A designated area where goods can be imported, stored, processed, or manufactured with duty deferral or reduction benefits.
A Free Trade Zone (FTZ) — also called a foreign trade zone in the US — is a designated geographic area, often adjacent to a port or airport, where goods can be imported, stored, processed, assembled, or manufactured with significant duty advantages. Unlike standard customs territory, goods in an FTZ are considered outside US commerce for duty purposes until they leave the zone.
Key FTZ benefits for importers: duty deferral (pay duties only when goods leave the FTZ for domestic consumption), duty reduction (if goods are manufactured in the FTZ using components with different duty rates, you pay the lower of the component or finished good duty rate), and duty elimination (if re-exported, no duties are owed). FTZs also streamline customs processing for high-volume importers.
For brands working with 3PLs, FTZ access is most relevant for: manufacturers importing components and assembling finished goods, high-volume importers in high-duty categories, and operations with significant re-export volume. Not all 3PLs have FTZ designation — it requires a CBP application and ongoing compliance program.
FTZ benefits are most significant when: your duty rates are high (15%+ on finished goods), you have substantial import volume ($2M+ in dutiable value per year), or you have meaningful re-export volume. For most DTC brands importing under $1M/year, the administrative overhead of FTZ compliance outweighs the duty savings.
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