In many ways, FTZs seem to be having a real moment over the past few months. This shifting terrain is a signal of increasing fear from U.S. importers and manufacturers over the protracted trade war launched by the Trump administration. FTZs allow companies to keep inventory of finished goods awaiting distribution without being liable for trade duties. Together, this configuration enables a clever approach to help businesses better react to changing tariffs.
Congress established the Foreign Trade Zone (FTZ) program in the 1930s as an incentive for domestic investment. Its aim was to make the U.S. economy more competitive. In addition, it has manufactured millions of high-quality, middle-class jobs. Today, it supports over 550,000 American jobs in all 50 states and Puerto Rico. The program covers a shark tank-lengthy list of industries and sectors, offering a major second line of defense for businesses against the pitfalls of global trade.
It’s no coincidence that the recent uptick in membership within FTZs has occurred alongside increased media attention focused on tariffs. While tariffs are often in the news, businesses show increasing interest in the various programs that can help them offset their effects. Firms of all sizes are doing a much deeper dive on their import activities. Importantly, they typically choose to take advantage of a Foreign-Trade Zone (FTZ) less by the industry, but more by the size of these operations.
Traditionally, consumer goods and retail, automotive, aerospace and electronics have been the major industry users of FTZs. What’s changed Though the global political debate around trade has made many businesses more cautious, a wider range of industries are looking into these zones. Between the 2024 presidential election and the beginning of Trump’s trade war, company interest in Foreign Trade Zones more than doubled. This huge uptick is a testament to their increasing interest in exploring FTZ opportunities.
Membership numbers have soared to unprecedented levels. The National Association of Foreign Trade Zones has said it has seen an increase in registrations. The response Companies have already expressed robust interest in learning to chart a course through these tariff storms.
“Any time tariffs are in the news, we see an increase in interest in all programs that help U.S. companies mitigate the impact,” said Jeffrey J. Tafel.
The current trade war has forced many companies to rethink their logistics plans. Both durable goods manufacturing orders and transoceanic freight vessel sailings from Asia have recently dropped sharply. This troubling trend reflects that many companies have decided to stop moving forward with shipments while they figure out their path forward. In order to address these unknowns, businesses are increasingly turning to FTZs. This approach will let them defer duty payments while they figure out how they’re going to deal with their imported goods.
“With tariff changes happening so quickly, there are companies that are looking for FTZ storage space in order to defer the duties until they are able to decide how they want to proceed with the merchandise, much of which was purchased before the tariffs were known,” Tafel added.
For all their benefits, creating an FTZ does come with its difficulties. It can be a very costly process. You’ll need to spend on pro services just to get through the setup, not to mention hiring trained staff and setting up dedicated IT systems to manage the zone once it starts operations. Jackson Wood emphasized this point, stating that “a year ago, an FTZ was a nonstarter because of the investment a company would have to make.”
With the introduction of new tariffs, businesses are re-assessing their financial investments. Wood noted that “now they are crunching the numbers to see if it makes financial sense, and for some it does.” This cost-conscious stance highlights an enormous change in the way businesses are looking at FTZs, especially with the growing uncertainty of tariffs.
Beyond overall membership growth, there’s increased interest in FTZ grantees. The Foreign-Trade Zones Board, an agency of the Department of Commerce, authorizes these effectively unlimited entities to establish, operate, and maintain foreign-trade zones. This authorization significantly improves the scope and use of the program.
Chelsea Pavona Gardner pointed out that “recent tariff changes have made FTZs more appealing, as other duty reduction or recovery options, like duty drawback, are not eligible for the new tariffs.” This, combined with importers facing new tariffs, has made FTZs an even more appealing option.