A Foreign Trade Zone, or FTZ, is a secured area in or near the United States that is treated differently for customs purposes, allowing imported goods to be stored, processed, assembled, manufactured, or re-exported without immediate payment of certain duties and taxes. Businesses use FTZs to improve cash flow, defer duty payments, reduce duties on eligible finished goods, manage inventory, and support re-export operations. Goods entering the U.S. market from an FTZ are subject to customs rules when they are formally entered for consumption. An FTZ is considered outside U.S. customs territory for duty purposes, and goods may be brought into it without formal customs entry.
Key Benefits of FTZs
- Defer duty payment until goods are formally entered for consumption
- Goods re-exported from an FTZ pay no U.S. duty
- Inverted tariff benefit: if the finished product has a lower duty rate than the components, the FTZ manufacturer can pay the finished product rate
- Merchandise processing fees and harbor maintenance fees may be reduced for FTZ users
FTZ vs. Bonded Warehouse
- FTZs allow manufacturing and assembly operations; bonded warehouses are storage only
- FTZ operators must apply for FTZ designation from the Foreign Trade Zones Board
- Both defer duty payment until goods enter U.S. commerce
Related terms: Bonded Warehouse, Bonded Goods, In-Bond Shipment, Duty Drawback.
