A special area where foreign goods can be stored, processed, and re-exported with deferred customs duties.
Detailed Definition
US foreign-trade zones were created by the Foreign-Trade Zones Act of 1934. The Foreign-Trade Zones Board, within the Department of Commerce, approves zones, and U.S. Customs and Border Protection supervises activity in them. For duty purposes, goods admitted to a zone are treated as outside US customs territory: duties are paid only when goods enter US commerce, and generally not at all if goods are re-exported. A zone differs from a bonded warehouse, which is mainly for storage under a customs bond.
What can happen to goods inside a zone
- Storage without paying duty until goods leave for the US market.
- Repacking, relabeling, sorting and inspection.
- Manufacturing or assembly, when the FTZ Board authorizes it.
- Re-export without paying US duty.
- In some cases, paying duty at the rate for the finished product instead of its imported parts, which helps when the finished product carries the lower rate.
Pallet and packaging points in an FTZ
Zones do not change plant health rules. Imported goods arriving on wood pallets are still subject to US wood packaging import rules, so pallets without a valid ISPM 15 mark can cause problems at entry. Goods exported from the zone need wood packaging that meets the destination country's rules. Inventory control inside a zone is strict, so pallet labels, lot data and warehouse records need to match what is reported to customs.
When an FTZ is worth considering
Zones tend to help importers with high duty goods, products that are re-exported, or manufacturing that turns imported parts into a finished product with a lower duty rate. Zone users can also file weekly entries for goods leaving the zone, which can reduce paperwork and fees. These benefits must be weighed against the cost of setting up the zone, inventory systems and ongoing compliance work.
Related Glossary Terms
Frequently Asked Questions
What is the difference between an FTZ and a bonded warehouse?
Both let imported goods sit without paying duty right away, but zones allow more. Bonded warehouses are mainly for storage and limited handling under a customs bond, with a time limit on how long goods can stay. Foreign-trade zones also allow manipulation and, with approval, manufacturing, and goods can generally stay without a time limit. A customs broker or zone operator can explain which suits a particular product and volume.
Who operates a foreign-trade zone?
Each zone has a grantee, often a port authority or economic development organization, which holds the grant from the FTZ Board. Daily operations are usually run by operators, which can be private companies running warehouses or plants within the zone. Some sites serve many users, while subzones and usage-driven sites are set up for a single company. CBP oversees admissions, inventory and removals in all of them.