, defects and damage, quotas and production waste are a few examples of non-tariff considerations. Utimately, companies become involved in FTZs due to dramatic cost savings.

Where are the General Purpose Zones located?

General Purpose Zones are located at six sites in the state of Minnesota:

• Greater Airport Bloomington
• Mid-City Industrial Area
• Eagan Industrial Park
• Minneapolis Convention Center
• Saint Paul
• Seaway Port Authority of Duluth

What companies use FTZ Subzones?

	Many companies are excellent Subzone candidates. Products moving through U.S. FTZs include electronics, computers, petroleum, pharmaceuticals, food products, office equipment, sporting goods, manufacturing components and more. Manufacturers, distributors and suppliers are all candidates for FTZ Subzones.
	General Electric now manufactures refrigerators, stoves, dishwashers, washing machines and clothes dryers in an FTZ Subzone. This helps GE keep prices down and be more competitive in both U.S. and foreign markets.
	Eastman Kodak manufactures a disposable camera in the Subzone. This helps them keep their prices down and enjoy a money-saving benefit.

Oneida Limited manufactures and distributes stainless steel cookware. By taking advantage of FTZ policy regarding weekly Customs entry, significant cost savings were realized.

How much can a company save with Subzone status?

Your Customs Broker, Steve Anderson, Greater Metropolitan Area Foreign Trade Zone Commission (GMAFTZC) Administrator, will explain the requirements and process of successful Subzone applications. Together, you and he will prepare the applications for Subzone status. If the benefits of Subzone status look promising, the GMAFTZ will help your company establish its own FTZ turn-key program.

How does a company apply for Subzone status?

Together with you and your Customs Broker, Steve Anderson, GMAFTZC Administrator, will explain the requirements and process of successful Subzone applications. If the benefits of Subzone status look promising, the GMAFTZ will help you establish an FTZ turn-key program.

How long does the application process take?

Like cost savings, the length of the application process will vary by company. Normally, the application and approval by the U.S. Commerce Department is approximately six months to one year. With the help of the GMAFTZC, some applications may be expedited.

How does a company get involved?

It's easy to check out the benefits of using a General Purpose Zone or establishing a Subzone. You may ask your Customs Broker to contact Steve Anderson, GMAFTZC Administrator, or call Steve directly at 612-725-8361.