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What is a Foreign Trade Zone?

Foreign & Domestic Merchandise in the Trade Zone

The Foreign Trade Zone is a site within the U.S., where foreign and domestic merchandise is considered to be outside of U.S. Customs territory.Merchandise can be imported into a Foreign Trade Zone without a formal customs entry procedure or the payment of federal import duties.The Foreign Trade Zone allows a user (an individual or business) to delay, reduce, or eliminate duty payments on foreign merchandise that enters the Foreign Trade Zone.

Products subject to quota are able to enter a Foreign Trade Zone when a quota restricts a product from entering the U.S.The product can be transferred from a Foreign Trade Zone once the quota is removed.With the approval of U.S. Customs and Border Protection, damaged foreign merchandise entering can be destroyed within a Foreign Trade Zone, thus avoiding duty payments.In summary:

  • Duty rates are often higher on components rather than for a finished product.If a component enters the Foreign Trade Zone and is then used in the assembly of a finished product, the duty rate on the finished product is assessed, rather than the higher duty rate on the component.
  • No duties are paid while foreign merchandise is in the Foreign Trade Zone.
  • No duties are paid on foreign merchandise entering a Foreign Trade Zone and are then exported.

Permitted Activities in the Trade Zone

Activities permitted within a Foreign Trade Zone include:

  • Assembly
  • Destroying Merchandise
  • Manipulating
  • Manufacturing*
  • Processing
  • Relabeling
  • Repackaging
  • Sampling
  • Storage
  • Testing

Note: The U.S. Foreign Trade Zones Board must approve manufacturing within a Foreign Trade Zone.