What Is a Foreign Trade Zone (FTZ)? Benefits, Types & How to Use One

A Foreign Trade Zone (FTZ) is a designated area within the United States that is legally considered outside US customs territory for duty purposes. Goods can be imported into an FTZ without paying customs duties until they leave the zone and enter US commerce. If the goods are exported from the FTZ, no US duties are ever paid. As of 2026, there are 293 FTZ projects across all 50 states, plus Puerto Rico and the US Virgin Islands. Companies operating within FTZs save an estimated $3 billion per year in duties, fees, and inventory costs. FTZs are supervised by CBP and administered by the Foreign-Trade Zones Board (part of the Department of Commerce).

How FTZs Save Money

• Duty deferral — Duties are not paid until goods leave the FTZ and enter US commerce. For goods stored for months, this can improve cash flow by hundreds of thousands of dollars.
• Duty elimination on exports — If goods enter an FTZ and are later exported, no US duties are ever paid. This is critical for manufacturers who import materials and export finished products.
• Inverted tariff savings — If the duty rate on a finished product is lower than on its components, you can manufacture within the FTZ and elect to pay the lower finished-product rate when goods enter US commerce. Example: Component duty is 15%, finished product duty is 3%. Manufacturing in the FTZ saves 12 percentage points.
• No MPF on zone-to-zone transfers — Goods moving between FTZs don't trigger the Merchandise Processing Fee.
• Weekly entry filing — Instead of filing a customs entry for every shipment, FTZ operators can file a single weekly entry covering all goods leaving the zone, reducing brokerage costs.
• No duty on waste and scrap — If manufacturing in an FTZ produces waste, the waste is exported or destroyed without duty. You only pay duty on the usable product.

Types of FTZs

• General Purpose Zones (GPZ) — Large designated areas (often at ports, airports, or industrial parks) open to multiple users. Any company can apply to use space within a GPZ. There are approximately 195 active GPZs.
• Subzones — Specific sites designated for individual companies, usually at their own manufacturing or distribution facilities. There are approximately 640 active subzones. Major users include auto manufacturers (BMW, Honda, Toyota), oil refineries, pharmaceutical companies, and electronics assemblers.

How to Activate an FTZ

1. Determine if an FTZ makes sense — Calculate your potential savings by analyzing your import volume, duty rates, storage time, export percentage, and inverted tariff opportunities.
2. Find your nearest FTZ — Use the Foreign-Trade Zones Board directory at trade.gov. Most major ports and industrial areas have a zone.
3. Apply for activation — Work with the FTZ grantee (the local entity managing the zone) to activate space. For a subzone at your own facility, apply through the FTZ Board.
4. Set up CBP oversight — The local CBP port director must approve zone activation. You'll need procedures for inventory control, security, and record-keeping.
5. Begin operations — Once activated, you can admit goods into the zone under CBP supervision, manipulate, manufacture, or store them, and file weekly entries when goods leave.

FTZ vs. Bonded Warehouse: What's the Difference?

Both FTZs and bonded warehouses allow duty deferral, but FTZs offer broader benefits. In an FTZ, you can manufacture, assemble, test, label, and repackage goods — activities not permitted in a bonded warehouse. FTZs allow inverted tariff election; bonded warehouses do not. FTZ goods can stay indefinitely; bonded warehouse goods must be exported or entered within 5 years. Bonded warehouses are simpler to set up but offer fewer cost advantages. For companies that only need to defer duties on inventory with no manufacturing, a bonded warehouse may be sufficient.

How Camtom Helps FTZ Users

Accurate tariff classification is the foundation of FTZ cost savings — especially for inverted tariff analysis. Camtom's AI engine classifies components and finished products, calculates the duty differential, and identifies where manufacturing within an FTZ would yield the greatest savings. For importers evaluating whether an FTZ makes financial sense, our platform provides the classification and duty data needed to build a clear business case.

Wondering if an FTZ could save your company money? Try Camtom's free tariff lookup to see your duty rates, or schedule a demo to explore how our classification platform supports FTZ and other duty-saving strategies.