Some things simply seem too good to be true. Given the long list of FTZ benefits, including saving on Merchandise Processing Fees (MPF), reducing or eliminating duties, taxes, and tariffs, and allowing for tax-free storage of inventory while in the zone, it’s natural to wonder why more companies aren’t taking advantage of FTZs. In other words, what’s the catch?
The truth is, as with many government programs, there’s no shortage of bureaucratic red tape and seemingly endless forms to navigate. One key requirement of FTZ management is meticulous inventory recordkeeping. For many companies, this task proves so daunting that they opt to never try FTZs in the first place.
Inventory Control in an FTZ: an Overview
There are a multitude of regulations surrounding inventory control and recordkeeping in an FTZ. The official list of regulations can be found here, and companies should be sure to talk to experts for advice on how these apply to any given situation. However, there are a few requirements that all companies operating, or interested in operating in an FTZ, should know about.
First, inventory records must be kept at all times to keep track of merchandise within a zone. These records must specify by zone lot number or unique identifier:
- Location of merchandise
- Zone status
- Cost or value of merchandise
- Beginning balance, cumulative receipts and removals, adjustments, and current balance on hand by date and quantity
- Destruction of merchandise
- Scrap, waste, and by-products
Second, operators must also keep records of all merchandise transferred from a zone. With large amounts of products entering, exiting, and transferring between FTZs, the amount of information related to merchandise movement is vast.
Furthermore, this information must be detailed enough to demonstrate that transferred products entered the FTZ in a way that is compliant with US Customs and Border Protection (CBP) authorized inventory methods. Gaps in data can result in regulatory action and jeopardize FTZ status.
Third, operators must prepare annual reconciliation reports that are available for future spot checks and audits. These reports contain information regarding all merchandise on hand at the beginning of the year, transfers made throughout the year, inventory on hand at the end of the year, and more.
Given these regulations and more around inventory control in FTZs, companies cannot afford to use outdated and inefficient methods. While these regulations are complex, a robust Inventory Control and Recordkeeping System (ICRS), ensures compliance, streamlines recordkeeping, and reduces administrative costs.
Four Benefits of Streamlining Inventory Control with QAD Global Trade and Transportation Execution (GTTE)
1. Ensure Audit-Readiness with Digitized Recordkeeping
Keeping track of inventory with pen and paper, or even MS Excel, is prone to human error. When audits come unexpectedly, without a robust solution, companies will struggle to find all the necessary paperwork. With a comprehensive ICRS, recordkeeping is digitized and files are automatically backed up without any user intervention necessary. Ideally, the ICRS should utilize user-friendly dashboards to quickly view inventory records so that when audits come, companies are ready with easily accessible documents forming a clean audit trail.
2. From Reactive to Proactive: Advanced Notifications
What separates good companies from great companies? Good companies are reactive; great companies are proactive. Rather than realizing inventory has exceeded weekly entry estimates after the fact, your ICRS should empower you to be proactive, receiving advanced notifications if shipments will exceed weekly entry estimates. Furthermore, the solution should alert operators of upcoming CBP due dates so that teams are prepared, not scrambling, when deadlines for documentation submission come. These alerts can be customized to send emails, texts, and reports to the customer for various deadlines ensuring that everyone is prepared and on the same page.
3. Reduce Administrative Time by Easily Creating and Submitting Inventory Documentation
FTZ management is abound with forms to be created, filled out, and submitted – all of which leads to greater time and money spent on administrative tasks. If companies aren’t careful, they can easily cut deeply into their FTZ margins with administrative costs. However, with a best -in-class ICRS, companies can easily create and submit critical FTZ documentation, dramatically reducing costs. Some of the documents that can be submitted electronically include:
- Annual CBP Reconciliation
- FTZ Board Report for OFIS submission
- Individual and weekly entry (CBPF 3461 and CBPF 7501)
- Quarterly Harbor Maintenance Fee Report (CBPF 349)
- E-214 ACE submission
- CBPF 7512 (QP/WP) ACE submission
- Permit to Transfer ACE submission
- ISF ACE submission
4. Integrate with CBP’s ACE System
It is critical that your ICRS solution should seamlessly integrate with CBP’s ACE system. This ensures that work is not duplicated while allowing companies to keep reporting in-house. Furthermore, the FTZ solution extends the capabilities of CBP ACE with advanced built-in reporting tools and in-depth customization options. Through the solution’s integration with CBP ACE, key data is automatically updated, including HTSUS updates, country code updates, currency conversion rates, LACEY Act APHIS declarations, and much more.
Learn More about QAD FTZ ICRS
Managing an FTZ can be intimidating, but by partnering with FTZ experts and leveraging the right tools, companies can reap all the benefits of FTZs without the headache of managing them the old-fashioned way. Our experts have successfully completed over 1,000 FTZ projects. No matter where a company is on its FTZ journey, whether it’s looking for more information on whether an FTZ is the right solution, or it’s looking for help managing any aspect of an FTZ, such as inventory control, QAD we are here to help answer questions. To schedule a consultation, click here.
