This article was published on the Adam Smith Project website on June 7, 2017. For the latest investigative analysis of trade policy, compliance, and supply chain technology, visit

Foreign trade zones programs exist around the globe for companies willing to understand their differences

Many importers and exporters throughout the United States have participated in or are aware of our nation’s nearly 90-year-old Foreign-Trade Zone (FTZ) program. Foreign-Trade Zones are secure areas under U.S. Customs and Border Protection (CBP) supervision, but considered outside CBP territory so that they can provide significant duty and related savings to U.S. manufacturers and distributors.

Foreign and domestic merchandise may be moved into a zone for operations that include storage, assembly, manufacturing, and other processing. Under zone procedures, payments of duties are not required on the foreign merchandise until it enters CBP territory for domestic consumption, at which point the importer generally has the choice of paying duties at the lower rate of either the original foreign materials or the finished product. Deferring and/or inverting duty to the lower rate can result in savings in the millions of dollars for many companies.

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