What FTZ Benefits Can I Expect in the 2025 Tariff Environment?

The FTZ program is a complex program, and we are navigating a complex trade environment. The below information provides a general overview, each situation needs to be individually investigated. FTZs remain the most flexible tool to help companies manage tariff risk for their U.S. operations, FTZs are more flexible to the operator than a bonded warehouse. If you activate your facility as an FTZ, your facility is considered outside of U.S. customs territory. This allows you to defer the customs entry process and thereby defer tariff payments. There may be opportunities to reduce or eliminate tariffs altogether if the product never enters U.S. customs territory. The main benefits are summarized below:

• Duty deferral – In a high-tariff environment, it’s important not to underestimate the value of a duty deferral. Rather than paying the tariff on imported product at the port of entry when imported (in one lump sum payment), you pay the tariff as the product leaves your facility (only for the product sold as it’s sold) and enters U.S. customs territory. The benefit here is cash flow – take control of when you pay your tariff, in smaller increments timed to align with when you sell the product.
• Tariff elimination (warehouse / distribution Operations) – If you are a distributor (warehouse only – not manufacturing) of imported product, you can eliminate U.S. import tariffs on products that you re-export outside of the United States (including re-exports to Canada, Mexico and Chile) by activating your warehouse as a foreign trade zone. This is because your product will never enter U.S. customs territory, and therefore never clear U.S. customs.
• Tariff elimination (manufacturing operations) – If you are a manufacturer with a final product that uses imported components, you can eliminate U.S. import tariffs on products that are re-exported outside of U.S.M.C.A. and Chile (you CANNOT eliminate tariffs on re-exports to Canada, Mexico and Chile) by activating your facility as a foreign trade zone. You cannot eliminate tariffs on manufactured product sold to Canada, Mexico or Chile because the U.S.M.C.A. and U.S. Chile Free Trade Agreements require that you clear manufactured products through U.S. customs before re-export to Canada, Mexico or Chile.

The above are the largest, most impactful zone benefits, there are other potential zone benefits depending on your situation. The below table summarizes the major categories of benefits. So far, new tariffs announced are requiring that affected products enter into the FTZ under privileged-foreign status, so those products will not be able to benefit from the inverted tariff benefit. It’s important to recognize that new information is being released and clarified daily, always verify potential benefits based on your unique fact pattern with a qualified trade attorney or customs broker!