What is a Foreign Trade Zone?


Foreign Trade Zone

A U.S. Foreign Trade Zone is a site physically located within the United States where foreign and domestic goods are considered legally outside of the country and U.S. Customs territory. Certain types of goods can be imported into a zone to be stored, distributed, exhibited, combined with other foreign and domestic goods or used in manufacturing operations. The Customs duties of these goods are due only at the time the goods are moved out of the zone for consumption in the U.S.


What may be done in a Foreign Trade Zone?

Foreign and domestic merchandise permitted in a zone may be:

  • Stored: Merchandise imported into a zone may be stored for as long as necessary without U.S. Customs duties being levied. Duties are levied only at the time the goods are moved out of the zone into U.S. territory. If goods are shipped out of the zone to a foreign country, no U.S. duty is charged.

  • Process/handled: Foreign merchandise may be brought into a zone and cleaned, weighed, inventoried, graded, repackaged, sampled, relabeled, inspected, manipulated and/or processed before entering U.S. Customs territory. Duties are only levied on articles actually entering U.S. territory.


  • Manufactured/assembled: Foreign materials and/or parts may be combined with domestic or other foreign materials to produce a finished product. If the finished product is brought into the U.S. for consumption, the duty to be paid may be based on the rate for the foreign parts and raw materials or on a possibly lower rate for the finished product, whichever is more advantageous to the user. If the finished product is exported, no duty is levied.


  • Exhibited: Permanent exhibition of imported merchandise for sale to prospective customers is permitted. No duty is paid on goods that not which are on display or stored for sale. A duty is charged when merchandise is sold to a customer in U.S. territory.


  • No Customs duty or excise tax, if applicable, is paid on goods in a foreign trade zone until they are shipped out of the zone for consumption in the U.S.

  • Goods may be exported from a zone free of duty and tax.

  • There are no quotas in zones. So goods shipped into the zone in excess of a U.S. quota may be held there without penalty until the next quota period.

  • Indefinite zone storage encourages quantity purchases to obtain purchase and transportation discounts and allows distribution as market conditions warrant.

  • Merchandise may be sampled and tested for quality before payment of duties. Goods which are found to have impurities or excessive waste or which are otherwise sub-standard may be repaired or discarded before assesment of duty. In addition, goods that shrink, evaporate or otherwise lose weight while in the zone, pay duty at the time-of-distribution weight.

  • Operating capital is available longer because duty is not paid until goods are entered into U.S. territory.

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