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What Is a Foreign-Trade Zone (FTZ)?

3PL Glossary > Foreign-Trade Zone (FTZ)

Foreign-Trade Zone (FTZ) Definition | TLDR

Foreign-trade zone (FTZ) is a designated area within a country where imported goods can be stored, processed, or assembled without being subject to customs duties or taxes until they are exported or released into the domestic market.

Foreign-Trade Zone (FTZ) Meaning

A foreign-trade zone (FTZ) is a designated geographical area within a country that is treated as if it were outside the national customs territory for certain customs purposes. Also known as a free trade zone, a foreign trade zone is established to promote economic activity, attract investment, and facilitate international trade. The key feature of an FTZ is that it allows businesses within its boundaries to import, export, store, and process goods without going through standard customs procedures and without being subject to tariffs and duties until the goods leave the zone for the domestic market.

What Is an Example of a Foreign-Trade Zone?

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A foreign-trade zone (FTZ) is a designated geographical area within a country that is treated as if it were outside the national customs territory for certain customs purposes. Also known as a free trade zone, a foreign trade zone is established to promote economic activity, attract investment, and facilitate international trade. The key feature of an FTZ is that it allows businesses within its boundaries to import, export, store, and process goods without going through standard customs procedures and without being subject to tariffs and duties until the goods leave the zone for the domestic market.

Foreign-trade zones play a vital role in promoting international trade and attracting foreign investment. They offer a strategic advantage for companies involved in global supply chains by providing a controlled environment for processing goods before they enter the domestic market. The use of FTZs is common in various industries, including manufacturing, distribution, and logistics, and they contribute to the overall competitiveness of a country in the global marketplace.

FAQs

Yes. While there are certain criteria and regulations to meet, businesses of various sizes and industries can operate within a foreign-trade zone. Eligibility criteria may vary by country, but typically, businesses involved in international trade, manufacturing, and distribution can benefit from FTZ advantages.

No. While customs duties and taxes are often deferred or reduced within an FTZ, they are not automatically eliminated. The specific benefits depend on the country's regulations and the activities conducted within the zone. Certain processing or manufacturing activities may lead to duty elimination upon export.

Yes. Goods can remain in an FTZ indefinitely, allowing businesses to defer customs duties until the goods are officially imported into the domestic market. This flexibility is advantageous for businesses engaged in international trade and those requiring storage or value-added processes before entering the local market.

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