New and Dynamic Zone Uses Marshall V. Miller, Esq. Miller & Company, P.C

New and Dynamic Zone Uses

Marshall V. Miller, Esq.Miller & Company, P.C.

©2007 Miller & Company P.C 2

Major FTZ Challenges

• Perception of Too Complicated to Use

• Perception That It Is A Paperwork Blizzard

• Significant Time Necessary to Establish

• In Some Instances Significant Costs to Establish

• Customs Compliance

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Major FTZ Challenges

• Inconsistent Customs Port Management

• Necessity for Accurate Inventory Control

• Opposition of Many Customs Brokers – Reduction/Elimination of Customs Entries Means Reduction of Income

• Free Trade Agreements/Duty Suspensions

• Chinese 3PL Direct Ship to Retailers

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FY 2005 FTZ Board Annual Report Product Trends Over the Past Three Years

(In $millions)

Category 2003 2004 200503 to 05 +/-

Current Trend

Crude Oil & Petroleum Products 61910 74746 129727 109.5%

Automobiles/ Motor Vehicles/Parts 13398 19049 21368 59.4%

Pharmaceutical & Related Products* 2274 3275 2746 20.7%

* Denotes categories similarly titled in General-Purpose Zones and Subzones, but not identical

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(In $millions) (continued)

Category 2003 2004 200503 to 05 +/-

Current Trend

Computers/Office Equipment & Related Parts 490 1489 2296 368.0%

Electronic Products & Parts 2351 2836 1901 -19.1%

Chemicals* 519 813 1170 125.4%

Machinery/ Equipment & Supplies 1519 1049 1148 -24.4%


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Category 2003 2004 200503 to 05 +/-

Current Trend

Audio Video Equipment & Supplies* 804 903 1101 36.9%

Ship Parts & Related Equipment* 162 1199 985 508.0%

Home Appliances/ Furnishings & Related Parts* 242 359 910 276.0%


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Category 2003 2004 200503 to 05 +/-

Current Trend

Juice Concentrate 135 103 174 28.8%

Apparel/Textiles & Related Products* 680 552 738 8.5%

Jewelry/ Watches 290 450 606 108.9%

Metal and Mineral Products 533 396 483 -9.3%

Electrical Equipment and Related Parts 95 279 175 84.2%


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Category 2003 2004 200503 to 05 +/-

Current Trend

Tobacco** 140 192 161 15.0%

Toiletries/ Cosmetics & Related Products 271 253 129 -52.3%

Satellite Parts** 0 0 125

Liquor** 145 149 112 -22.7%

Photo Optical Equipment & Supplies** 308 102 93 -69.8%

**Denotes categories listed in either General-Purpose Zones or Subzones, but not in both

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Category 2003 2004 200503 to 05

+/-Current Trend

Vacuum Fluorescent Displays** 94 93 90 -4.2%

Bearings** 3 52 62 1966.0%

Miscellaneous 5 32 54 980.0%

Steel 79 48 37 -53.1%

Sporting Goods/ Recreational Equipment** 76 84 33 -56.5%


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Category 2003 2004 200503 to 05 +/-

Current Trend

Other Food Products** 45 78 24 -46.6%

Plastic* 12 15 20 66.6%

Medical Equipment & Supplies** 47 27 13 -72.3%

Sugar** 5 4 6 20.0%



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2005 FTZ Board Annual ReportTop 10 FTZ Product Increases

Category Aggregate % 2003 2005

Bearings 1966.0% 3 62Ship Parts & Related Equipment 508.0% 162 985Computer Equipment 368.0% 490 2,296Home Furnishings 276.0% 242 910Chemicals 125.0% 519 1,170Crude Oil & Petroleum Products 109.5% 61,910 129,727Jewelry/Watches 108.9% 290 606Electrical Equipment 84.2% 95 175Plastic 55.6% 12 20Audio Video Equipment 36.9% 804 1,101

