Free Trade Zone is 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.
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.
If 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.
Outside 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.
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.
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