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FTZ Inventory Training

FTZ Inventory Training . August 2011. Brooke Meadows. Introduction to Foreign Trade Zone . Description of ftz operations

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FTZ Inventory Training

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  1. FTZ Inventory Training • August 2011 • Brooke Meadows

  2. Introduction to Foreign Trade Zone • Description of ftz operations The facilities of ThyssenKrupp Stainless USA, LLC were designated as U.S. Foreign-Trade Subzone No. 82-I by Foreign-Trade Zones Board Order No.1727. The Subzone grant was issued to the City of Mobile, grantee of the Foreign-Trade Zone No. 82 project. ThyssenKrupp Stainless USA, LLC operates Subzone 82-I under a user agreement with the Mobile Foreign-Trade Zone Corporation, the Zone Project Administrator of the FTZ No. 82 project. Under this procedures manual ThyssenKrupp Stainless USA, LLC shall use its subzone for the purpose of production equipment construction, assembly and testing. Specific operations will include receiving, storage, manufacturing, fabrication, inspection, repair, manipulation, and destruction of merchandise.

  3. Definitions • Merchandise: Merchandise includes goods, wares, and chattels of every description, except Prohibited Merchandise. • Domestic Merchandise: Merchandise which has been produced in the United States and not exported there from, or previously imported into the Customs territory of the United States and properly released from Customs territory of the United States. • Foreign Merchandise: Imported merchandise that has not been properly released from Customs custody in the Customs territory of the United States. • Mixed Status Merchandise: Foreign merchandise that has been combined with Domestic Merchandise in the zone is sometimes referred to as Mixed Status Merchandise. • Conditionally Admissible Merchandise: Merchandise which may be imported into the U.S. under certain conditions. Merchandise that is subject to permits or license, or which must be reconditioned to bring it into compliance with the laws administered by various Federal agencies, is an example of Conditionally Admissible Merchandise.

  4. Continuation of Definitions • Prohibited Merchandise/Operations: Merchandise,- the importation of which is prohibited by law on grounds of public policy or morals, or any merchandise that is excluded from a zone by order of the Foreign-Trade Zones Board. Books urging treason or insurrection against the U.S., obscene pictures, and lottery tickets are examples of prohibited merchandise. Also certain operations involving the following merchandise are prohibited: Tobacco, Cigars, cigarettes, and cigarette papers and tubes (26 U.S.C. 5701-5706); Firearms (26 U.S.C. 4181-4181/5811), Distilled spirits, alcohol, wine and beer (26 U.S.C. 5001-5008, 5010); sugar (U.S.C. 4501-4503); Watch movements (19 U.S.C. 1367-1368); Bicycle parts have been prohibited for a limited time period (19 U.S.C. 810 & CR 146.14). • Restricted Merchandise/Operations: Merchandise,-which may not be authorized for delivery from Customs custody without a special permit, or a waiver thereof, by an agency of the U.S. Government. Also, the Foreign-Trade Zones Board and U.S. Customs have restricted certain operations involving the following products: steel, textiles, television tubes, sugar. Operations involving orange juice may be restricted. The restrictions may vary on a case-by case-basis.

  5. Continuation of Definitions • Fungible Merchandise: Merchandise, which for commercial purposes, is identical and interchangeable in all situations. • Audit-Inspection Procedures: These procedures provide the framework for Customs to reduce on-site supervision of zones and for zone operators/users to increase zone-operating flexibility through the audit-inspection method of supervising zones. The systems may be manual, computerized, or a combination of both. • Zone Lot Number (ZLN): A collection of merchandise maintained under an inventory control method based on specific identification of merchandise admitted to a zone by lot and lot number. Use of this method requires use of uniquely numbered lot files, and physical segregation and marking of merchandise for each lot. ThyssenKrupp Stainless USA, LLC will not use a lot number system for control of merchandise.

  6. Continuation of Definitions • Unique Identifier Number (UIN): This inventory control method controls merchandise in a zone by cumulative identification, i.e., by unique numbers and/or letters that identify merchandise admitted to a zone. Inventory levels are adjusted on a First-In-First-Out (FIFO) or Foreign First (FOFI) basis pursuant to generally accepted accounting principles. Merchandise need not be segregated. All FTZ reports are linked to the inventory and record keeping systems to insure accurate records. ThyssenKrupp Stainless USA, LLC uses a UIN system with FIFO inventory relief methodology. • Admit: To bring merchandise into a zone with zone status. • Constructive Transfer: A legal fiction that permits acceptance of a Customs entry for transfer to the Customs territory. Constructive transfer is deemed to have occurred when Customs receives an Entry in proper form. If the Entry is not accepted, it will be deemed constructively transferred back to the zone in its previous zone status.

