Foreign-Trade Zone

A foreign trade zone is a federally approved location within the United States, which is considered outside of US Customs territory where domestic and foreign merchandise may be placed without formal customs entry and without payment of duties and taxes.  Subzones are special-purpose facilities for companies unable to operate effectively at public zone sites. Foreign trade zones are usually located in or near Customs ports of entry, at industrial parks or terminal warehouse facilities.  Their purpose is to attract and promote international trade and commerce.

The Foreign Trade Zones Board authorizes operations within these zones based upon showing that the intended operations are not detrimental to the public interest. A Foreign Trade Zones Board, created by the Foreign Trade Zones Act of 1934, reviews and approves applications to establish, operate, and maintain foreign trade zones. It is important to note that although foreign trade zones are treated as being outside the customs territory of the United States for tariff and customs entry purposes, all other federal laws, such as the Federal Food, Drug, and Cosmetic Act, are applicable to products and establishments within such zones.

Within a foreign trade zone goods may be stored, manipulated, mixed with domestic and/or foreign materials, used in assembly or manufacturing processes or exhibited for sale without being subject to duties. Only when these goods are shipped out of the zone into the Unites States, are you required to pay U.S. duty. Goods shipped out of the zone and into foreign commerce are not subject to U.S. duty at all.  This means, for example, if you import parts for assembly within a Foreign Trade Zone, you may be subject to less duty on the completed products than the individual parts themselves. Spoiled, damages or waste goods may also be disposed of or re-exported without payment of duty.

Foreign exporters planning to expand or open up new American outlets may forward their goods to a foreign trade zone in the United States to be held for an unlimited period while awaiting a favorable market in the United States or nearby countries without being subject to customs entry, payment of duty or tax or bond.

Why use a foreign trade zone?  Simply put, to maintain your company’s competitive edge and substantially improve your profits.  By doing business in a Foreign Trade Zone, you may reduce some costs associated with operating in the U.S. rather than in a foreign country.  This can help generate more U.S. jobs and make your company more competitive in foreign and domestic markets.


  • Savings in shipping charges, duties and taxes
  • Relief from inverted tariffs
  • Duty exemption on re-exports
  • Duty elimination on waste, scrap and yield loss
  • Duty elimination on shrinkage, seepage or evaporation
  • Quota goods may be held until the next quota period
  • Weekly entry savings
  • Capital stays with you, not customs, until goods are cleared
  • No time limit on how long foreign merchandise can be stored in a zone