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In recent times, businesses of all sizes have increasingly turned to specially designated U.S. Customs-approved sites as a temporary measure to sidestep the financial burden of new tariffs introduced during President Trump’s administration. These sites, known as foreign trade zones (FTZs) and bonded warehouses, serve as secure storage or manufacturing spaces where imported goods are not subject to U.S. duties or excise taxes until they enter the domestic market.
Importers only incur duties when they remove goods from an FTZ or bonded warehouse for consumption within the United States. “Just a year ago, the concept of an FTZ was not appealing due to the significant initial investment required,” remarked Jackson Wood, the director of industry strategy for Descartes Global Trade Intelligence, which offers technology solutions for FTZs. “However, companies are now reassessing their financial strategies, and many, including smaller businesses, are finding that FTZs can be a viable option as tariffs continue to rise.”
A 90-day grace period is currently in effect for most countries before new tariffs take effect, although tariffs on goods from China have skyrocketed to as much as 145%. FTZs allow U.S. importers and manufacturers the flexibility to store imported finished goods without incurring trade duties for an indefinite period. Goods stored in a bonded warehouse can remain for up to five years from the date of import. This approach enables companies to manage their import strategies effectively, as it may allow them to pay reduced customs duties or, in some cases, none at all—a tactic often referred to as an “inverted tariff.”
The ability to defer duties, taxes, and fees normally associated with imports can significantly improve a company’s financial standing by enhancing cash flow and operational flexibility.
Jeffrey J. Tafel, the president of the National Association of Foreign Trade Zones, noted a marked increase in membership coinciding with the 2024 presidential election, with registrations sharply increasing to record levels. “The rapid changes in tariffs have prompted many companies to seek FTZ storage solutions to delay duty payments while they strategize on how to deal with their goods, much of which was acquired before the imposition of the tariffs,” Tafel explained. “Whenever tariffs are discussed in the media, we see a surge in interest from businesses looking for alternatives to mitigate their impact.”
Moreover, there is heightened interest in FTZ grantees, which are entities authorized by the Foreign-Trade Zones Board to establish and manage FTZs. Inquiries regarding these grantees have reportedly increased by two to four times the usual rate.
Originally established by Congress in the 1930s, the foreign-trade zones program was designed to encourage domestic investment in the U.S. economy. Today, these zones contribute to the employment of over 550,000 workers across all 50 states and Puerto Rico and span a wide array of industry sectors.
Faced with the option of not shipping goods at all, recent data from Asia indicates a significant drop in manufacturing orders and freight vessel departures. On the other hand, utilizing duty-free zones presents an attractive alternative for importers.
“The recent tariff landscape has made FTZs increasingly attractive, especially since other duty reduction methods, such as duty drawbacks, are not applicable for the new tariffs,” commented Chelsea Pavona Gardner, a spokesperson for Maersk in North America. “Therefore, we see a growing number of companies that previously dismissed the idea of FTZs now reevaluating them as a legitimate strategy.”
“Many clients are currently in a holding pattern, awaiting clarity on upcoming changes,” said Janet Labuda, head of customs compliance at Maersk. “Others are actively moving their products into bonded warehouses for short durations to see if the situation improves before making a final decision on duty payments,” she added.
While establishing an FTZ can involve significant costs—covering the initial setup, professional services for navigating the approval process, trained personnel, and dedicated IT systems—the potential benefits are substantial. The decision to utilize an FTZ often hinges less on industry type and more on the volume of a company’s import activities. Traditionally, the primary users of FTZs have included sectors such as consumer goods and retail, automotive, aerospace, and electronics.
Furthermore, in addition to warehousing, FTZs can also encompass manufacturing sites or portions thereof, particularly when the components imported carry a higher tariff than the finished products. Once the finished products are released from the FTZ, companies benefit from lower tariffs. There is also the opportunity for Customs to grant approval for the disposal of leftover materials from the manufacturing process, which would not incur duties. This can also extend to the export of such products to other countries.
Jordan Dewart, president of Redwood Logistics Mexico, shared insights regarding the growing interest in FTZ services, attributing this trend to importers’ concerns over the duration of the ongoing trade tensions. “The current surge in FTZ inquiries reflects a proactive approach from customers seeking solutions in case tariffs become a long-standing issue,” he stated.
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