  7. Continuation of Definitions • Default: An action or omission that will result in a claim for duties, taxes, charges, or liquidated damages under the FTZ Operator's bond. • Subzone: Is a special purpose zone established as part of a zone project for a limited purpose, which cannot be accommodated within an existing zone. The term "zone" also applies to a subzone, unless specified otherwise herein.  • Transfer: To take merchandise with zone status from a zone for consumption, transportation, exportation, warehousing, cartage, or lighterage, vessel supplies and equipment, admission to another zone, and like purposes.

  8. Zone Status • Zone Status: The status of merchandise admitted to a Foreign-Trade Zone: • Privileged Foreign (PF): Foreign merchandise or non-tax-paid domestic merchandise upon which the duty and applicable taxes have been determined at the time the status is approved. The determined duty rate and taxes are not subject to future fluctuation. Once established, Privileged Foreign status cannot be changed. If merchandise has already been admitted to a zone with Non-privileged Foreign status, Privileged Foreign status may be obtained by filing a CF 214 and related documents. Application for this status, however, must be filed prior to manipulation or manufacture in the zone. • Non-privileged Foreign (NPF): Foreign merchandise or non-tax paid domestic merchandise upon which the duty and applicable taxes will be determined at the time the merchandise enters the Customs territory of the United States from the zone for consumption. • Domestic (D): Merchandise produced in the U.S., not exported there from, and on which all internal revenue taxes, if applicable, have been paid; and, imported merchandise properly released from Customs custody on which all applicable duties and taxes have been paid. • Zone Restricted (ZR): Merchandise admitted to a zone for the sole purpose of exportation or destruction. Merchandise with Zone Restricted status may not enter U.S. Customs territory for consumption except when approved by the Foreign-Trade Zones Board.

  9. Bureau of Customs & Border Protection forms (“CF”) • 3461: Immediate Delivery Application. Used for entry of Foreign or Mixed Status merchandise into U.S. Customs Territory. Duties and taxes are payable on filing of the CF 7501 within ten working days of release of merchandise. An estimated CF 3461 may be used if the Operator operates under Estimated Production Procedures for Consumption (CR 146.63c) • 5119-A: Informal Entry. Entry for goods valued under $2000. Informal entry does not require a bond. Informal entry is generally not permitted for textiles and textile products.  • 7501 Entry Summary- Entry for Foreign or Mixed Status merchandise into the Customs territory of the United States. Duties and taxes must be paid at the time of filing this form. The CF 7501 provides a detailed summary by line item and is used to assess duties and taxes payable to U.S. Customs. This form must be filed and duties and taxes paid within 10 working days of the release of merchandise under a CF 3461. • 7512: Transportation Entry and Manifest of Goods subject to Customs Inspection and Permit. This form is used to establish the responsibility of bond for the transfer of Foreign or Mixed Status merchandise from the port of unlading to the zone (Unless the zone is located in the port of unlading which requires the use of a CF 214, CF 6043) The CF 7512 is also used to establish the responsibility of bond for Foreign or mixed status merchandise for zone-to-zone transfers between zone sites in different ports of entry. • MANIFEST DISCREPANCY REPORT: This report is used to report discrepancies at the point of unlading. The report consists of an explanation of the discrepancy, filed on company letterhead by the party responsible for the discrepancy.

  10. foreign-trade zone forms • The two Foreign-Trade Zone forms, CF 214\E214 and CF 216, are official U.S. Customs forms, required for admitting merchandise into the zone and manipulating merchandise while in the zone. • 214: Application For Foreign-Trade Zone Admission and/or Status Designation. This form is used as an application for zone status and to admit merchandise into the zone. A CF 214 or E214 may also be used to report shortages at the point of unlading, on arrival at the zone, or in the zone if signed jointly by the operator and the carrier, and if discovered within 15 days after admission to the zone; the CF 214 must be filed with Customs within 2 working days thereafter.  • 216: Application for Foreign-Trade Zone Activity Permit. This form is used as an application for manipulation, manufacture, exhibition or destruction of zone merchandise. A blanket, yearly CF 216 may be used In lieu of individual CF 216s for certain kinds of activity.

  11. Security Procedures Employees and Other Persons Entering or Leaving the Zone • Employees and other persons entering or leaving the ThyssenKrupp Stainless USA, LLC facility shall only use the designated entrance(s). Anyone entering or leaving the zone may be subject to physical examination as U.S. Customs deems necessary, or at the request of ThyssenKrupp Stainless USA, LLC. Anyone entering the zone for whatever reason shall adhere to the Foreign-Trade Zones Board regulations, Customs regulations, and the rules and regulations issued by ThyssenKrupp Stainless USA, LLC.

