Free Trade Zone FTZ
Stands for: Free Trade Zone
A US Customs-supervised area where imported goods are treated as outside US customs territory for duty purposes, allowing duty deferral, reduction, or elimination on re-exported merchandise.
Definition
A **Free Trade Zone (FTZ)** in the US sense is a secure area, supervised by US Customs and Border Protection, that is legally considered outside the customs territory of the United States. The FTZ program is administered by the Foreign-Trade Zones Board, which is chaired by the Secretary of Commerce. Goods admitted to an FTZ may be stored, manipulated, manufactured, or assembled without being subject to formal customs entry procedures, payment of duties, or excise taxes until they leave the zone for US consumption.\n\nIf goods are re-exported, no US duties are paid at all. Manufacturers can also benefit from inverted tariff relief, meaning they can pay the lower of the duty rate on the imported components or the finished product when goods enter US commerce. The FTZ program supports over 460,000 jobs across more than 200 active zones nationwide.\n\nOutside the US, the term Free Trade Zone is used more loosely and often overlaps with Special Economic Zones and free zones in jurisdictions such as the UAE, Turkey, and Panama. Always check whether a counterparty referencing FTZ means the US program or a generic free zone.
When you'll encounter it
You will encounter FTZs when planning US distribution, manufacturing, or warehousing operations that involve imported components or re-export flows. Importers, automotive plants, oil refineries, and 3PL operators routinely use FTZs to defer duty payments and improve cash flow. Founders setting up a US subsidiary that will import inventory should ask their customs broker whether the warehouse or factory site can be activated as a subzone of an existing FTZ.
Used in our guides
FAQ
What is the difference between a free zone and a US Free Trade Zone?
A US FTZ is specifically a customs-supervised area for duty deferral on imported goods, with no special corporate tax benefits. A free zone in jurisdictions like the UAE bundles customs benefits with corporate tax exemptions, 100 percent foreign ownership, and dedicated regulatory regimes.
Who administers FTZs in the United States?
The Foreign-Trade Zones Board, with day-to-day oversight by US Customs and Border Protection. Each zone has a grantee (often a port authority or local economic development agency) that operates the zone and approves operators and users.
Can software or services use an FTZ?
No. FTZs are tangible-goods focused. They are designed for import, storage, manufacturing, and re-export of physical merchandise, not intangible services or digital goods.
References
- US Foreign-Trade Zones Board https://www.trade.gov/ftz
- US Customs and Border Protection - FTZ https://www.cbp.gov/border-security/ports-entry/cargo-security/cargo-control/foreign-trade-zones
- National Association of Foreign-Trade Zones https://www.naftz.org/