Foreign Trade Zones (FTZs) are special areas within the United States that are considered outside the country for customs purposes. These zones allow businesses to import goods without immediately paying duties, offering operational flexibility and a variety of financial benefits. Similar programs exist around the world under various names like Free Trade Zones, Special Economic Zones and Export Processing Zones.
Although FTZs have existed in the U.S. since the 1930s, they’ve become significantly more attractive in recent years due to tariff complexities, streamlined approval processes and trends to “reshore” distribution and manufacturing activity back to the U.S.
Key Benefits of Using FTZs
Companies that participate in the FTZ program can realize significant advantages:
- No duties on re-exports – Goods brought into an FTZ and later exported are generally not subject to U.S. customs duties.
- Deferred customs payments – When products are stored in an FTZ, duties only apply when they’re moved into the U.S. market, helping companies better manage cash flow.
- Inverted tariff structure – If a finished product carries a lower duty rate than its imported parts, companies may benefit by manufacturing in the FTZ.
- Reduced fees – Businesses can consolidate shipments and reduce Merchandise Processing Fees (MPF) and customs brokerage fees.
- Faster, streamlined entry – With direct delivery approval, shipments can be delivered directly to FTZ facilities, minimizing port delays and reducing risk of examinations or holds at the first U.S. port of arrival.
- Storage for goods pending clearance – Items awaiting regulatory approval or final labeling can remain in a U.S. FTZ until they are compliant, avoiding unnecessary delays.
- Free trade agreement optimization – Goods moving through the U.S. FTZs can often retain preferential status for trade agreement benefits, if requirements are met.
- Property tax relief – Qualifying inventory held in FTZs may be eligible for state and local property tax savings.
- Equipment duty timing – Imported machinery or tools can be held duty-free in the zone until they’re fully installed and used in production.
Industries That Gain the Most
While any company involved in cross-border trade can benefit, certain sectors find FTZs especially impactful:
- Life sciences and pharmaceuticals
- Automotive and components
- Consumer electronics
- Heavy machinery and equipment
- Oil, gas and petrochemicals
FTZs are especially valuable for companies that:
- Pay substantial import taxes or duties
- Have high-volume global trade operations
- Are building or expanding U.S. manufacturing sites
- Are looking to optimize their North American supply chain footprint
How Long Does Implementation Take?
Launching an FTZ typically takes four to six months, although timelines may vary based on complexity and location. Key steps include:
- Feasibility assessment
- Selection of FTZ grantee/sponsor
- Application and regulatory filings with the FTZ board
- Developing and documenting compliance procedures (generally including software integration)
- Activation with U.S. customs
How Kroll Can Help
Navigating the FTZ application, setup and compliance process requires deep knowledge of trade regulations and government procedures. Our experienced advisory team can support you by:
- Assessing feasibility and ROI – Evaluate potential cost savings and compliance risks across various facilities or trade lanes.
- Guiding setup and activation – Support through site selection, application drafting, documentation and CBP coordination.
- Ensuring ongoing compliance – Help maintain proper controls, conduct mock audits, train staff and update procedures to meet ever-evolving regulations.
For FTZ projects, our Trade and Customs Team at Kroll also brings deep expertise in complementary areas, such as property tax advisory, site selection and incentives advisory, transfer pricing, supply chain logistics and much more.
- Our FTZ Advisory Services Include:
- Preparing and submitting FTZ applications
- Facilitating site activation with U.S. customs
- Developing internal control and inventory systems
- Training staff and building operational procedures
- Evaluating tax and duty savings across your supply chain
- Supporting with software selection or system integration
- Performing mock audits and preparing for CBP inspections
- Assisting with compliance reporting and recordkeeping
- Helping companies manage multiple FTZ sites or products