Foreign Trade Zones (FTZ)
Goods in an FTZ are not formally entered until they leave, so duty is deferred, never owed on re-exports, and sometimes reduced through inverted tariff relief.
Best for: High volume importers, re-exporters, and multi-country assembly
How it works
The order the work actually runs in.
- 1
Model your flows: what comes in, what is re-exported, what is scrapped, and what is assembled from dutiable components into a lower-rate finished good.
- 2
Choose the structure, either a subzone at your own site or space inside an existing general purpose zone, which is far faster to start.
- 3
Complete activation with the FTZ Board and your local CBP port, including the inventory control and recordkeeping system, which is the gating requirement.
- 4
Move to weekly entry filing rather than per shipment, which also reduces merchandise processing fees.
- 5
Where components carry a higher rate than the finished good, apply for inverted tariff relief.
A worked example
What the strategy looks like once you put numbers on it.
Deferral, re-export relief, and an inverted tariff on one flow
An assembler importing $24M a year in components, and re-exporting about 20 percent of finished units, moved into space inside an existing general purpose zone.
Duty was paid on every component at import, including on the fifth of production heading straight back out to export customers, and cash sat with CBP for months before the finished units ever sold.
Operations moved into space inside an existing general purpose zone rather than applying for a subzone, which cut the setup timeline substantially. Inventory control was the gating requirement. Entries moved to weekly filing.
Duty on re-exported units was never owed, worth about $1.2M a year. Inverted tariff relief on the domestic portion plus weekly entry filing added roughly $310k more. Duty on everything else is now deferred until goods leave the zone.
Figures are illustrative math on a representative volume, not a specific client engagement. Your own numbers depend on your product, your codes, and current policy.
Before you commit
What this needs from you, and where it goes wrong.
What it takes
- Volume. Setup and ongoing compliance cost about the same whether you run $2M or $200M through the zone.
- An inventory control and recordkeeping system CBP will accept
- Activation with the FTZ Board and your local CBP port, which takes months rather than weeks
- A decision between your own subzone and space inside an existing general purpose zone
Watch-outs
- The overhead is real and permanent. Model it against the saving before you apply, not after.
- Inverted tariff relief is not automatic and is not available for every product.
- A zone does not fix a wrong classification. Sort the classification review first.
Would this one work for your product?
Send us your HTS codes and volumes. We will tell you whether this strategy applies to you, what it is worth, and what it takes to put in place.