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2005 FTZ Board Annual ReportTop 10 FTZ Product Decreases

Category Aggregate % 2003 2005

Medical Equipment & Supplies - 72.3% 47 13Photo/Optical Equipment - 69.8% 308 93Toiletries/Cosmetics - 52.3% 271 129Sporting Goods/Recreation Equip – 56.5% 76 33Steel - 53.1% 79 48Other Food Products - 46.6% 45 24Machinery/Equipment -24.4% 1,519 1,148Liquor - 22.1% 145 112Electronic Products - 19.1% 2,351 1,901Metal & Mineral Products - 9.3% 533 483

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Easiest Way to Increase Existing FTZ Use

• Identify and Include All Direct Foreign Sourced Material

• Identify and Include Domestic Purchased Merchandise that is Really Foreign-Sourced Merchandise

• Include Duty-Free Merchandise• Packaging• Scrap/Waste/Obsolete• Kitting• In Bond Exports

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Packaging

• Non-Reusable Containers• Foil/Plastic• Pumps

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Scrap/Waste/Obsolete

• Consumer Goods• Chemicals• Glassware• Dinnerware

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Kitting

• Liquor/Glasses/ Cradle

• Cosmetics• Cell Phones• Computers• Home Theatre Kits• Tool Kits• Napkins/Rings

• Pen Set• Audio Rack

System• Surgical Pack• Clothing Set• Dinnerware Set• Glassware Set

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Everybody Does It

• Oil Refineries• Motor

Vehicles/Parts• Engine Production• Pharmaceutical/

Medical Equipment Production

• Chemical Production

• Shipyards/ Offshore Drilling Rig Production

• Information Technology

• Toner Cartridges• Footwear• LME Warehouses

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London Metal Exchange Warehouses (42)

• Baltimore, Maryland (8)• Chicago, Illinois (6)• Detroit, Michigan (4)• Long Beach, California (2)• Los Angeles, California (2)• Louisville, Kentucky (1)• New Orleans, Louisiana (16)• Owensboro, Kentucky (1)• St. Louis, Missouri (2)

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Future Users/Uses

• Expand Current FTZ Operations

• AD/CVD Merchandise

• High Duty Rate Merchandise – Compound/ Chapter 99/ General

• Downstream Oil Processing

• Auto-Storage/ Production

• All U.S. Distribution Warehouses

• Spare Parts Warehouses

• Returns/Repair Operations

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Top Twenty Anti-Dumping/Countervailing Duty

Cases

Description DOC Case Number CountryHighest% Rate

Hand trucks A-570-891 China 383.6

Fresh garlic A-570-831 China 376.67

Carbon steel wire rod A-841-805 Moldova 369.1

Natural bristle paint brushes A-570-501 China 351.92

Saccharin A-570-878 China 329.33

Roasted in-shell pistachios C-507-601 Iran 317.89

Pure magnesium (granular) A-570-864 China 305.56

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Cases (continued)


Chlorinated Isocyanurates A-570-898 China 285.63

Certain artist canvas A-570-899 China 264.09

Certain lined paper A-570-901 China 258.21

Silicomanganese A-834-807 Kazakhstan 247.88

Hot-rolled carbon steel flat products A-834-806 Kazakhstan 243.46

Steel concrete reinforcing bar A-841-804 Moldova 232.8

Crawfish tail meat A-570-848 China 223.01

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Cases (continued)


Frozen or canned warm water shrimp and prawns A-570-893 China 217.94

Foundry coke A-570-862 China 214.89

Honey A-570-863 China 212.39

Forged stainless steel flanges A-533-809 India 210

Preserved mushrooms A-570-851 China 198.63

Crepe paper A-570-895 China 198.08

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Top HTS Specific Duty Rates

Product Rate RangeLeaf Tobacco $5.48 per kgBroomcorn $4.95/tCotton Card Strips $1.079 per kg. to $3.159

per Watches $1.75 ea to $2.28 eaCheeses $2.269 per kgButter substitutes $1.996/kgCigars, Cheroots , and Cigarillos $1.89 per kgFat and Oils Derived from Milk $1.865 per kgGrapes, fresh, if entered from July 1 through Feb. 14th $1.8/m3Flowers bulbs/pips $1.44/1000