  12. Security Procedures • Signs • The below will be contained within signs posted within the boundaries of the FTZ and within plain sight of every entrance and exit of the zone. THIS IS A U.S. FOREIGN-TRADE ZONE. WHOEVER ENTERS IS SUBJECT TO PHYSICAL SEARCH. WHOEVER ENTERS WITH INTENT TO REMOVE ANY MERCHANDISE, OR UNLAWFULLY REMOVES MERCHANDISE FROM U.S. CUSTOMS SERVICE CUSTODY OR CONTROL SHALL BE GUILTY OF A FEDERAL CRIME AND FINED UP TO $250,000, IMPRISONED NOT MORE THAN 2 YEARS, OR BOTH. (18 U.S.C. 549, 3571)

  13. Physical facilities and material management • All merchandise stored in the Zone will be stored in a safe and sanitary manner. Aisles will be established in storage areas, and all entrances should be left unblocked. Trash and waste should be promptly removed from the zone. Scrap will be placed in designated containers or areas.

  14. Inventory Control and Recordkeeping Systems • General • The systems are designed to meet the requirements of the U.S. Customs Service Regulations (T.D. 86-16) for Audit-Inspection Procedures in Foreign-Trade Zones. Under the Regulations, the Operator maintains the inventory records. U.S. Customs is relieved of the duty of actually keeping the records, but maintains assurance of the systems' accuracy by selective examinations of merchandise, and spot checks and audits of zone facilities. The systems are capable of producing the following required results: • Accounting for all merchandise, including domestic status merchandise, temporarily deposited, admitted, granted a zone status and/or status change, stored, exhibited, manipulated, manufactured, destroyed, transferred, and/or removed from a zone; • Producing accurate and timely reports and documents as required by the Customs Regulations; • Identifying shortages and overages of merchandise in the zone in sufficient detail to determine the quantity, description, tariff classification, zone status and value of the missing or excess merchandise; • Providing all the information necessary to make entry for merchandise being transferred to the Customs territory; and • Providing an audit trail to Customs forms from admission through manipulation, manufacture, destruction or transfer of merchandise from the zone by a Customs authorized inventory method.

  15. proprietary information • No proprietary information contained on a Customs form or in the inventory control and record keeping systems will be disclosed to unauthorized persons. • User systems/manual • ThyssenKrupp Stainless USA, LLC’s Inventory control and record keeping system(s) will meet the following criteria: • The System(s) satisfy the requirements set forth in Item III.A above. • A description of the system is included in this manual. See attached Exhibit A. • The system(s) is subject to regular spot checks and audits by the Zone Project Administrator and Customs. • The FTZ Inventory Record also shows the following information: • The quantities on hand recorded by part or other UIN Number. • Quantities received and/or constructively transferred by part or other UIN number with reference to the appropriate CF214\E214 number or entry number. • The transaction dates and Foreign-Trade Zone status of the merchandise.

  16. Record Retention • Records will be retained for five (5) years after the merchandise is constructively transferred from the zone. Records will be readily available for Customs review at the zone site. (Regulation 19CFR163.4)

  17. Procedures for Receipt of Merchandise at Zone • Standard admission procedures • Upon arrival at the first port of unlading, ThyssenKrupp Stainless USA, LLC or its Customhouse broker will arrange for foreign merchandise to be transferred in-bond on a CF 7512 (I.T.) to the zone. If the first port of unlading is the Port of Mobile, a CF 6043, or CF 214/E214 will be used for delivery of merchandise to the zone. • ThyssenKrupp Stainless USA, LLC prepares for the arrival of foreign merchandise by completing a uniquely and sequentially numbered CF 214/E214 in 5 copies. Item 6 will be filled in with the sequential 214 numbers. The remainder of items 1-27 are completed, and ThyssenKrupp Stainless USA, LLC as the Operator signs and dates the CF 214 in items 28-30. Then ThyssenKrupp Stainless USA, LLC [or its designee] transmits the CF 214/E214 to Customs along with a copy of an examination invoice and evidence of right to make entry to the Port Director. Customs may require additional information if needed to conduct an examination of the merchandise under Customs' selective entry processing criteria, or to determine whether the merchandise is admissible to the zone. • Customs will sign the CF 214/E214 in items 31-41 and return all copies to the bonded carrier, thereby permitting the merchandise to be admitted to the zone.

