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THE ABCs of FTZs


What is a foreign-trade zone?

A foreign-trade zone (FTZ) is a defined physical area within the United States that, for customs purposes, is treated as if it is outside U.S. borders. FTZs are often at ports, airports, or industrial parks. Companies may use FTZs for both storage/distribution activities or, after specific authorization by the U.S. FTZ Board, for production.

In FTZs, "production" is considered to be anything that results in a substantial transformation of an article or that changes its HTSUS classification or eligibility for entry.

Glossary of FTZ Terms

Why would I want to consider operating in a FTZ?

When you operate under FTZ procedures, your company is treated (for purposes of customs duties) like it's located outside the United States. That can mean that U.S. import duties don't have to be paid on imported components coming to your factory. If your finished product is ultimately shipped to the U.S. market, you may have the option of paying the finished product duty rate rather than the component duty rate. (Many finished products have lower duty rates - or are duty-free - than their components.) And if you re-export the finished product, you don't ever pay duties on the component materials. There are other potential savings, too, like avoiding duties on imported materials that become scrap, and possible administrative savings and efficiencies.

What is involved in getting FTZ production authority?

To conduct production activity in a FTZ, you will first contact your local foreign trade zone to discuss the requests that will be submitted to the FTZ Board to designate your site as part of the FTZ and prepare the notification of production authority.

The U.S. FTZ Board has simplified its procedures to make the benefits of the FTZ program accessible to a broad range of companies. The production notification process is 120 days and will be authorized if no issues come up during the 120-day process.

What does the FTZ Board base its decisions about applications on?

If no issues come up in the notification process then the activity will be authorized.

Do I already have to be located in a FTZ to use the program?

No. If it's practical, you may choose to relocate to an existing FTZ site - there are more than 200 FTZs all across the United States, many of which encompass multiple sites. However, if it's not practical for you to relocate to an existing zone site, the FTZ Board has quick, straightforward procedures for you to work with your local FTZ to create a "subzone" at your facility.

Is there a fee to apply?

There is no fee to apply for production authority.

If your local zone has reorganized under the FTZ Board's alternative site framework, there would be no fee to request a subzone within that zone's service area. For other zones, or if the subzone is outside of the service area, there is a one-time application fee (either $4,000 or $6,500, depending on the number of products).

How do I get in touch with my local FTZ?

The FTZ Board has contact information for the FTZ closest to you.

What next?

The best place to start is with the "Simplified Savings Estimator" available on the production center page. We also have more frequently asked questions, or take a look at our application page. If there's anything we've missed - the FTZ Board's staff is also available to help guide you.