Foreign Trade Zones: What They Are and How They Work

In today’s global economy, businesses that import and export goods are constantly seeking ways to reduce costs and improve efficiency. One powerful tool that helps companies manage their international trade operations is a Foreign Trade Zone (FTZ).

Foreign Trade Zones offer significant benefits, including duty deferral, cost savings, and streamlined supply chain management. But how do these zones work, and how can businesses take advantage of them? This guide will cover everything you need to know about FTZs, including their benefits, how they operate, and how businesses can utilize them to maximize profitability.

What is a Foreign Trade Zone?

A Foreign Trade Zone (FTZ) is a designated area within the United States that is considered outside of U.S. Customs and Border Protection (CBP) jurisdiction for tariff purposes. These zones allow businesses to store, process, or manufacture goods while deferring, reducing, or eliminating import duties and taxes.

FTZs are particularly beneficial for manufacturers, importers, and exporters who deal with high volumes of international goods. By using an FTZ, businesses can reduce overall costs and gain greater control over their supply chains.

How Do Foreign Trade Zones Work?

When goods arrive at a Foreign Trade Zone, businesses can store them indefinitely without paying duties until they are entered into U.S. commerce. This flexibility allows businesses to better manage cash flow and inventory.

Here’s how companies typically use FTZs:

• Duty Deferral: No customs duties or federal excise taxes are paid while goods remain in the FTZ.
• Duty Reduction: If a product is manufactured within an FTZ, duties may be based on the finished product’s tariff classification, which is often lower than the tariff on raw materials.
• Duty Elimination: If imported goods are re-exported from the FTZ without ever entering U.S. commerce, no duties are paid.
• Simplified Logistics & Compliance: Goods in an FTZ can be stored, repackaged, assembled, or processed before being distributed, improving overall supply chain efficiency.

These benefits make FTZs an attractive option for companies looking to reduce import/export costs and improve operational flexibility.

How Can a Business Use a Foreign Trade Zone?

There are two main ways a business can take advantage of a Foreign Trade Zone:

1. Operating within an Existing FTZ: Many businesses opt to use a pre-established FTZ, which is already approved and fully operational. This allows them to quickly access the benefits of an FTZ without the lengthy application process.

2. Applying for FTZ Status: Companies that wish to establish their own FTZ must apply through the Foreign-Trade Zones Board and comply with regulations set by U.S. Customs and Border Protection (CBP). This process requires approval and compliance with security and operational standards.

For most businesses, utilizing an existing FTZ is the fastest and most cost-effective way to take advantage of Foreign Trade Zone benefits.

MTA Lines: The Only Fully Enclosed General Purpose Foreign Trade Zone in the County

For businesses looking for a reliable and established Foreign Trade Zone, MTA Lines offers a General Purpose FTZ that’s privately operated, employee-owned, and designed to streamline logistics for importers and exporters. We’re the only fully enclosed FTZ of its kind in the county—providing a secure, indoor facility that keeps your goods protected while deferring import duties and improving supply chain efficiency.

• Duty-Free Storage: Keep goods in our FTZ without paying import duties until they are needed.

• Cost Savings: Defer import/export fees by utilizing FTZ regulations.

• Supply Chain Efficiency: Streamline operations with our secure, indoor facility and expert logistics support.

Is a Foreign Trade Zone Right for Your Business?

If your business involves importing, exporting, or manufacturing goods, operating within a Foreign Trade Zone can offer significant cost savings and logistical advantages. Whether you need to store goods duty-free or simplify your customs processes, utilizing an FTZ could be a smart strategic move.

Contact MTA today to learn more about our Foreign Trade Zone availability and how we can support your business.

Resources:

https://www.cbp.gov/border-security/ports-entry/cargo-security/cargo-control/foreign-trade-zones/about