Foreign Trade Zones were created in the United States to provide special customs procedures to U.S. plants engaged in international trade-related activities. Duty-free treatment is accorded to items that are processed in foreign trade zones and then re-exported, and duty payment is deferred on items until they are brought out of the foreign trade zone for sale in the U.S. market. This helps to offset customs advantages available to overseas producers who compete with domestic industry. Foreign trade zones are considered to be outside of U.S. Customs territory for the purpose of customs duty payment. Therefore, goods entering foreign trade zones are not subject to customs tariffs until the goods leave the zone and formally enter the U.S. Customs territory. Merchandise that is shipped to foreign countries from foreign trade zones is exempt from duty payments. This provision is especially useful to firms that import components in order to manufacture finished products for export.
There is no time limit on goods stored inside a foreign trade zone and certain foreign and domestic merchandise held in those zones may be exempted from state and local inventory taxes. This allows firms to minimize their costs while their products are waiting to be shipped. In addition, quota restrictions are in some cases waived for items entering a foreign trade zone; however, the restrictions would apply if the items were to enter the U.S. market.
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