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High Duty Rates – Chapter 99

Product Duty % Rate

Gin/Brandy/White Wine 200.0%

Cheeses 200.0%

Carrots 200.0%

Pork Ham 200.0%

Olives 200.0%

Peanuts 54.6%

ADP Machine 100.0%

TV Receiver 100.0%

Rotary Drill 100.0%

Ukraine Goods 100.0%

French Goods 100.0%

EC Goods 100.0%

Articles the Product of Japan 40.0%

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General Product Duty Rates

Product Rate Range Rate Type

Footwear $0.62/pair + 13% -to- $0.90/pair + 37.5% Compound Rate

2.5% -to- 48% Ad valorem

Apparel free -to- $0.617/kg +16% Compound Rate

16% -to- 28.6% Ad valorem

Gloves free -to- $0.312/kg +7% Compound Rate

2.8% -to- 23.5% Ad valorem

Luggage 5.7% -to- 20% Ad valorem

Porcelain/China .7% -to- 28% Ad valorem

Drinking Glasses 3% -to- 28.5% Ad valorem

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2007 Wild Card Free Trade Agreements

2006 Imports

Korean Free Trade Agreement $ 45,829,578,469

Potential Future FTA’sJapan FTA$148,091,153,702EU FTA $332,130,840,377

List of Other Major Exporters to U.S.Canada (NAFTA)$303,416,249,743Mexico (NAFTA) $198,258,638,178Taiwan $ 38,214,770,347China $287,772,785,927

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Free Trade Agreements Impact

Free Trade Agreements Import ValueAustralia $ 3,134,246,743Bahrain $ 46,688,026Chile $ 5,486,187,474DR-CAFTA (Incl. DR-CAFTA+) $ 3,928,750,682Israel $ 2,767,814,258Jordan $ 309,057,854Morocco $ 115,866,351NAFTA (CA & MX) $276,881,729,699Singapore $ 868,855,7052006 U.S. FTA Import Value $293,539,196,792

2006 Total Import Value $1,855,119,254,218

FTA as a Percent of Total 15.7%

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Duty Suspensions

• 1995 – World Trade Organization – Congressional Agreement – No More Duty Suspensions

• Miscellaneous Trade & Technical Act of 2000 —169 New Duty Suspensions & Reductions—19 Extensions

• Miscellaneous Trade & Technical Corrections Act of 2004—330 New Duty Suspensions & Reductions—5 Extensions

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Duty Suspensions (continued)

• Tax Relief & Health Care Act of 2006—348 New Duty Suspensions—34 Reductions—138 Extensions

• Duty Savings must be under $500,000 per year

• No Chapter 99 Census Records

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Published Article

Western retailers shift their supply chain tasks to China

By Robert Wright in Shanghai Published: March 27 2007 03:00 | Last updated: March 27 2007 03:00Retailers and consumer goods companies in the developed world are increasingly shifting logistics operations from their home countries to China. Goods are sorted, labelled and even placed in displays for direct shipment to individual stores before leaving Chinese ports.Shipping lines, logistics companies and warehouse operators say costs spur customers to move the sorting process away from consuming countries, continuing the outsourcing trend to lower wage economies that began with manufacturing going to China.The process is known as "distribution centre bypass" because it cuts out distribution centres in the destination country. © 2007 The Financial Times Ltd.

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Summary

• Major FTZ Challenges• FTZ 2005 Annual Report Material

Increases/Decreases• Easiest Way to Increase Existing FTZ Use• Future Users/Uses• Free Trade Agreements/Duty

Suspensions• Chinese 3PL’s

Documents

New and Dynamic Zone Uses Marshall V. Miller, Esq. Miller & Company, P.C