04/14/2025
How a Foreign-Trade Zone Helps You Manage U.S. Tariffs
Defer duties, reduce costs, and protect your business from volatile tariff changes with a Foreign-Trade Zone. Discover how FTZs work, find out if they're right for your business, and learn how an FTZ can improve your bottom line.
Your business success depends on managing your import costs and maintaining supply chain flexibility. Foreign-Trade Zones (FTZs) are secure areas located in the U.S. that are legally considered outside of U.S. Customs territory for duty and tax purposes. FTZs allow you to defer, reduce, or eliminate duties on your imported merchandise.
The current administration's tariff changes are significantly reshaping import costs and supply chain strategies across industries. With base tariffs on most imports and targeted increases for specific countries, businesses face significant challenges with cost management and cash flow optimization.
This guide will help you decide if a Foreign-Trade Zone is right for your business. It will explain how you can use an FTZ to protect your margins and deal with a rapidly changing U.S. trade policy.
Key takeaways
- Defer duty payments until goods leave the FTZ and enter U.S. commerce, improving your cash flow management
- Reduce or eliminate duties on merchandise that is re-exported, scrapped, or destroyed
- Save on Merchandise Processing Fees by filing weekly entries instead of per-shipment entries
- Accelerate your speed to market by having goods physically present in the U.S. while awaiting regulatory approvals
- Prepare for and reduce the impact from volatile tariff changes through strong inventory management
- Work with experienced FTZ operators to ensure your compliance and maximize benefits
Is an FTZ right for my business?
You’ll need to consider several areas to decide if a Foreign-Trade Zone will work for your business. Use these questions to help confirm if an FTZ strategy should be part of your import operations.
Do you import more than 52 shipments per year?
FTZs allow you to file one customs entry per week instead of per shipment, meaning you’ll pay just one Merchandise Processing Fee every week. If you're processing more than one shipment per week on average, you'll likely see savings on these fees alone.
Are you paying significant duty amounts?
The higher your duty costs, the greater the potential benefit from duty deferral. Businesses paying substantial duties can significantly improve cash flow by delaying payment until goods enter the U.S. marketplace.
Do you re-export a portion of your imported goods?
If you import items that are later exported without entering U.S. commerce, an FTZ eliminates duties on these goods entirely, potentially creating substantial savings.
Does your business experience product damage, waste, or obsolescence?
No duties are paid on goods that are destroyed under customs supervision while in an FTZ. This can create meaningful savings for businesses dealing with breakage, spoilage, or other forms of product loss.
Are you waiting for regulatory approvals on imported goods?
If you import FDA-regulated products or goods requiring other agency approvals, an FTZ allows you to position inventory in the U.S. while awaiting clearance, reducing time-to-market once approval is received.
Are you concerned about upcoming tariff changes?
While FTZs require "privileged foreign status" for goods subject to additional tariffs (locking in current rates), they still provide valuable inventory positioning and cash flow benefits during uncertain trade conditions.
Are you importing into states with inventory taxes?
Imported products held in an FTZ, as well as domestic products held in a zone for export, are typically exempt from state and local ad valorem taxes, providing additional cost savings.
If you answered "yes" to several of these questions, your business may benefit from an FTZ strategy.
Need help deciding if an FTZ is right for your business? Contact our customs and trade experts for a personalized assessment.
Understanding Foreign-Trade Zones
What is a Foreign-Trade Zone?
A Foreign-Trade Zone is a secure, designated area within the United States that, for customs purposes, is treated as if it were outside U.S. Customs territory. This special status allows businesses to defer, reduce, or potentially eliminate duties on imported goods.
Important distinctions to understand:
- FTZs are specific to the United States regulatory environment
- FTZs are different from bonded warehouses in several key ways, particularly regarding which duty rates are applicable
- You can find out more about FTZs vs. bonded warehouses later in this guide
How FTZs operate
FTZs function under strict U.S. Customs and Border Protection (CBP) supervision. Goods can be imported, stored, manipulated, manufactured, and exported under specific regulatory controls. Each movement into and out of an FTZ must be properly documented and reported to CBP.
