What is Foreign Trade Zone?

A Foreign Trade Zone (FTZ) is a designated area within the United States, in or adjacent to a port of entry, where foreign and domestic merchandise is generally considered to be outside the customs territory of the U.S. for duty purposes. Goods can be brought into an FTZ without paying customs duties until they are formally entered into U.S. commerce. FTZs offer several advantages: duty deferral, duty elimination on re-exports, inverted tariff benefits (pay the lower duty rate when components are assembled into a finished product in the zone), and weekly entry filing (reducing per-entry costs). The FTZ program is administered by the Foreign-Trade Zones Board (Department of Commerce).

Goods in an FTZ have not yet 'entered' U.S. customs territory, so duties are not assessed until withdrawal for consumption. If tariff rates change while goods are in the FTZ, the importer pays the rate in effect at the time of withdrawal — potentially avoiding the need for a CAPE refund. However, goods already entered for consumption (outside the FTZ) that paid higher rates are still CAPE-eligible.