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On a global scale, changes in transportation, communication and information technology are affecting the way businesses choose locations and remain competitive. International trade is having profound implications for regions and cities throughout California. The Inland Empire’s total two-way trade in 2004 is estimated at $8.1 billion or 10.6% of the region’s personal income.
What is a Foreign Trade Zone (“FTZ”)?
Foreign Trade Zones are designated areas within the United States where qualifying businesses are considered to be outside the country for custom’s purposes.
What are the benefits of the Foreign Trade Zone?
In short, by participating in the FTZ, you will save time and money. Specifically,
- Approved companies within the FTZ can defer, reduce or COMPLETELY ELIMINATE customs duties on imported materials and products, and can also significantly reduce merchandise processing fees and broker fees.
- Businesses in the FTZ are also able to defer the payment of duty on any goods brought into the FTZ until they leave the FTZ, so businesses with fewer inventory turns can realize savings from the time value of money on duty payment.
- Businesses in the FTZ are also eligible to receive direct delivery, so that containers are brought directly to the businesses’ distribution center in the FTZ, as opposed to being held at the Port.
- All inspections of containers are done in the FTZ instead of at the Port, which can save on rental fees at the Port.
My business is located in the City of Ontario. Does the zone apply to my business?
Yes! All businesses located in Ontario can activate within the Foreign Trade Zone. In one section of the city – the California Commerce Center – businesses have the added benefit of being located in what is called a “sub-zone.” Businesses located in the sub-zone are eligible for a lower annual fee of $7,750 compared to the $10,000 annual fee applied to all other businesses.
My business imports less than 50 containers a year. Is participation in the FTZ worth my investment?
Not at this time. However, if you think business will be growing in the next two years, you are encouraged to reach out now to the City of Ontario to determine whether starting the application process now makes sense.
My business imports more than 200 containers a year. Is this worth my investment?
Yes. Currently, each time you bring in a container to the U.S. (except for NAFTA goods), you are paying a Merchandise Processing Fee of .003464, which is based on the value of the container and caps out at $485. If you participate in the FTZ, your Merchandise Process Fee would only be $485 PER WEEK no matter how many containers you bring in, for an annual total of $25,220. The more containers you ship, the higher the Return on Investment. For example, assuming the value of your containers is $140,000 or greater, if you ship
- 200 CONTAINERS: Without the FTZ, if you shipped 200 containers, you would pay $97,000. With the FTZ, you would pay $25,200, which is a cost savings of $71,800.
- 500 CONTAINERS: Without the FTZ, if you shipped 500 containers, you would pay $242,500 in Merchandise Processing Fee. With the FTZ, you would pay $25,200, which is a cost savings of $217,300.
- 1,000 CONTAINERS: Without the FTZ, if you shipped 1,000 containers, you would pay $485,000. With the FTZ, you would pay $25,200, which is a cost savings of $459,800.
In addition to Merchandise Processing Fees, you are also presently paying Broker Fees on every container for the entries on the containers to be sent to customs. Without the FTZ, you pay between $85 to $100 per container to your broker, but once you are approved as an FTZ, you would only pay between $85 to $100 per week, no matter how many containers you bring in to the U.S. Similar to the Merchandise Process Fee, the more containers you import, the higher the Return on Investment.
|Containers||Fees||Without FTZ||Total||Total Cost w/out FTZ||With FTZ||Total Cost w/ FTZ||Savings w/ FTZ||Total Savings|
|200 Containers||Merchandise Processing Fee||$485/container||$97,000||$117,000||$22,500||$27,700||$71,800||$86,300|
|500 Containers||Merchandise Processing Fee||$485/container||$242,500||$292,500||$22,500||$27,700||$217,300||$261,800|
|1,000 Containers||Merchandise Processing Fee||$485/container||$485,000||$585,000||$22,500||$27,700||$459,800||$554,600|
What are the Other Expenses Associated with a Foreign Trade Zone?
- One-time Application fee - $10,000 ($7,750 in the California Commerce Center)
- One-time Activation fee - $10,000 ($7,750 in the California Commerce Center)
- Annual fee - $10,000 ($7,750 in the California Commerce Center)
- One-time Software License - $35,000-$50,000
Businesses that participate also need to plan for any additional costs that might be associated with increased security measures, including the installation of fencing, cameras and/or the hiring of security guards.
How long does it take to get started?
The entire process from beginning takes between 6 to 18 months.
What is the process?
The process includes an application phase, an implementation phase and an activation phase. To learn more about the process, click here.
Do I have to renew annually? What is the process for that if I do?
There is no annual renewal, but there is an annual report that needs to be filed and an annual fee of $10,000 (or $7,750 for businesses located in the California Commerce Center).
Can the City of Ontario help me through this process?
Yes! As a unique business incentive offered exclusively to Ontario businesses, the City pays for a consultant to assist you through the entire process. Please contact the City of Ontario Economic Development staff to find out how you could take advantage of the Foreign Trade Zone.