Types of merchandise status in FTZs
Understanding the different status types for your products is critical for maximizing FTZ benefits:
- Domestic merchandise: Goods sourced from the U.S. or customer returns
- Duty-paid merchandise: Foreign goods on which duty has been paid
- Non-privileged foreign status: Allows duty payment based on the condition of merchandise at the time of withdrawal
- Privileged foreign status: Required for goods subject to trade remedies or additional tariffs, locks in duty rates at the time of admission
Goods imported under the Trump Administration tariffs are typically classed as “Privileged foreign status,” which means you’ll lock in the duty rates at the time you admit the goods into the foreign-trade zone.
Benefits of using Foreign-Trade Zones
Cash flow management
One of the main advantages of an FTZ is the ability to defer duty payments until goods leave the zone and enter U.S. commerce. This deferral can create significant cash flow benefits:
- Hold imported inventory without immediate duty payment
- Pay duties in smaller, incremental amounts as goods are withdrawn
- Align duty payments with your actual sales cycle
- Preserve capital for other business needs
Duty reduction or elimination
FTZs offer several opportunities to reduce or eliminate duties entirely:
- Re-exports: No duty paid on goods that are exported from an FTZ
- Scrap/waste/destruction: No duty paid on goods that are to the point of no residual value or under customs supervision
- Inverted tariffs: In manufacturing scenarios, pay a lower duty rate based on the finished product instead of the higher component rates (subject to specific approvals)
Please note that inverted tariffs are not available for “privileged foreign status” goods, such as those imported under the Trump Administration’s 2025 tariffs.
Weekly entry savings
Instead of filing a customs entry for each shipment, FTZ operators can file one entry per week:
- Pay just one Merchandise Processing Fee each week instead of per shipment
- Reduce customs broker fees associated with multiple entries
- Streamline documentation and administration
Speed to market
Having goods physically present in the U.S. while awaiting regulatory approvals can significantly reduce time-to-market:
- Import while waiting for FDA or other agency approvals
- Once approval is received, immediately distribute to U.S. customers
- Save 4-6 weeks compared to waiting for approval before shipping by ocean, for example
Tax benefits
FTZs may provide tax advantages beyond customs duties:
- Exemption from state and local inventory taxes in some locations
- Potential exemption from excise taxes in specific scenarios
- Improved tax planning and predictability
Operational efficiencies
Beyond direct duty and tax savings, FTZs can enhance overall supply chain performance:
- Improved inventory control and accuracy
- Enhanced security and asset protection
- Best practice compliance procedures
- Supply chain velocity
Want to see how you can benefit from an FTZ? Get in touch with GEODIS.
FTZ implementation process
Establishing an FTZ operation involves several key phases and can take anywhere between one and six months, depending on location, shipping volume, product type, and several other factors. Understanding this timeline will help you set realistic expectations for your FTZ implementation.
Phase 1: Consulting - Application, activation, and approval
The initial phase focuses on securing necessary permissions:
- FTZ Board application: Alternative site framework minor boundary modification (ASF MBM) or subzone application
- Production authority request: Required if manufacturing will occur in the FTZ
- CBP activation preparation: Developing operations manuals, conducting background checks, preparing for security inspections
- Approval monitoring: Tracking FTZ Board and CBP application progress
Phase 2: Start-up - Operations, IT, and go-live
The second phase develops your operational framework:
- Operations setup: Creating standard operating procedures, training staff, establishing communication protocols
- IT implementation: Setting up data mapping, file construction, CBP transmission capabilities, systems testing
- User acceptance testing: Validating FTZ operations and CBP integration before launch
Phase 3: Ongoing operations
The final phase covers your day-to-day FTZ management:
- Daily operations: Managing admissions, withdrawals, inventory control, compliance, and reporting
- Audit support: Conducting regular internal audits and supporting CBP compliance reviews
- Continuous improvement: Monitoring operations, systems, and savings opportunities
Navigating current tariff challenges with FTZs
Understanding the current tariff environment
The current administration has proposed significant changes to U.S. trade policy. You can find a guide to the latest tariffs in our tariff guide and our latest client updates. These changes are reshaping import costs and supply chain strategies across industries, making effective duty management more critical than ever.
