What is a Foreign-Trade Zone?
A Foreign-Trade Zone is an approved area within the United States, in or near a U.S. Customs port of entry, which is considered outside the U.S. Customs territory. Certain types of merchandise can be imported into a Zone without going through formal Customs entry procedures or paying import duties. Customs duties and excise taxes are only due at the time of transfer from the FTZ for U.S. consumption. If the merchandise is re-exported, then no duties or taxes are paid on those items.
Why do Foreign-Trade Zones exist?
The Foreign-Trade Zone program was created by the federal government in the 1930s to increase the global competitiveness of U.S. businesses. The government has highlighted the FTZ program as an integral part of the country’s National Export Initiative. It was designed to encourage capital investment in the United States, rather than abroad, in order to secure American Jobs. The benefits make it advantageous for companies that want to use American labor to manufacture products that require imported components.
What may a company do in a Foreign-Trade Zone?
Once a company imports merchandise into a Foreign-Trade Zone they are allowed to use it in the following operations: