Free Trade Zone (FTZ)

What Is a Free Trade Zone (FTZ)?

A Free Trade Zone (FTZ) is a designated area, usually near a port or airport, where goods can be imported, stored, handled, manufactured, or re-exported without being subject to standard customs duties until they leave the zone for domestic consumption.

How Does an FTZ Work?

Goods entering an FTZ are considered outside normal customs territory for duty purposes. Companies can store, assemble, or process goods within the zone duty-free, and duties are only assessed if and when the goods formally enter the domestic market, if the goods are re-exported instead, no duty is owed at all.

Benefits of Using an FTZ

• Deferred or eliminated duty payments
• Ability to process or assemble goods without incurring duty on the imported components
• Reduced merchandise processing fees for consolidated entries
• Useful staging point for re-export operations

Why FTZs Matter

For companies with significant import volume, especially those that re-export or process goods before final sale, an FTZ can meaningfully reduce duty costs and improve cash flow, though setting up FTZ operations requires navigating specific regulatory approval and compliance requirements.