How Foreign-Trade Zones Work
Foreign-Trade Zones (FTZs) provide special customs procedures that help companies that conduct international business-related operations better compete with foreign plants. An FTZ also facilitates and attracts offshore activity and encourages retention of domestic activity, helping to create employment opportunities.
When you operate under FTZ procedures, your company is treated like it is located outside the United States for purposes of customs duties. That means that U.S. import duties don’t have to be paid on imported components entering your factory.
If your finished product is ultimately shipped to the U.S. market, you may have the option to pay the finished-product duty rate rather than the component duty rate — and many finished products have lower duty rates than their components or are duty-free. And if you re-export the finished product, you don’t pay duties on the component materials.
Other potential savings include avoiding duties on imported materials that become scrap as well as possible administrative savings and efficiencies.