What is a Foreign Trade Zone? Why were FTZs established?

A site that has been licensed by the FTZ Board to contain foreign materials, under designated procedures, prior to formal customs entry occurring.  Duty can be deferred on these materials if sold in the U.S. or eliminated if re-exported.  Subzones are special-purpose zones, approved by local US Customs and Border Protection officials, typically for the purpose of manufacturing.  An activated manufacturing subzone enables duty deferral until after the manufacturing operation under the HTS of the manufactured product / by-product.  Foreign Trade Zones offset advantages available to overseas producers who compete with producers located in the United States, encourage and expedite United States participation in international trade, and support Government/Military activities.  Additional detail about the advantages of an FTZ are listed below.


Duty Elimination on waste, scrap and rejected or defective materials

Goods may be imported into, and then exported from, a zone without the payment of duty and excise taxes except to certain countries (NAFTA), in which case any applicable duty and excise tax will be levied. Goods may also be imported into, and subsequently destroyed in a zone without the payment of duty and excise taxes. 

Duty Reduction on materials consumed in manufacturing

In situations where zone production results in a finished product that has a lower duty rate than the rates on foreign inputs (inverted tariff), the finished products may be entered at the duty rate that applies to its condition as it leaves the zone (requires prior authorization). 



Duty Deferral on imported goods

Duty and federal excise tax payment deferred until merchandise is transferred from a zone to the Customs territory of the U.S. or transferred to a NAFTA country (Canada and Mexico).

Importation Cost Reduction

Self-filing weekly customs entries, versus making entry on each import transaction through a broker, typically reduces the Merchandise Processing and Customs Clearance fees and eliminates Brokers Advance fees. 

  • Improved Security and Inventory Accuracy

    Weekly reconciliation of FTZ inventory drives improved accuracy.  Customs security requirements and federal criminal sanctions are deterrents against theft. This may result in lower insurance costs and fewer incidents of loss for cargo imported into a zone.  

    Tax Benefits

    Merchandise imported from outside the United States and held in a zone for the purpose of storage, sale, exhibition, repackaging, assembly, distribution, sorting, grading, cleaning, mixing, display, manufacturing, or processing, and merchandise produced in the United States and held in a zone for exportation, either in its original form or altered by any of the above methods, is exempt from State and local ad valorem taxes. 

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