By David Hall

What is a Foreign-Trade Zone
A Foreign-Trade Zone (FTZ) [aka: Free Trade Zone] is an area of land within the United States, located at or near a U. S. Customs port-of-entry, where foreign and domestic merchandise is generally considered to be in international commerce (not in U. S. Commerce Territory). Foreign merchandise may enter this area without formal Customs entry or the payment of Customs duties or government excise taxes.

If the merchandise is later exported from the Zone, no U.S. Customs duty or excise tax is levied. If the final product is imported into the United States, Customs duty and excise taxes are due, but only at the time they leave the FTZ and enter U.S. Customs Territory.

In cases where foreign components are brought into the Zone and combined into a new product, the user may elect to pay the lower of the duty applicable to the product or to the component parts, and no duty must be paid on the portion of the value of the product created by domestic parts or labor in the Zone.

What can you do with merchandise in a Zone?

• Store/Test/Sample


• Display/Repair/Manipulate


• Assemble/Salvage/Repackage


• Clean/Process/Re-label


• Mix/Destroy/Inspect


• *Manufacture

• Imports may enter and be held in an FTZ without customs duties. Duty is paid only when those imports are shipped into U.S. Customs Territory.


• Customs duties are not paid on merchandise exported from an FTZ.


• Duties are reduced or eliminated on materials subject to defect, damage, obsolescence, waste and scrap.


• Duties are not owed on labor, overhead or profit attributed to FTZ production operations.


• FTZ users can pay the duty rate on component material or merchandise produced from component materials--whichever is lower.


• Most merchandise subject to U.S. quotas may be held in an FTZ until quotas open.


• Delays in customs clearances and duty drawback procedures are eliminated.


• Quality control inspections can identify sub-standard goods to be destroyed or returned without duty payment.


• No country-of-origin labels are required on merchandise admitted to an FTZ.


• Increased accountability reduces problems with inaccurate inventory, receiving and shipment, and helps track waste and scrap.


• Merchandise used/consumed in FTZ processing is generally not subject to duties.


• No duty is owed on in-bond, Zone-to-Zone transfer of FTZ merchandise.


• Title of merchandise may be transferred to an FTZ if there is no "retail" sale.


• Specific merchandise ID is unnecessary. FIFO (first in - first out) and FOCI (foreign first) inventory methods are acceptable in an FTZ.

• Help facilitate and expedite international trade.


• Provide special Customs procedures as a public service to help firms conduct international trade related operations in competition with foreign plants.


• Encourage and facilitate exports.


• Help attract offshore activity and encourage retention of domestic activity.


• Assist state/local economic development efforts.


• Help create employment opportunities.

• U.S. Department of Commerce, Foreign-Trade Zone Board's Internet home page that provides detailed information, FTZ Regulation (15 CFR Part 400) and more is located at:

• Foreign-Trade Zones Board Application Guidelines, Application Process Flowcharts, Federal Regulations and more with "Download" files ["wpd" WordPerfect 6.1 format]:

• The National Association of Foreign-Trade Zones (NAFZ) has additional information on its Internet home page: http//imex.com/naftz.html


• Oregon Manufacturing Extension Partnership, Southern Office, David H. Hall, Field Engineer

• Ore-Cal Trade Corp. [Managing Foreign-Trade Zone #206], Ralph Wehinger, President