To offset the rising costs of tariffs and trade war uncertainty, corporations are utilizing U.S. Customs-sanctioned overseas commerce zones (FTZs) and bonded warehouses to delay or cut back product taxes.
FTZs have a protracted historical past courting again to a earlier interval of commerce battle, created through the Nice Despair by Congress to encourage worldwide commerce and increase exports at time when the Smoot-Hawley tariffs had been as excessive as 53%.
Corporations importing uncooked supplies, semi-finished, or parts from overseas international locations to an FTZ or bonded warehouse are basically in a tariff bubble, which means once they enter the U.S. they’re saved duty-free.
As soon as inside an FTZ, a product could be assembled or modified. Duties are solely collected after a product leaves the zone and enters U.S. commerce. Merchandise could be saved in an FTZ indefinitely. Bonded warehouses have a restrict of as much as 5 years.
There are FTZs in all 50 states and there are roughly 2,240 FTZs in all throughout the nation, in accordance with U.S. Customs.
For corporations caught within the crossfire of Trump’s commerce battle, preserving money is king.
By delaying obligation funds, “FTZs and bonded warehouses basically frees up an organization’s money circulation,” mentioned Jason Strickland, director of gross sales at logistics agency Givens. “There’s additionally the additional advantage that if a product is manufactured in an FTZ and is re-exported overseas, no obligation funds are incurred in any respect.”
Givens Logistics, Chesapeake, Virginia, Could 2025.
Shawn Baldwin | CNBC
Earlier than the 2025 international commerce battle, corporations that manufactured merchandise in an FTZ had what is named an “inverted tariff” profit. Meaning the corporate had the choice of paying a decrease obligation charge on the completed product versus paying the upper duties on the person parts introduced into the manufacturing course of.
Corporations which have operated inside FTZs embrace automakers Ford, GM and Chrysler, in addition to Common Electrical, Intel and Sony. In line with the World Free Zones Group, FTZs had been additionally utilized by Pfizer whereas it was growing the Covid vaccine. This system enabled Pfizer to provide photographs with out incurring further duties on the medication’ parts and retailer the vaccine till it acquired FDA approval.
However President Trump ended that rule by the use of latest govt orders, and for corporations like Regent Tek Industries, which manufactures liquid street markings utilized by street crews to make the traces on the nation’s roads, byways, and highways, that is turn into a giant downside, leading to thousands and thousands of {dollars} in further tariffs.
“Our product is principally like baking a cake,” mentioned Helen Torkos, president of Regent Tek. “In case you’re lacking one ingredient, you possibly can’t make that cake. We can’t supply all of our parts right here. We’re paying round 7% extra now as a result of the inverted tariff possibility is now not accessible to us.”
With out the advantage of the FTZ inverted tariff, many corporations rapidly shifted to bonded warehouses. Strickland described the demand to CNBC as being via the roof.
Corporations can import merchandise in a bubble beneath the next tariff charge, and retailer with out paying duties. However in contrast to the locking in of tariff charges on FTZs, if the tariff drops whereas a product is in a bonded warehouse, the corporate can launch their product and pay the decrease tariff charge.
“On the finish of the day, the aim is to guard your money circulation,” Strickland mentioned. “You do not need to herald all of your items and spend your money circulation towards tariffs that might not be right here in, you already know, six weeks, six months, for those who can defer till the market is able to eat these items. I feel that is a win-win.”
Watch the total video above to be taught extra about these commerce battle tariff hideouts.