What is a Foreign Trade Zone?
A Foreign-Trade Zone (FTZ) is a specified physical area within the United States where certain merchandise and inventory, for Customs duty and tariff purposes, are treated as if they were located outside the U.S. borders. Foreign Trade Zones were created in the United States to provide special customs procedures to U.S. companies engaged in international trade-related activities.
Granted by the Foreign-Trade Zones Board, activated FTZ sites are secure areas under the supervision of the U.S. Customs and Border Protection (CBP); a FTZ can have more than one site. Given the nature of transporting commerce and because of the active role required by CBP in the supervision of Foreign Trade Zone security and their import & export activities, zone authorities are based from the local Customs Port of Entry. A FTZ site can be within 60 miles, or a 90 minute drive, of the local Customs Port of Entry. The closest Customs Port of Entry in our area is Bridgeport; FTZ No. 76 is the licensed zone from this customs port. The Bridgeport Port Authority is the Grantee of Foreign Trade Zone No. 76.
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What a Foreign Trade Zone Offers
Located through out the country, Foreign Trade Zones enable U.S. based businesses to compete with foreign entities by providing certain economic benefits, primarily to reduce or defer certain business costs. Depending on the type of transaction involved, benefits can include;
Deferment of Duty Payments – merchandise/materials within an FTZ may be held indefinitely without paying Customs duty or federal excise tax. Duty is only paid when the merchandise/materials is brought into the U.S. Customs Territory (“domestic market”) so a business can manage and conserve their cash flow.
Reduction of Duty Payments – Import duties are not paid on imported components coming into a FTZ, until the components move into the domestic market. If a finished product is to ultimately be shipped to the U.S. market, you may have the option of paying the finished product rate rather than the component duty rate (known as an inverted tariff, sometimes the duty rate on the finished product is lower than the duty rates of all of its components). If a company re-exports the finished product, generally duty is not paid on the component material. Duty payments may be reduced when dealing with waste or scrap from a manufacturing process, dependent on the ultimate disposal of the leftover material.
Making Duty Free Exports – merchandise/materials can be imported and stored in a Foreign Trade Zone and re-exported without ever incurring Custom duties.
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Frequently Asked Questions
Activities Permitted in a Foreign Trade Zone
Merchandise in a zone may be assembled, exhibited, cleaned, manipulated, manufactured, mixed, processed, relabeled, repackaged, repaired, salvaged, sampled, stored, tested, displayed and destroyed.
What a Foreign Trade Zone Does Not Do
- Local/State laws – are still applicable with regards to zoning, environmental, building codes and other ordinances.
- Retail shops/sales are not allowed in a FTZ .
Types of Foreign Trade Zones
There are two different types of sites that can be established within a FTZ;
A general purpose zone site is generally a warehouse type facility that can be utilized by multiple companies (“Users”). General Purpose sites are most commonly used for storage and distribution activities.
A subzone site is a single User location, generally for a single purpose. For example, a manufacturing company may seek to establish their facility (or a portion of) as a subzone site, for only their use in the “manufacture” (and ultimately the distribution) of their product.
Potential Duty Savings
Follow the link below to calculate a simple estimate of potential duty savings a company may realize if its activities are authorized and conducted within an activated Foreign Trade Zone site.
Who is involved with Foreign Trade Zones?
The Foreign-Trade Zones Board (FTZB) is comprised of the Secretary of Commerce and the Secretary of the Treasury; the Board is chaired by the Secretary of Commerce. The Commissioner of the U.S. Customs and Border Protection also plays a key role with regards to customs security, control and resource matters.
The United States Custom and Border Protection (CBP) is primarily responsible for security and security procedures of a Foreign Trade Zone (“FTZ”), and monitoring activities relating to goods and materials going in and out of a FTZ.
A Grantee is the party who holds the Zone license. Normally a public entity, the Bridgeport Port Authority is the Grantee for Foreign Trade Zone #76.
An Operator is the party designated to conduct and ensure security and paperwork compliance related to the day to day activities of an activated FTZ
A User is the company who actually “uses” the zone to conduct its business related activities.
Harmonized Tariff Schedule – provides duty rates for virtually every item that exists (normally determined by the U.S. International Trade Commission)
Also:
Approved sites – are sites approved by the FTZB for inclusion within the boundaries of an established FTZ. An approved site can lay dormant for a period of time until a specific use/user is authorized. FTZ No. 76 presently has 6 approved sites within its zone.
Activated sites – an approved site within a zone, a site is activated once CBP approves the security plan and stated operation of the site, and a Grant of Authority (depending on the type of activity) is given by the FTZB. An approved site is not an “automatic” activated site.
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Savings Calculator 
