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Foreign Trade Zone Overview
The U.S. Foreign Trade Zone Program is one of the nation’s earliest attempts to stimulate economic development and facilitate global trade and commerce. The U.S. Congress passed the Foreign Trade Zone Act in 1934. The Foreign Trade Zone program has enhanced global competitiveness for U.S.-based companies, particularly for firms engaged in manufacturing or production.
The City of San Jose received the Foreign Trade Zone grant of authority from the federal government in 1974 – the 18th Foreign Trade Zone established in the U.S. The City of San Jose contracts with San Jose Distribution Services, a private warehouse and logistics company, to operate the General Purpose Foreign Trade Zone. The General Purpose Zone is located at 2055 South Seventh Street, Suite A in San Jose’s Monterey Corridor industrial area.
As the grantee, the City of San Jose is responsible for administering the Foreign Trade Zone in Santa Clara, Monterey, San Benito and Santa Cruz counties, and the southern part of Alameda and San Mateo counties.
What is a Foreign Trade Zone?
The Foreign Trade Zone is a site within the U.S., where foreign and domestic merchandize is considered to be outside of U.S. Customs territory. Merchandise can be imported into a Foreign Trade Zone without a formal Customs entry procedure or the payment of federal import duties. The Foreign Trade Zone allows a user (an individual or business) to delay, reduce or eliminate duty payments on foreign merchandise that enters the Foreign Trade Zone.
Products subject to quota are able to enter a Foreign Trade Zone when a quota restricts a product from entering the U.S. The product can be transferred from a Foreign Trade Zone once the quota is removed. With the approval of U.S. Customs and Border Protection, damaged foreign merchandise entering can be destroyed within a Foreign Trade Zone, thus avoiding duty payments. In summary:
- No duties are paid while foreign merchandise is in the Foreign Trade Zone.
- Duty rates are often higher on components rather than for a finished product. If a component enters the Foreign Trade Zone and is then used in the assembly of a finished product, the duty rate on the finished product is assessed, rather than the higher duty rate on the component.
- No duties are paid on foreign merchandise entering a Foreign Trade Zone and are then exported.
Activities permitted within a Foreign Trade Zone include:
| Assembly |
Processing |
Destroying Merchandise |
| Storage |
Manipulating |
Repackaging |
| Testing |
Relabeling |
*Manufacturing |
| Sampling |
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*The U.S. Foreign Trade Zones Board must approve manufacturing within a Foreign Trade Zone.
San Jose’s Foreign Trade General Purpose Zone and Operator
San Jose’s General Purpose Foreign Trade Zone is located in a 330,000 square-foot warehouse building in San Jose's Monterey Corridor industrial area. The City of San Jose has contracted with San Jose Distribution Services to operate Foreign Trade Zone #18. San Jose Distribution Services was selected through a public Request for Qualifications process.
Established in 1956, San Jose Distribution Services provides third party warehousing logistics for a diverse range of products, including computer components, food, paper, medical devices, raw materials, retail products, and other commodities. San Jose Distribution Services has operated the General Purpose Zone since 1982.
Foreign Trade Zone Operator Contact Information
San Jose Distribution Services Inc.
2055 S. Seventh Street, Suite A
San Jose, California 95112
Phone: (408) 292-9100
Fax: (408) 292-7173
www.sjdist.com
tom@sjdist.com
Tom Guerra
Foreign Trade Zone Manager
Foreign Trade Subzones
A company engaged in larger-scale distribution or manufacturing that is not able to attain the benefits of a Foreign Trade Zone in a General Purpose Zone can apply to receive the designation of a Subzone. A Foreign Trade Subzone is a designation for a single company. Foreign Trade Subzones must be in the public interest and demonstrate a public benefit (often related to the retention and/or expansion of jobs) In its role as Grantee, the City of San Jose submits Subzone applications to the Foreign Trade Zones Board, the federal agency managing the Foreign Trade Zone Program. For information about Subzones, contact the City of San Jose Office of Economic Development.
City of San Jose Foreign Trade Zone Contact
Joseph Hedges
International Program Manager
(408) 535-8186
joe.hedges@sanjoseca.gov
Foreign Trade Zone Statistics/Facts
- There are 255 General Purpose Foreign Trade Zones in all 50 states and Puerto Rico
- There are 17 Foreign Trade Zones in California
- There are 517 Foreign Trade Subzones in the U.S. and Puerto Rico
- Subzones account for 80 percent of Foreign Trade Zone activity
- Two-thirds of merchandise in Foreign Trade Zones is domestic status
- Merchandise received in Foreign Trade Zones in the U.S.
1980 - $1 Billion
1990 - $95 Billion
2002 - $249 Billion
2006 - $491 Billion
- Merchandise received in San Jose’s Foreign Trade Zone in 2006-07 - $101 Million
- Exports from U.S. Foreign Trade Zones
2000- $14 Billion
2006 - $30 Billion
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