Foreign-Trade Zone (FTZ)

A foreign-trade zone (FTZ) is a designated location in the United States where companies can use special customs procedures that allow delayed or reduced duty payments on foreign merchandise. The program was created by the Foreign-Trade Zones Act of 1934 (19 U.S.C. 81a-81u). Zones are authorized by the Foreign-Trade Zones Board, chaired by the Secretary of Commerce, and CBP enforces the rules and monitors zone activity day to day. CBP's regulations are 19 CFR part 146.

How zone status works

Merchandise in a zone is treated as outside US customs territory for formal entry purposes, but it is still within US jurisdiction and considered imported. Goods are admitted on CBP Form 214, the application for zone admission and status designation (19 CFR 146.32). When they leave for the US market they are entered for consumption, and an operator can file a weekly estimated entry covering a week's removals (19 CFR 146.63).

Why importers use one

• Deferral: customs duty and federal excise tax are deferred until the goods enter US commerce
• Re-exports: no duty on goods shipped out of the zone to another country
• Inverted tariffs: when the finished product carries a lower rate than its foreign components, manufacturing in the zone can reduce the duty
• Rate timing: goods given privileged foreign status are classified and dutied at the rate in force on the date that status was applied for (19 CFR 146.65)

Goods may be stored, relabeled, repackaged, tested, processed and manufactured in a zone. Retail trade is prohibited.

FTZ vs bonded warehouse

Both defer duty. A customs bonded warehouse holds goods for up to five years from importation and allows cleaning, sorting and repacking under permit, but manufacturing only for export. An FTZ has no time limit and allows manufacturing for the domestic market, but it needs Board authorization, a zone operator and an inventory control and recordkeeping system (19 CFR part 146, subpart B). That overhead is why zones suit regular, high-volume importers and manufacturers, while a bonded warehouse is the simpler way to defer duty on a single shipment.

Finding a zone

The Foreign-Trade Zones Board's Online FTZ Information System (OFIS) lists every zone and subzone with its sites, contact information and Board orders. Using a zone means working with its operator and a licensed customs broker experienced in zone entries.

Airlift does not operate a foreign-trade zone. The warehousing page compares general, CFS, bonded, general-order and FTZ storage.