Title: The utilisation of foreign trade zones in the global supply chain: an exploratory study

Authors: Hokey Min, Thomas E. Lambert

Addresses: James R. Good Chair in Global Supply Chain Strategy, Department of Management, BAA 3008C, College of Business Administration, Bowling Green State University, Bowling Green, Ohio 43403, USA. ' Economics Department, School of Business, Indiana University Southeast, New Albany, Indiana 47150, USA

Abstract: Foreign Trade Zones (FTZs) are considered duty-free areas and, thus, not governed by the usual customs and tariff controls. In other words, the merchandise permitted in the FTZ may be stored, sold, exhibited, labelled, repacked, assembled, distributed and mixed with other merchandise without paying customs duty until merchandise is released from the zone. Deferred customs duties in the FTZs can contribute significantly to the profitability of the Multinational Firms (MNFs) that get involved in global supply chain activities. Thus, the utilisation of FTZs is believed to have a positive impact on export/import operations and the location decisions of MNFs. Despite such benefits, many MNFs still have not fully explored the possibility of utilising FTZs. Through an exploratory study, this paper identifies the factors that facilitate or hinder the usage of FTZs in the USA. Also, this paper examines the impact that FTZs have on the selected manufacturing and logistics industry and determines how significantly FTZs affect the MNFs| decisions on locating their facilities.

Keywords: foreign trade zones; FTZ; global supply chains; international trade; supply chain management; SCM; duty-free areas; multinational enterprises; MNEs; USA; United States; manufacturing industry; logistics.

DOI: 10.1504/IJSOM.2010.030631

International Journal of Services and Operations Management, 2010 Vol.6 No.2, pp.110 - 125

Published online: 27 Dec 2009 *

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