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What is a Foreign Trade Zone?
A Foreign Trade Zone (FTZ) is a designated geographic location within in the United States that is considered to legally be outside of U.S. Customs territory for duty purposes.  

Goods brought into a Foreign Trade Zone are considered to be part of international commerce and not domestic.  They will only be taxed upon officially exiting the zone and entering U.S. commerce.  

If the product is exported from the zone, no duty will be placed on that exported item.
What are the benefits of operating a Foreign Trade Zone?
Foreign Trade Zones benefit the companies that utilize them and the economy on a local community, state and national level.

On a larger level, Foreign Trade Zones encourage international trade, create employment opportunities, and encourage domestic activity. More specifically, the following benefits are what make Foreign Trade Zones appealing to so many companies:

  • Duty Deferral: Items imported into a Foreign Trade Zone will not be taxed until they enter U.S. commerce, thus delaying the payment of duties until an entry is made.
  • Duty Exemption: Merchandise or goods that are exported into foreign commerce directly from the zone do not face customs duties. Therefore, goods can be imported into a Foreign Trade Zone, manufactured, manipulated or stored in the zone and then exported with no duty imposed.
  • Inverted Tariff: In many situations, a finished good produced within the zone using products imported into the zone has a lower duty rate than the rates on the foreign inputs brought into the zone. This situation is known as an inverted tariff, and many companies choose to operate a Foreign Trade Zone in order to take advantage of this tax savings. However, it should be noted that production must be authorized before a product can be manufactured or manipulated within the zone.
  • Reduction in Fees: Zone users may be able to file a single customs “entry,” paying only one fee per week rather than making multiple entries on items entered into U.S. commerce that week, paying a fee per entry.
  • Other Benefits. Foreign goods and domestic goods held for export are exempt from state/local inventory taxes. Foreign Trade Zone status may also make a site eligible for state/local benefits.
How do I know if a zone is right for my company?

While the economic benefits of a Foreign Trade Zone are too good to pass for many companies, a Foreign Trade Zone is not always right for everyone.  Before you make the decision, be sure to evaluate the risks and benefits, as well as the costs for your specific company.

Some factors to consider involve what type of merchandise your company produces, the market you are in or if your company is already utilizing a Customs tariff-reduction program.  If you are considering creating a Foreign Trade Zone for your business, be sure to do a detailed cost-benefit analysis before taking that next step.

Zone Solutions is happy to serve as a consultant for your company to determine whether a Foreign Trade Zone is the right fit for you.  President and CEO, Eva Tomlinson, regularly works side-by-side with companies to determine the benefits to their specific company of utilizing a Foreign Trade Zone.  

What activity is permitted in zones?
Goods may be stored, assembled, exhibited, cleaned, manipulated, manufactured, mixed, processed, relabeled, repackaged, repaired, salvaged, sampled, stored, tested, displayed and destroyed in the zone.  

However, any production activity must be authorized by the Foreign Trade Zone Board prior to the activity taking place in the zone.

Production activity is defined as any activity that results in a substantial transformation of a foreign article or a change in customs classification of the article.  Retail trade activity is explicitly prohibited within a Foreign Trade Zone.
Why should I outsource my administrative operations?

Outsourcing administrative operations is quite common in most industries, and Foreign Trade Zones are no exception.  To properly operate a Foreign Trade Zone, the Operator needs to be well-versed in the law and customs regulations.  The regulations spell out very specific rules on establishing, activating and maintaining a Foreign Trade Zone.  For this reason it is imperative that the entity operating the zone is fully compliant with regulations.   Many companies do not have a dedicated staff person fully knowledgeable in Foreign Trade Zone regulations, so they look for outside assistance and resources to help them in their Foreign Trade Zone operations.

Further, many companies do not have the staffing capacity to handle the additional administrative tasks and responsibilities that come along with creating and operating a Foreign Trade Zone.  By working with a Foreign Trade Zone Administrator outside of your company, you are taking advantage of resources and expertise that may not be internally available in your company.  Outsourcing will also mitigate complexity and risk that comes along with Foreign Trade Zone operations and allows you to reallocate resources and capital funds for other purposes as well as reduce and control operating costs.

What should I look for in an administrative operations provider?
Knowledge and experience are a must when it comes to evaluating an administrative operations provider. Assess the company’s experience and request references from their current or past clients, if they are willing to provide the information. Ask about their daily processes, their staff coverage and warehouse management system.

Above all, ensure the company you choose is familiar with the law, regulations and Foreign Trade Zone Manual. At the end of the day, you need a provider you can trust will have your company’s best interests in mind.

When outsourcing your administrative operations, you should look for a “collaborative partner.” This partner should improve your company’s efficiency, effectiveness and continuous improvement of quality product. Zone Solutions has been that source of experience, expertise, resources and knowledge for many companies operating a Foreign Trade Zone.
What can Zone Solutions do for me?
Creating and maintaining a Foreign Trade Zone is no easy task and requires a high degree of specialized knowledge and skill, as well as resources and time.  

By working with Zone Solutions, you will be working with experts in the field who will use their years of experience in assessing the costs and benefits of whether a Foreign Trade Zone is the right fit for your company, preparing and filing an application for activation and performing zone administrative operations to keep your company in compliance with Customs.  

Zone Solutions’ motto is:  "We are what we repeatedly do. Excellence, therefore, is not an act, but a habit."  Excellence and quality work product is what you should expect and will receive when working with Zone Solutions.

Corporate Office

UPS Trade Management Services, Inc.
One Indiana Square, Suite 1350
Indianapolis, IN 46204
Phone: 317-260-2926
Fax: 317-244-2901

We're currently looking for great people to join our team. If you're passionate about doing your best in a detailed-oriented atmosphere, send us our resume. Click on the link below to learn more.

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Useful Links

We’ve provided you with a short list of helpful links to more trade zone information. If there are other links you believe would be useful, email them to us.

Foreign Trade Zones Board
Journal of Commerce

Federal Register

Code of Federal Regulations (CFR)

HTS On-Line Reference Tool

Foreign Trade Zone

SHORT DEFINITION - A Foreign Trade Zone (FTZ) is a designated geographic location within in the United States that is considered to legally be outside of U.S. Customs territory for duty purposes.

Goods brought into a Foreign Trade Zone are considered to be part of international commerce and not domestic. They will only be taxed upon officially exiting the zone and entering U.S. commerce.

Leadership Team

Zone Solutions is led by a strong management team with a proven track record. Click on a team member name below to learn more.