Foreign trade zone (FTZ)
Foreign Trade Zones, or FTZs, are specifically recognized in the United States as locations in which products are made available under conditions which allow local industries to remain competitive in the midst of international trade. This may include certain customs duties exemptions and lower taxes. These areas are commonly located within the territory of or close to customs ports. FTZs are supervised by the United States Customs Service.
FTZs were mainly created for the benefit of U.S companies and plants which engage in international trade. Products which are produced in such factories are exempted from duties. Such payments are deferred until the point at which duty-free products exit the FTZ and are then made available to the U.S. market.
By setting up FTZs, the U.S. Department of Commerce as well as the U.S. Department of Treasury are able to ensure that local industries are not put at a disadvantage despite the benefits on customs which are afforded to foreign companies that bring their products into the United States. As such, companies have much to gain from positioning their plants within FTZs. While actual production of goods within FTZs is subject to stricter regulation and requires certain permits, it is possible. At the same time, a host of other functions may be performed within an FTZ. For instance, since storage costs are much lower and storage itself not subject to strict limits, businesses can enjoy bigger savings. They may also decide to assemble, sort, or repack items for more efficient distribution in order to maximize the benefits provided by FTZs.