Definition
A Foreign Trade Zone (FTZ) is a designated area within the United States, approved by the Foreign-Trade Zones Board, where imported goods can be stored, assembled, manufactured, and processed without being subject to formal customs entry or duty payment until the goods leave the zone and enter U.S. commerce. If goods are re-exported from the FTZ, no U.S. duties are owed at all.
Why It Matters for Importers
FTZs offer significant duty savings strategies beyond simple deferral. The inverted tariff benefit is one of the most powerful: if raw materials carry a higher duty rate than the finished product, you can manufacture within the FTZ and pay the lower finished-goods rate when the product enters U.S. commerce.
FTZs also eliminate duties on waste and scrap generated during manufacturing, reduce merchandise processing fees to a weekly or annual fee instead of per-entry, and allow indefinite storage without duty payment. For high-volume importers with manufacturing operations, an FTZ can save hundreds of thousands of dollars annually.
Key Details
- Duty deferral: Duties are not due until goods leave the FTZ and enter U.S. commerce.
- Inverted tariff: Pay the lower rate when components have higher duties than the finished product.
- Re-export benefit: No duties owed on goods that are re-exported from the FTZ.
- Reduced MPF: Merchandise processing fees can be dramatically reduced through weekly entry filing.
- Over 190 FTZs operate across the United States, with hundreds of subzones for individual companies.
Deciding between an FTZ and a bonded warehouse depends on your operations. Compare FTZs and bonded warehouses.
← Back to Glossary