FTZ vs. bonded warehouse considerations
Understanding the difference between FTZs and bonded warehouses is critical:
- FTZs lock in duty rates at the time of admission for goods subject to additional tariffs through required "privileged foreign status"
- Bonded warehouses apply the duty rate in effect at the time of withdrawal, which may be advantageous if tariffs are expected to decrease
This distinction is particularly relevant when tariff rates are in flux, as businesses must carefully decide which approach best suits their specific situation and market outlook.
Please note that GEODIS does not provide bonded warehouses in the U.S.
Strategic FTZ use during tariff volatility
Despite a required privileged foreign status for many goods, FTZs still offer valuable benefits during tariff uncertainty:
- Cash flow preservation: Defer duty payments while maintaining U.S. inventory positioning
- Supply chain continuity: Position inventory to minimize disruption from changing tariffs
- Regulatory navigation: Take advantage of FTZ expertise to stay compliant amid evolving trade policies
- Strategic inventory management: Carefully time FTZ admissions based on tariff implementation dates
GEODIS FTZ capabilities
GEODIS-operated FTZs
GEODIS currently operates several Foreign-Trade Zones across the United States:
- Four FTZs available for general use (subject to space availability)
- Strategic locations near major ports and transportation hubs
- Fully compliant facilities with established CBP relationships
- First-come, first-served availability
Customer-operated FTZs
GEODIS supports customer-operated Foreign-Trade Zones, offering:
- Conversion of client facilities into FTZs
- Ongoing FTZ management services
- Compliance expertise and support
- Integration with existing operations
Complete FTZ service offerings
GEODIS provides end-to-end FTZ services across all industries and regions in the U.S.:
FTZ management services
- FTZ operation and administration
- FTZ software implementation and management
- Transload services
- Warehousing
- Labor management
Entry services
- E214 documentation
- Weekly entry processing
- In-bond entries
- Export documentation
- Annual reporting
FTZ consulting services
- FTZ designations and activations
- Regulatory approvals
- Compliance support
- Training programs
- Audit assistance
GEODIS FTZ approach
What sets GEODIS apart in FTZ management:
- Focus on compliance: Multiple audit layers, comprehensive documentation, detailed issue tracking
- Collaborative partnership: Regular health checks, trend monitoring, SOP reviews, comprehensive reporting
- Expert training: FTZ awareness programs, desk-level procedure training, annual recertification
Frequently asked questions
FTZ basics
What is the difference between a Foreign-Trade Zone and a bonded warehouse?
The key distinction is how duty rates are determined. FTZs lock in duty rates at the time of admission for goods subject to additional tariffs, while bonded warehouses apply the duty rate in effect at the time of withdrawal. This difference is particularly important during periods of tariff volatility. Please note that GEODIS does not provide bonded warehouses in the U.S.
Are there time limits for storing merchandise in an FTZ?
No, merchandise may remain in an FTZ indefinitely, unlike bonded warehouses which has a five-year limit.
Who oversees Foreign-Trade Zones?
The Foreign-Trade Zones Board grants zone status, while U.S. Customs and Border Protection (CBP) oversees day-to-day operations and compliance.
FTZ benefits
How do weekly entries save money?
Instead of filing a customs entry for each shipment with separate Merchandise Processing, FTZ operators file one entry weekly, paying just one fee. For companies with multiple shipments per week, savings can be substantial.
Can duties be eliminated completely with an FTZ?
Yes, in specific scenarios. Duties are eliminated on goods that are:
- Re-exported without entering U.S. commerce
- Destroyed under customs supervision
- Scrapped or wasted during processing (with proper documentation)
How does an FTZ improve cash flow?
Duties are only paid when goods leave the FTZ and enter U.S. commerce, not when they arrive in the country. This allows you to align duty payments with your actual sales cycle rather than your import schedule.
