Foreign trade zone

What is a foreign trade zone (FTZ)?

A foreign trade zone (FTZ) is a secure, designated area in or near a U.S. Customs and Border Protection (CBP) port of entry where goods are considered outside U.S. customs territory for duty purposes. Businesses can manufacture, assemble, store or process goods within an FTZ and defer, reduce or eliminate import duties until those goods enter U.S. commerce.

FTZs are the U.S. equivalent of what other countries commonly call free-trade zones. The program was established under the Foreign Trade Zones Act of 1934 and is administered by the Foreign Trade Zones Board, with day-to-day oversight by CBP.

What is the purpose of a foreign trade zone?

FTZs exist to help U.S.-based businesses remain competitive in global trade. Companies that move large volumes of goods through U.S. ports benefit most: the FTZ structure reduces the cost and administrative burden of handling imports and exports by allowing duty payments to be deferred or avoided entirely in some cases.

According to CBP, the FTZ program was designed to promote American competitiveness by encouraging companies to maintain and expand their operations in the United States.

How do foreign trade zones benefit U.S. businesses?

FTZs give importers and exporters greater flexibility in how they manage inventory, control costs and structure logistics operations. Common benefits include:

• Duty deferral: Duties on imported goods are paid only when items leave the FTZ for U.S. consumption—not when they enter the zone

• Duty reduction: When goods manufactured or assembled in an FTZ contain imported components, the duty may apply to the finished product's rate rather than the higher rate of the components

• Duty elimination on re-exports: Goods that are manufactured or assembled in an FTZ and then exported internationally may incur no U.S. import duty at all

• Simplified customs procedures: FTZ-specific processes reduce paperwork and can expedite the movement of goods through customs

• Operational savings: FTZs provide a controlled environment for consolidation, deconsolidation, manufacturing and storage, reducing handling costs and delivery timelines

What are the advantages of FTZ warehouses?

FTZ warehouses are typically located near high-traffic ports of entry, which makes them well-suited for centralizing order fulfillment while managing import and export costs. Unlike a bonded warehouse, which is primarily designed for storing dutiable goods under customs supervision, an FTZ can also support manufacturing, assembly and processing activities while duties are deferred. Because these facilities are already designed with logistics and transportation in mind, companies can store imported inventory duty-free within the U.S. and pay required fees only when goods are released for domestic shipment.

Warehouses in FTZs also serve as secure, compliant locations for short- and long-term storage, making them useful for businesses that need to hold inventory while waiting for market conditions, customer demand or further processing.

Who can use foreign trade zones?

FTZs are available to a broad range of businesses, including manufacturing companies, retailers, distributors, customs brokers, logistics service providers, freight forwarders and transportation companies.