Distributors: Use FTZ to Reduce Inventory Carrying Costs

An efficient supply chain is the competitive differentiator of the decade for distribution companies. Since before the onset of COVID, companies have been storing more product in inventory to combat the supply chain crisis, eating into cash flow. Activating a facility as an FTZ will help companies hold onto their cash as they increase inventory volumes.

When you activate your facility as an FTZ, you remove the footprint of your operation from U.S. Customs Territory. This allows you to delay the customs entry process, and therefore the payment of import tariffs, until after your product leaves your facility and heads to a customer, rather than paying the tariff upon the product entering the United States. Since many distributors pass tariff costs onto their customers anyway, an FTZ can remove a distributor from the business of lending the tariff cost to their customer while the inventory is in the warehouse.

When you look at your warehouse, do you see a lot of imported product sitting there, eating into your cash flow? If your inventory is imported from China (Section 301 tariff) or is Steel or Aluminum (Section 232), it likely has increased the cash flow impact by as much as 25%. Imagine now, that you defer that 25% premium paid until after that product has left your facility. This can reduce inventory carrying costs by as much as 20%. How would you use that extra cash, rather than lending it to your ultimate customers? 

In northern Illinois, FTZ #176 encompasses 11 counties running from LaSalle-Peru, Illinois and north up to the Wisconsin state line. Distribution companies within that region have the ability to lower costs and boost their competitive edge by becoming part of the zone.

For more information about joining FTZ #176, call 312-221-1115 or contact us online.