What Is a Foreign-Trade Zone?
Last updated
In this article
Talk to our experts- Foreign-trade zone
- A foreign-trade zone (FTZ) is a designated site in the United States, licensed by the Foreign-Trade Zones Board, where companies can use special customs procedures. Activity involving foreign goods can take place there before formal customs entry: duty payment is deferred on goods sold into the US market, and goods that are re-exported are duty-free.
Also called: FTZ
How it works
A foreign-trade zone is the United States' version of what are known internationally as free-trade zones: a secure area under US Customs and Border Protection (CBP) supervision. The International Trade Administration (trade.gov) describes it as a designated location where companies can use special customs procedures that allow delayed or reduced duty payments on foreign merchandise.
The Foreign-Trade Zones Board, made up of the Secretary of Commerce, who chairs it, and the Secretary of the Treasury, licenses zones and authorizes production activity. CBP handles day-to-day monitoring: merchandise is admitted to a zone on CBP Form 214 and removed through CBP entry or transportation under bond.
A zone is considered outside the customs territory of the United States for formal entry procedures only. trade.gov says foreign merchandise in a zone is within the territory and jurisdiction of the United States and is considered imported.
Merchandise in a zone may be assembled, exhibited, cleaned, manipulated, manufactured, mixed, processed, relabeled, repackaged, repaired, salvaged, sampled, stored, tested, displayed and destroyed. Production activity must be specifically authorized by the FTZ Board, and CBP says no retail trade of foreign merchandise may be conducted in a zone.
This is general information, not legal or customs advice.
Benefits trade.gov lists
- Duty exemption. No duties or quota charges on re-exports.
- Duty deferral. Customs duties and federal excise tax are deferred on imports until merchandise is shipped from the zone to the US market.
- Inventory taxes. Foreign goods and domestic goods held for export are exempt from state and local inventory taxes.
- Production benefits. A foreign-status component in a product that is exported owes no US duty, scrap and waste owe none, and a component in a product shipped to the US market generally pays the rate that applies to the finished product.
Privileged foreign status
Merchandise admitted in privileged foreign (PF) status pays duty at the rates for its condition at the time of admission, even if it is transformed into a different product. The FTZ Board's regulations require PF status for merchandise subject to antidumping or countervailing duty actions, and trade.gov says US government actions under Section 232 of the Trade Expansion Act of 1962 or Sections 201 or 301 of the Trade Act of 1974 have required PF status for subject merchandise.
Foreign-trade zone vs. bonded warehouse
Both let foreign goods wait before duty is paid. In a bonded warehouse, under 19 U.S.C. 1557, merchandise may stay up to 5 years from importation unless CBP permits longer, and duty is paid at the rate in force on the date of withdrawal. Bonded warehouse classes allow manipulation such as cleaning, sorting and repacking, and manufacture in bond solely for exportation. In a zone, the activities trade.gov lists run from storage to manufacturing, with production authorized by the FTZ Board.
Example
A manufacturer admits 1,000 imported components worth $100 each, $100,000 in all, to a zone site with Board-authorized production. The rates here are hypothetical, for illustration only: 8% on the component, 3% on the finished product. Each finished product uses one component. It ships 400 finished products abroad and 600 into the US market.
The 400 exported products owe no US duty on their components. For the 600 sold in the United States, duty is generally payable on the components' value, 600 x $100 = $60,000, at the finished product's rate: $60,000 x 0.03 = $1,800, against $60,000 x 0.08 = $4,800 at the component rate. Had the components been admitted in PF status, the component rate would apply.
On Shopify
Shopify defines a location as any physical place where you sell products, fulfill orders, or stock inventory, and lists warehouses among the places you can add as locations. If you manage inventory across multiple locations, the quantity for a product is displayed for each location.
How Uncap helps
Uncap's Sage integration page notes that Sage 300 adds the multi-currency, multi-entity, and cross-border capability that internationally-operating distributors and manufacturers require.
Sources
Frequently asked questions
How much does an FTZ cost?
As of October 28, 2026, the International Trade Administration lists FTZ Board application fees of $3,200 for an additional zone, $4,000 or $6,500 for a subzone depending on production activity and the number of products, and $1,600 for an expansion. It also warns that a newly approved zone carries security and operating requirements that may be cost prohibitive without a strong need for zone services.
Do FTZ avoid tariffs?
A foreign-trade zone defers duty rather than removing it for goods sold in the US: duty is paid when merchandise leaves the zone for the US market, while re-exports owe no duty. Merchandise admitted in privileged foreign status pays the rate for its condition at admission, and Section 232, 201 and 301 actions have required that status for subject merchandise.
How long does it take to set up a FTZ?
It depends on the type of authority. As of October 28, 2026, the International Trade Administration says a subzone or usage-driven site can be designated in a simple 30-day process under the alternative site framework, a production notification takes 120 days as standard, and a new zone takes approximately 10 months after the FTZ Board dockets the completed application.
How long can goods stay in an FTZ?
US Customs and Border Protection says merchandise may remain in a foreign-trade zone indefinitely, whether or not it is subject to duty. A bonded warehouse is limited to 5 years from importation unless CBP permits longer.
