A Foreign Trade Zone (FTZ) is a secure area within the United States that is legally considered outside U.S. customs territory for duty purposes, even though it is physically inside the country. FTZs are authorized by the Foreign-Trade Zones Act of 1934 (19 U.S.C. §§ 81a-81u) and administered jointly by the Foreign-Trade Zones Board (Commerce) and CBP under 19 CFR Part 146.
Benefits. Merchandise admitted to an FTZ is not subject to U.S. duty until withdrawn for U.S. consumption. Importers gain:
- Duty deferral — duties are paid only when goods enter U.S. commerce, not when admitted to the zone
- Duty reduction (inverted tariff) — if manufacturing in the zone creates a finished good with a lower duty rate than its components, the importer can pay the lower rate (Privileged Foreign vs. Non-Privileged Foreign status — see below)
- Duty elimination — goods re-exported from the zone never enter U.S. customs territory and pay no U.S. duty
- Weekly entry — admissions over a week may be consolidated into a single weekly entry summary, reducing MPF costs
- No quota counting — quota-restricted goods can be admitted and then withdrawn when quotas open
Status types.
- Privileged Foreign (PF) status — the HTS code and duty rate are locked at the time of admission. Useful when manufacturing would otherwise create a higher-duty finished good
- Non-Privileged Foreign (NPF) status — the HTS code and duty are determined at the time of withdrawal. Useful for the "inverted tariff" benefit
Scale. As of 2026, the U.S. has over 280 active FTZs with hundreds of subzones used by major manufacturers (auto, oil refining, pharmaceuticals, electronics). FTZs accounted for over $900 billion in merchandise admissions in recent years.
FTZs do not exempt merchandise from Section 301, Section 232, or IEEPA tariffs — special rules apply, including mandatory PF status for these goods.