Foreign-Trade Zone (FTZ)

What it means

"Free trade zone" is the term most Americans type into a search box. The legal U.S. name is foreign-trade zone, and in the U.S. the two mean the same thing. The FTZ Board describes one as a designated location in the United States where companies can use special customs procedures.^[1] CBP describes zones as secure areas under its supervision that are considered outside CBP territory for entry purposes.^[2]

The FTZ Act lets foreign and domestic merchandise in a zone be stored, sold, exhibited, broken up, repacked, assembled, distributed, sorted, graded, cleaned, mixed, otherwise manipulated or manufactured. The goods can then be exported, destroyed or sent into U.S. customs territory.^[3] Foreign goods that go into U.S. customs territory become subject to the normal import laws at that point.^[3]

Who runs a foreign-trade zone

Several parties are involved, and each has a different job.

• The law. The Foreign-Trade Zones Act of 1934, as amended, codified at 19 U.S.C. 81a through 81u. The Board's rules are in 15 CFR Part 400, and CBP's rules are in 19 CFR Part 146.^[2]
• The FTZ Board. It is made up of the Secretary of Commerce and the Secretary of the Treasury, with the Commerce Secretary as chair. The Board approves zones, subzones and production activity.^[1]
• CBP. It enforces the import laws and supervises zone activity. CBP must approve activation of a zone before any merchandise is admitted under the FTZ Act, and the local Port Director oversees operations.^[2]
• The grantee. A qualified public or private corporation sponsors the zone and may run it or contract for its operation.^[2]

Zone vs. subzone

A typical general-purpose zone offers leasable storage and distribution space that many users can share.^[2] The FTZ Board calls sites that are open to multiple operators magnet sites.^[1]

A subzone is different. CBP says subzones are normally private plant sites authorized by the Board,^[2] and the FTZ Board describes subzones and usage-driven sites as approved for a specific company or use.^[1] A manufacturer that wants zone benefits at its own plant usually goes the subzone or usage-driven route rather than renting space in a general-purpose site.

Zone status in one paragraph

Every item admitted to a zone carries a zone status, and the status decides how duty is figured when it leaves. Privileged foreign goods keep the status they had in the condition they were admitted. Non-privileged foreign goods are evaluated in the condition they are in when they are shipped out of the zone.^[1] CBP also recognizes domestic status for U.S. goods and zone-restricted status for goods moved into a zone from U.S. territory, which are treated as exported and generally cannot come back for consumption.^[2] The choice matters when tariff rates change, which is covered in our 2026 tariff changes guide. Your licensed customs broker should make this call, not the warehouse.

The main benefits

The FTZ Board lists these benefits for zone users:^[1]

• Duty deferral. Customs duties and federal excise tax on imports are deferred until goods leave the zone for U.S. consumption.
• No duty on re-exports. Goods shipped abroad from the zone pay no U.S. duty or quota charges.
• Inverted tariff relief. If the finished product leaving the zone has a lower tariff rate than its foreign parts, the duty can be reduced. This is called an inverted tariff.
• Weekly entry. Zone users can use streamlined procedures such as one customs entry per week instead of one per shipment.
• Inventory tax. Foreign goods and domestic goods held for export are exempt from state and local inventory taxes.

Who uses foreign-trade zones

Zone users bring foreign and domestic goods into zones for storage, assembly, manufacturing and processing.^[2] In practice that points to a few kinds of companies: manufacturers whose finished goods carry a lower rate than their imported parts, distributors that re-export a large share of what they import, and importers that hold stock for a long time and want to pay duty only when goods sell. A business that imports a few containers a year and sells them quickly usually gets little from a zone, because zone admission, recordkeeping and CBP oversight add work.

How to find your local zone

The FTZ Board keeps a public zone database, OFIS, with each zone's grantee, service area and contact. In northern and central New Jersey the zone is Foreign-Trade Zone 49 (Newark/Elizabeth). OFIS lists the Port Authority of New York and New Jersey as grantee and an approval date of April 6, 1979. Its service area covers Hudson County and parts of Bergen, Essex, Middlesex, Monmouth, Morris, Passaic, Union and Somerset Counties.^[4]

Being inside a service area does not make a building part of the zone. A site has to be brought in through the grantee, and CBP must approve activation before goods can be admitted under the FTZ Act.^[2] Start with the grantee's FTZ contact listed in OFIS and with your customs broker. More on the port itself is in our Port Newark guide.

Free trade zone vs. bonded warehouse

Both defer duty, which is why people compare them. A bonded warehouse is for storage and limited handling such as cleaning, sorting and repacking, while a zone also allows manufacturing and has no fixed storage clock. The rules for when the duty rate is set also differ. The full side-by-side, including FTZ 49 and the 2026 rules, is in bonded warehouse vs. free trade zone.

Why it matters

If you are paying duty on goods months before you sell them, or paying duty on parts that end up in products shipped abroad, a zone may change your cash flow. If your goods clear customs and move within days, a zone usually adds cost and paperwork without much benefit. RapidShips runs a dock in East Brunswick, NJ that is not in a foreign-trade zone, so we handle freight only after it has cleared customs.

Example

Illustrative only, with no real rates: a company imports electronic components and assembles them into finished units in a subzone at its plant. It pays no duty while the parts sit in the zone. Units it ships to overseas buyers leave with no U.S. duty. Units it sells in the U.S. are entered when they leave the zone. If the finished unit carries a lower tariff rate than the parts and the parts were in non-privileged foreign status, the finished unit's rate can apply. The company's customs broker confirms the status and the rate before the first admission.

Frequently asked questions