3 Things To Know About Foreign Trade Zones (FTZ)

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If you ship in products from other countries to the United States for sale, you are going to face the consequences of trade policies, such as the China tariffs on a variety of different goods. When it comes to bringing in products from countries with tariffs, there are steps you can take to mitigate the impact of the tariffs on the price of the goods. One of those is by using bonded warehouses or foreign trade zones (FTZ) within the United States. 

What are Foreign Trade Zones?

Foreign trade zones are areas that are secure and fall outside of the US Customs and Border Protection's (CBP) legal jurisdiction. FTZ are basically free trade zones that are located near ports of entry, but do not fall under their legal jurisdiction. Within an FTZ, one can move, store, assemble, and even manufacture merchandise. Although these areas are not subject to the US Customs and Border Protection's jurisdiction, they do have to follow state, local and federal laws, as well as any rules put in place by the FTZ. 

What Can Be Put in Foreign Trade Zones?

All merchandise, which includes both foreign merchandise as well as domestic merchandise, that is not prohibited by law, can be put in an FTZ. Merchandise that is under a quota by CBP can also be put into an FTZ until the quota is lifted for that product. This can be really helpful if you purchased a lot of product that is currently under a quota and would cause you a large fine otherwise to bring it into the country; with an FTZ, you can wait until that quota is lifted before formally bringing that product into the country and shipping it around the country. 

How are Duties Impacted by an FTZ?

When items are in an FTZ, you do not have to pay duties on the items. As stated above, an FTZ falls outside of the CBP jurisdiction, which means that goods inside of an FTZ cannot have duties applied to them until the goods leave the FTZ. This can allow your business to hold goods in an FTZ area until the duties for that item have been lifted or until the tariff on those items has passed; then you can take the goods out of the FTZ and pay the lower duty fees. The complicated part of an FTZ is that you can't distribute your products from an FTZ until you have paid the duties on the products, but you can get use the space to wait for the duties to be more agreeable before accessing that merchandise.  

Before you use a bonded warehouse or foreign trade zone for goods, talk with your international trade attorney like those at Braumiller Law Group. They will be able to help you navigate the legal waters of importing goods and make sure that you are following all applicable laws and that you are not being taken advantage of either as a business.