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A Brief Background of the Foreign-Trade Zones Program


By Greg Jones


The Foreign-Trade Zones program was created in 1934 in an attempt to mitigate some of the destructive effects of the 1930 Smoot-Hawley Tariffs. It was intended to “expedite and encourage foreign commerce” in the United States by designating certain geographic areas as Foreign-Trade Zones, in or adjacent to Customs Ports of Entry, and under the oversight of the U.S. Bureau of Customs and Border Protection. Commercial merchandise would be treated, for Customs purposes, as though it were outside the commerce of the United States. Since 1986, regulatory oversight for FTZ sites has been conducted on an audit-inspection basis.

The FTZ program lowers the costs of U.S.-based operations engaged in international trade by allowing them to store, repackage, repair, manipulate, use in manufacturing or processing foreign merchandise in a Zone, free of tariffs and ad valorem taxes while the merchandise remains in the Zone. The result is the creation and retention of U.S.-based economic activity that results from those operations.

In a General-Purpose Zone, any number of firms may operate, limited only by the Zone’s physical limitations. Subzones are single firm sites designated for a special purpose (typically manufacturing) when the operation cannot be accommodated within the General-Purpose Zone project serving the area.

The Foreign-Trade Zones program offers duty exemption on re-exports, relief from “inverted tariffs,” improved logistics, cash flow through duty deferral, no duty on value added, Zone-to-Zone transfers, no duty on damaged or nonconforming items, and duty avoidance on government and military sales. Due to the changing global trade environment, use of the program has increased phenomenally over the last thirty-five years. Companies use it to improve their bottom line, and communities use it as part of their industrial recruitment and retention strategies.

Jones began working in the FTZ program in 1986, and has been an active member in the National Association of Foreign Trade Zones (NAFTZ) since 1987. He served as president of the NAFTZ from 1993 to 1995, and was designated as an Honorary Life Member in 2000. The Foreign-Trade Zone Corporation ( is a service provider offering FTZ cost-benefit analyses, FTZ Board applications, training, assistance in designing, creating and managing Zone projects, and its SmartZone® Foreign-Trade Zone management software (


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