Freight Forwarding & Incoterms: Key Terms Explained in Detail

A Foreign Trade Zone (FTZ) is a designated area where goods can be imported, stored, handled, or even re-exported without the immediate payment of customs duties or taxes. These zones operate under special customs procedures that give businesses more flexibility in how they manage inventory and cash flow. Goods inside an FTZ are considered “outside” the country’s customs territory for duty purposes until they officially enter the local market.

Within an FTZ, companies can sort, assemble, relabel, repackage, or process goods without triggering duty charges. Duties are only paid when the products leave the zone for domestic consumption. If the goods are re-exported, no duties are due at all. This structure makes FTZs valuable for businesses that import large volumes, handle multi-country distribution, or require long-term storage before deciding their next move.

FTZs also help reduce logistics costs by minimizing port congestion and speeding up customs processes. They allow companies to defer, reduce, or eliminate duties depending on how the goods are used. For manufacturers, an FTZ can also offer tariff inversion—paying lower duties on finished products than on imported components. This creates substantial financial advantages in global supply chains.

Overall, Foreign Trade Zones provide a controlled, duty-efficient environment that supports smooth international operations. They offer cost savings, operational flexibility, and faster clearance options. For companies managing global inventories, FTZs help improve cash flow, reduce risk, and streamline import-export activities.