  18. Procedures for Receipt of Merchandise at Zone • If Statistical information is not reported directly to the Census Bureau, the information required by the Census Bureau will be furnished on a CF 214A (pink or salmon copy) and transmitted to Customs with each CF 214. • A CF 216 or blanket CF 216 may be prepared and filed with Customs prior to receipt of merchandise which is to be manipulated in the zone. • If the Customs seals are broken, missing, or improperly affixed on arrival at the zone, then ThyssenKrupp Stainless USA, LLC's dock manager will be notified and he shall obtain the written concurrence of the carrier on the CF 7512 as to the condition of the seal on delivery, and prevent unloading until a Customs officer is notified and instructions received. If Customs cannot be contacted within 2 hours, then the merchandise may be temporarily deposited in the zone. • ThyssenKrupp Stainless USA, LLC's dock personnel receive all paperwork from the carrier. The merchandise is unloaded, inspected by ThyssenKrupp Stainless USA, LLC's dock personnel and quantities verified against the manifest and cartage documents. Any damage or discrepancy is noted on the CF 214 in item 46 & on the 7512 to confirm the damage or discrepancy. U.S. Customs will be immediately notified of any refusal by a carrier to sign for the damage or discrepancy. If the cartage documents have already been signed and the carrier released prior to unloading or inspection of the merchandise, damage or discrepancy will be reported on the CF 214. • The CF 7512 is signed and dated by ThyssenKrupp Stainless USA, LLC to accept responsibility for the merchandise under the FTZ Operator's bond, and to relieve the carrier of responsibility once delivered to the foreign trade zone. The bonded carrier retains a copy of the signed CF7512. ThyssenKrupp Stainless USA, LLC also completes items 46-49 on the CF 214. • One copy of the CF214 will be returned to US Customs and ThyssenKrupp Stainless USA LLC will retain the remaining copies as required by regulation. • The inventory system is updated to reflect the receipt and admission of the merchandise.

  19. Incomplete Documentation • Merchandise received without complete Customs documentation or which is unacceptable to the inventory control and record-keeping systems will be recorded in the Admission Suspense Account. When sufficient information or documentation becomes available, ThyssenKrupp Stainless USA, LLC will complete the admission procedures above, and relieve the Admission Suspense Account accordingly. The Suspense Account will be completely documented to explain what has occurred and the corrections made

  20. procedures for reporting theft, overage and shortage and damage of merchandise • Thefts or suspected thefts of any merchandise shall be reported in writing to the Port Director of Customs upon discovery. Every effort shall be made to determine the facts and assist Customs and other Federal or local agencies in any investigation and prosecution for theft. Based on 19CFR146.53(a) Theft reporting-The operator is required to immediately report to the Port Director any theft or suspected theft from the zone, including thefts or suspected thefts of domestic status merchandise. Theft of merchandise from a zone is usually considered a theft in interstate or foreign commerce, a felony under 18 USC 549 punishable by a fine of up to $250,000 imprisonment for not more than 2 years or both (18 USC 549,3571)

  21. Overage AND SHORTAGES • The inventory control and record keeping systems shall record all inventory overages and shortages (ZR, NPF, PF and D) and report the same as follows: • Domestic Status merchandise not admitted to the zone on a CF 214 need not be the subject of any report (nor in the Annual Reconciliation) to U.S. Customs because of any overage, shortage or damage. • Overage--Excess Foreign Status Merchandise not properly admitted to the zone shall be admitted to the zone on a CF 214 or Customs Entry shall be made. The CF 214 or Customs Entry shall be filed with Customs within five (5) days after identification. Failure to do so may result in the merchandise being sent to General Order, or the imposition of liquidated damages, penalties, suspension or revocation. • Shortage--Shortages of 1 percent (%) or more of the quantity of Foreign Status merchandise in a UIN, if the missing merchandise would be subject to duties and taxes of $100 or more upon entry to the Customs Territory shall be reported in writing to the Port Director upon identification, and a Customs entry shall be filed for the missing merchandise. Otherwise, merchandise shortages shall be accounted for in the zone inventory control and record keeping systems and accounted for in the Annual Reconciliation (Section XI).

  22. DamageD and Adjustments to Merchandise • Damaged merchandise shall be segregated, marked and otherwise secured to preserve its identity as damaged merchandise • Adjustments Adjustments will be made to the FTZ Inventory Record upon final determination that an overage or shortage exists. An appropriate CF 214 or Customs Entry will be made.

  23. Annual Reconciliation • Inventory counts ThyssenKrupp Stainless USA, LLC will conduct an annual physical inventory of all merchandise in the zone [unless cycle counts are taken as part of an ongoing inventory control program.] Customs will be given prior notification of the date(s) when the annual physical inventory will be performed so that Customs may participate if deemed necessary. Discrepancies will be reported per the Customs Regulations and this Operations Manual. “Closeout review” with CBP for final delivery of inventory counts.

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