What tax benefits do FTZs provide?
Imported products held in an FTZ, as well as domestic products held in a zone for export, are typically exempt from state and local ad valorem taxes (inventory taxes), though this varies by location.
FTZ operations
What activities can take place in an FTZ?
Approved activities include storage, inspection, packaging, labeling, exhibition, assembly, manufacturing (with approval), testing, repair, and destruction.
Can I manufacture products in an FTZ?
Yes, with prior approval from the Foreign-Trade Zones Board. Manufacturing approval requires a separate application process beyond basic FTZ activation.
What security requirements apply to FTZs?
FTZs must meet minimum security standards including controlled access points, camera systems, and secure perimeters. CBP conducts security inspections before approval.
What reporting is required for FTZ operations?
FTZ operators must maintain detailed records of all movements into and out of the zone, file weekly entries, reconcile inventory, and provide an annual report to the FTZ Board.
FTZ implementation
How long does it take to set up an FTZ operation?
The standard timeline is four to six months under optimal conditions. Low-volume operations in existing FTZs may be established more quickly (30-45 days), while complex implementations may take longer.
What are the main phases of FTZ implementation?
The process includes three main phases:
- Consulting: Application, activation & approval
- Start-up: Operations, IT & go-live
- Ongoing operations: Management, compliance & optimization
What IT requirements exist for FTZ operations?
Systems must communicate with FTZ software, transfer data in electronic format, and integrate with warehouse management systems. Required data includes complete product information, accurate classification, country of origin, and quantities/values.
FTZ costs and ROI
What types of fees are associated with FTZs?
FTZ costs typically include:
- Grantee fees (startup and annual)
- Transaction fees (per movement)
- Software subscription fees
- FTZ operator bond
- Management fees
How is FTZ ROI typically calculated?
ROI analysis compares all FTZ-related costs against benefits including duty deferral value, duty elimination on exports/destroyed goods, weekly entry savings, tax savings, and operational efficiencies.
What volume is needed to justify an FTZ?
For weekly entry savings alone, at least 52 entries per year is the typical threshold. However, businesses with high-duty goods, significant exports, or product waste/breakage may benefit from an FTZ with lower volumes.
Tariff considerations
How do FTZs handle goods subject to Section 301 and other additional tariffs?
Goods subject to trade remedies must be admitted into an FTZ in Privileged Foreign (PF) status, which locks in the duty rate at the time of admission. These additional duties can be deferred but not eliminated unless the goods are exported.
Can FTZs help if tariffs decrease in the future?
For goods requiring privileged foreign status, FTZs lock in rates at admission, so future decreases wouldn't apply. Bonded warehouses may be more advantageous if tariffs are expected to decrease.
Can I still use weekly entries for goods with additional tariffs?
Yes, withdrawals with provisional duties are still eligible to be consolidated into one weekly entry, preserving this cost-saving benefit.
GEODIS FTZ capabilities
What FTZ options does GEODIS offer?
Clients have three main options:
- Use space in an existing GEODIS-operated FTZ (subject to availability)
- Convert a GEODIS facility that the client already uses into an FTZ
Have GEODIS help establish the client's own facility as an FTZ with GEODIS providing administration
What sets GEODIS apart in FTZ management?
GEODIS differentiates its FTZ services through:
- Rigorous compliance focus with multiple audit layers
- Collaborative partnership approach with regular health checks
- Comprehensive training and certification programs
End-to-end service capabilities from consulting through operations
How does GEODIS support client-operated FTZs?
For client-operated facilities, GEODIS provides:
- Assistance with FTZ designation and activation
- Systems implementation and integration
- Staff training and certification
- Ongoing compliance support and management
- Regular audits and continuous improvement
How GEODIS can help
Navigating the complex world of Foreign-Trade Zones requires expertise and careful planning. If you're considering an FTZ strategy for your business, GEODIS can help you assess your specific situation, quantify potential benefits, and implement a solution tailored to your needs.
