Foreign Trade Zones FTZ

What is a Foreign Trade Zone (FTZ)?

Foreign Trade Zones (FTZ) are areas granted a special status by the Foreign Trade Zone board. Within the boundaries of a Foreign Trade Zone, goods imported from another country can be stored without being subjected to Customs duties until entered into the commerce of the United States.  FTZs are located near Customs’ ports of entry and are considered outside of Customs’ territory. Despite the items’ exemption from Customs duty, the United States holds full jurisdiction over the items in a U.S. Foreign Trade Zone. There is no time limit as to how long goods can be held in an FTZ; however, as soon as the goods leave the Foreign Trade Zone destined to enter U.S. commerce, they become subject to full Customs duties and taxes.

An FTZ provides many benefits to businesses operating in the global trade arena. Since duties and taxes on one element manufactured product can be levied at a different rate than the entire manufactured product when it enters U.S. Commerce, manufacturing the product in a Foreign Trade Zone can sometimes reduce the amount of duties and taxes paid to import certain goods. Many organizations, including some automobile manufacturers, take advantage of this unique ability by manufacturing their products within the Foreign Trade Zone.

Along with manufacturing or storing merchandise in a FTZ, another benefit would be entering merchandise into an FTZ under zone-restricted status. When merchandise is entered in zone-restricted status, the goods are considered exported from US Customs territory and cannot be entered into the United States for domestic consumption.

FTZs are highly controlled, restricted access facilities that remain under close CBP supervision. Tight regulation of an FTZ is paramount in order to eliminate the likelihood of misuse and the potential for clandestine operations to abuse the unique status granted to these areas. Foreign Trade Zone Operators are required to hold a surety bond to guarantee their adherence to standards and regulations relating to these zones.

To learn more about Foreign Trade Zones, and how their unique status can affect the import process, consult Customs and Border Protection’s FTZ overview document. CBP’s website serves several similar documents that can be helpful in understanding how Foreign Trade Zones operate.