What is a Foreign Trade Zone?
A Foreign Trade Zone (FTZ) is a designated, secured site in the United States, usually near a port or airport, that is treated as outside US customs territory for duty purposes. FTZs were created by the Foreign-Trade Zones Act of 1934. They are authorised by the FTZ Board within the Department of Commerce and supervised by CBP.
Core principle: Duty is only due when goods leave the zone for the US market, and goods that are exported never pay US duty at all.
Main benefits
1. Duty deferral
What it is: Duties are paid when goods leave the zone for consumption, not on arrival.
Why it matters: Improves cash flow for importers holding large inventories.
2. Duty-free re-export
What it is: Goods shipped from the zone to foreign destinations pay no US duty.
Why it matters: Useful for regional distribution hubs.
3. Inverted tariff relief
What it is: If components carry a higher duty than the finished product, manufacturers can sometimes choose the finished-product rate.
Why it matters: Can lower total duty for assemblers.
4. Weekly entry
What it is: Some operators can file one entry per week for all shipments leaving the zone.
Why it matters: Reduces the number of Merchandise Processing Fee payments.
Recent US tariff measures require some goods to be admitted in “privileged foreign status”, which fixes the duty rate on admission and limits certain FTZ benefits, so check current rules for your products.
FTZ vs bonded warehouse
| Foreign Trade Zone | US bonded warehouse | |
|---|---|---|
| Time limit | None | Up to 5 years from importation |
| Manufacturing | Allowed with FTZ Board approval | Only in specific warehouse classes |
| Customs status | Treated as outside US customs territory | Inside customs territory, with duty suspended |
See also: Bonded warehouse · Bonded goods.
The EU equivalent: free zones
The EU has free zones under the Union Customs Code, where non-EU goods can be stored and processed with duty and import VAT suspended. Many EU businesses use customs warehousing instead, which works in a similar way at individual authorised premises.
Frequently asked questions
Do FTZs eliminate duties?
They defer duties on goods sold in the US and eliminate them on goods re-exported. Inverted tariff relief can also lower the rate paid.
Can an eCommerce brand use an FTZ?
Yes, usually through a third-party logistics operator that runs an activated FTZ site.
Who regulates FTZs?
The Foreign-Trade Zones Board (Department of Commerce) authorises zones, and CBP supervises activity inside them.
