Key Benefits:

• Inverted tariff or reduced duty by leaving the zone as a byproduct at a lower tariff rate than crude oil
• Duty elimination on re-exported product
• Duty is only paid when product leaves the zone for consumption, providing cash flow benefit

Example:

ExxonMobil reinvests its savings from FTZs:

ExxonMobil has been a participant in the FTZ program since late 1995. Currently, ExxonMobil has five refinery complexes approved by the Foreign-Trade Zones Board. ExxonMobil buys and refines crude oil from the U.S. and over twenty countries around the world. Refining the crude in a foreign trade zone allows ExxonMobil to reinvest the duty savings and promote its export program.

For example, many times ExxonMobil buys foreign crude, refines it into jet fuel, moves it in-bond to another foreign trade zone (like an airport), and loads the jet fuel on an airplane bound for international destinations. In this instance, no formal entry has been made.

Many departments at ExxonMobil, like purchasing, scheduling and legal, are aware of the program, its costs and its benefits. ExxonMobil was an early participant in the FTZ program and has enjoyed the success of the duty savings and duty planning opportunities.

• Source: “Why Zones are Important to the Oil Refining Business in the U.S.” by Vance Poe, ExxonMobil and Mike Heldebrand, Ernst & Young, LLP