Foreign Trade Zone, Customs Bonded Warehouse

[et1883]

 

Have searched without success for discussions re experience with foreign trade zone/customs bonded warehouse - we have some plans for importing from several countries, and re-export to selected other markets without the products touching the US markets.  Welcome any comments on experience with US CBP, local governments, etc. 

[dhdunbar]

Well, you have hit upon an esoteric enterprise.  When you get involved with import and export, you always want to deal with Customs through a customs broker.  Period.  I consult for distilleries and I would never say that you always, or even usually, want to use the services of someone of my ilk when dealing with TTB.  It is not necessary.  When dealing with Customs, it is.  Did I say, "Period?"

I am not competent to comment on your question, at least not in detail.  I will refer you, instead, to a Customs' webpage that discusses  their bonded warehouses.  They come in a variety of flavors.  See https://www.cbp.gov/sites/default/files/documents/bonded_20wh2_2.pdf.

Two of those flavors are described as follows: 

6. Bonded warehouses established for the manufacture in bond, solely for exportation, of articles made in whole or in part of imported materials or of materials subject to internal revenue tax; and for the manufacture for domestic consumption or exportation of cigars made in whole of tobacco imported from one country; and 

8. Bonded warehouses established for the cleaning, sorting, repacking, or otherwise changing the condition of, but not the manufacturing of, imported merchandise, under CBP supervision, and at the expense of the proprietor. 

I know just enough to be dangerous.  Contact a customs broker for reliable information.  I'd also be interested in knowing why you would not simply import it in bulk into the DSP, then remove it for export without payment of tax once it is bottled?  Those are transactions of which I do have some knowledge.

 

 

 

[et1883]

Quote

Dhdunbar, you are right.  I agree on value of customs brokers to facilitate inbound and outbound shipments.  paperwork can be complex.  the goal would be to avoid payment of US duty upon entry to the US of an import (to a traditional, not a customs bonded warehouse). My own background includes about 15 years abroad, with some familiarity with free-trade-zones.   Having paid no duty inbound, the product would head outbound to countries where we have opportunity for sales.   Did I read your comment correctly that there is no duty on inbound bulk spirits?  That would make the whole effort simpler.     Of the two options you listed, our preference is for the second one, so product(s) can be worked on, blended, bottled, labeled, etc.   Here below is a link to the foreign trade zone general statement (USG uses 'foreign trade zone' instead of the 'free trade zone' more common name found in other countries).  The benefit to the local community is additional employment.  Welcome any additional thoughts.   The link:  http://ia.ita.doc.gov/ftzpage/info/adjacency.html 

 

 

[dhdunbar]

TTB's regulations provide (Sec. 19.409 )  A proprietor may withdraw from customs custody spirits imported or brought into the United States in bulk containers for transfer of those spirits without payment of tax to the bonded premises of the proprietor's distilled spirits plant. The proprietor may receive these spirits either in bulk containers or by pipeline. Spirits received on bonded premises under this section may be:  (a) Withdrawn for any purpose authorized by chapter 51 of the IRC in the same manner as domestic spirits...

Again, I know little about the Customs regulations and am not even confident that I can figure out the questions to ask.  I suspect that the manipulation in a CMBW or other customs facility is going to be cost prohibitive.  "Suspect" is a carefully choshen word.  I use it because I simply lack knowledge. 

Also, I am not sure of the manner in which Customs uses the word duty.  A quick Google search of "transfer of distilled spirits from Customs to Internal Revenue Bond leads to:

§ 141.102 When deposit of estimated duties, estimated taxes, or both not required.

Entry or withdrawal for consumption in the following situations may be made without depositing the estimated Customs duties, or estimated taxes, or both, as specifically noted:

(a)Cigars and cigarettes. A qualified dealer or manufacturer may enter or withdraw for consumption cigars, cigarettes, and cigarette papers and tubes without payment of internal revenue tax in accordance with § 11.2a of this chapter.

(b)Bulk distilled spirits transferred to the bonded premises of a distilled spirits plant. An importer may transfer distilled spirits in bulk to the bonded premises of a distilled spirits plant, without the payment of tax, under the provisions of section 5232(a), Internal Revenue Code of 1986 ( 26 U.S.C. 5232(a)), and the regulations of the Bureau of Alcohol, Tobacco and Firearms ( 27 CFR part 251).

The reference to ATF, instead of TTB, dates the regulation, but it may be a simple housekeeping matter that has not been resolved.

The phrase "estimated Customs duties, or estimated taxes, or both" implies that the duty is different than the tax, but .... 

IRC regulations [19.223(e)] go on, "[W]hen imported distilled spirits in bulk containers are withdrawn from customs custody and transferred to the bonded premises of a distilled spirits plant without payment of the tax imposed on imported distilled spirits by 26 U.S.C. 5001, the person operating the bonded premises of the distilled spirits plant to which spirits are transferred will become liable for the tax on the spirits upon their release from customs custody, and the importer will thereupon be relieved of liability for the tax.

So, I know you do not pay the taxes upon transfer from customs to IRC bond,, but whether a separate duty is due, I don't know. 

As you can see 19.409, which I quote above, if you transfer from Customs to IRC bond, the spirits are treated in the manner of domestic spirits that are held in bond.  That means that the tax is not due until you do something that triggers the liability, and removals from IRC  bond for export are done without payment of tax.  They are not tax free, which means that you remove them without payment, but before you are relieved of the tax, you must prove the exportation, which occurs if you deposit them into a  customs bonded warehouse or have them ladened onto a ship.  There are rules that cover the relief.

Hopefully, this bit of free advice gives you a place from which you can start to pursue the  alternatives.   Send me a personal message if you would like me to pursue this further, since it will take some time to do so, which comes under the heading, "That's my business :-)." 

 

 

 

[et1883]

Thank you again, dhdunbar, I'm awaiting a comment from the FTZ people directly to see if there is a simple solution.  The option above (remove from customs (or remove from FTZ?) to bonded DSP) without paying tax until a triggering event occurs (like moving it to a domestic US location for sale) seems to make sense, but "it's government," so what makes sense may not be correct or legal! :-)  I'll post what I hear from FTZ.