Foreign Trade Zones Unlocked
Strategic Benefits, Cost Savings and Compliance Excellence
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2月 27, 2025
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A Foreign Trade Zone (“FTZ”) is a designated area within the U.S. that, for duty and customs “entry” purposes, is treated as though it is outside of U.S. customs territory. Many countries have a rough equivalent of this program, including “free trade zones,” “export processing zones,” “industrial free zones,” or “special economic zones.”1
In the U.S., FTZs have been around since the 1930s but have seen an explosion of growth in the last decade, particularly due to a more efficient application process and escalation of tariff actions.2
What Are the Benefits of Using an FTZ?
FTZs provide cost savings and operational efficiencies:
- Duty Exemption: Without an FTZ, duty and import fees are generally paid upon importation and customs entry. By bringing merchandise into FTZs, customs entry is not required, and duty is not paid at time of importation. Goods re-exported from FTZs are generally not subject to duty at all.3
- Duty Deferral: Goods withdrawn from FTZs for U.S. consumption benefit from duty deferral, realizing a cash-flow savings.
- Inverted Tariff: Goods withdrawn from FTZs after having undergone “production” activity are eligible for duty reduction.
- Reduction in Merchandise Processing Fee (“MPF”) Payments: In lieu of paying MPF on every importation, FTZs users with weekly entry approval only pay MPF once per week (currently capped at around $600), often resulting in significant annual fee reduction.
- Direct Delivery: FTZs with direct delivery approval from U.S. Customs and Border Protection (“CBP”) may move imported merchandise directly to their FTZ site, often bypassing CBP delays, holds or examinations at the first U.S. port of arrival.
- Entry Eligibility: In certain instances, merchandise not eligible for entry into the U.S. (e.g., pending FDA approval, or not properly marked/labeled) may be admitted into an FTZ until the entry requirement is satisfied.
- Free Trade Agreement (“FTA”) Transshipment: Many FTAs include provisions which allow originating merchandise to transit a third country, provided that the transshipped merchandise remains “under customs control.” U.S. FTZs generally satisfy the “under customs control” condition for eligible merchandise transiting the U.S., thus preserving FTA duty benefits through the supply chain transshipment.
- Inventory Tax Savings: Qualifying tangible personal property held in an FTZ is not subject to state and local ad valorem taxation. This benefit is state- and jurisdiction-specific and generally requires cooperation with relevant taxing jurisdictions.
- Duty Savings on Eligible Production Equipment: Imported equipment is not subject to duty until that equipment is completely assembled and used in production.
What Industries Can Benefit From an FTZ?
Nearly every industry that has imports or exports takes advantage of these benefits. The industries which use FTZs the most include, but are not limited to:
- Pharmaceuticals
- Oil/Petroleum
- Vehicles and Vehicle Parts
- Consumer Electronics and Products
- Machinery and Equipment
An FTZ strategy may be helpful in the following scenarios:
- Companies who pay a significant amount of duty (tariffs), merchandise processing fees (MPF) or inventory tax
- Companies with a high volume of import and export transactions
- Companies thinking about reshoring operations to the U.S. or building new manufacturing plants
- Companies looking to leverage U.S. operations to facilitate North American supply chain activity
What Are the Implementation Considerations?
The average FTZ implementation timeline is 4-6 months, but may take longer depending on the size and complexity of the proposed operation:
Feasibility
Sponsorship
Geographic
Application to FTZ Board
Production Notification to FTZ Board
Development of FTZ Procedures
Activation with Local CBP
Ongoing FTZ Management
The FTZ Advisory Offering at FTI Consulting Includes:
- Activation Support with U.S. CBP
- Analysis of Other Program Impacts to the FTZ
- Application Preparation and Submission
- Compliance Program Assessment and Development
- Customizable Training Packages and Simulated Audits
- Development of Operational Procedures and the Inventory Control and Recordkeeping System (“ICRS”)
- FTZ Administrator Insourcing and Training Support
- FTZ Software Consulting
- Grantee Marketing Plans and Compliance Support
- Navigation of Local Taxing Jurisdictions
- Preparation of Periodic Reporting Requirements
- Production Authority Preparation and Submission
- Strategic Feasibility Studies and Presentation to Stakeholders
- Support with CBP Compliance Reviews and Audits
- Support with FTZ Board Monitoring Visits and Scope Reviews
- Technical and Industry Research
How FTI Consulting Can Support
FTI Consulting’s international trade and customs professionals provide practical guidance on all aspects of the FTZ program. View our FTZ advisory services here.
Footnotes:
1: Congressional Research Service, “U.S. Foreign-Trade Zones: Background and Issues for Congress,” (December 19, 2019).
2: U.S. Foreign-Trade Zones Board, “85th Annual Report of the Foreign-Trade Zones Board to the Congress of the United States,” (August 2024).
3: National Association of Foreign-Trade Zones, “Basics & Benefits,” NAFTZ.
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2月 27, 2025
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