Department of Commerce
Foreign Trade Zones

The foreign trade zone program reduces or eliminates the tariffs in defined geographic areas. These zones are valuable to companies that import parts or supplies from abroad for the manufacturing of their products and then export the finished product. Without trade zone status, companies must pay a tariff upon the arrival of the imported components. If a foreign trade zone is designated, companies are not required to pay a tariff on components imported from abroad as long as the finished product is exported.

If the finished product is not exported, and instead is sold within the U.S., the company pays a tariff on either the components or the finished products, whichever is lower. This procedure is known as the Inverted Tariff Structure.

Two types of foreign trade zones have been authorized by Congress. General purpose zones offer benefits to firms primarily interested in warehousing and distribution activities. However, if a firm's primary interest is manufacturing, sub-zones are an appropriate alternative, as nearly 90 percent of all sub-zone activity is related to manufacturing.

For More Information:

National Association of Foreign Trade Zones in Washington, D.C.: (202) 331-1950