U.S. Foreign-Trade Zones in 2025: How new tariffs and proclamations are changing the playbook

By Melissa Irmen, Director of Advocacy & Strategic Relations, NAFTZ

U.S. Foreign-Trade Zones (FTZ) have been part of the U.S. trade toolkit since 1934. Conceptually simple, but operationally powerful, an FTZ is a secure area under U.S. Customs and Border Protection (CBP) supervision that’s treated as outside the customs territory for tariff purposes.

Companies admit inputs, both foreign and domestically sourced, stage or manufacture goods, and decide later whether, how, and when to enter merchandise into U.S. commerce—or to export it outright.

That timing flexibility is the core of the program’s value proposition; and it still matters, even as new executive actions and tariff frameworks have narrowed certain traditional advantages.

What the FTZ program delivers    

1. Cash-flow relief via duty deferral: Duties are paid only when merchandise leaves a U.S. FTZ for consumption in the U.S. Inventory that sits, gets destroyed, or is ultimately exported does not trigger customs duty outlays.

For large importers, that deferral until the product is sold can translate into significant working-capital benefits. This is especially true for U.S. manufacturers that may require inputs early in the production process and have long lead-times for delivery of their products.

2. Duty exemption on exports: Duties are only assessed once goods enter the U.S. market. If goods are exported directly from the zone, no U.S. customs duties are owed. This is one of the program’s strongest advantages for companies engaged in global trade.

Businesses that import components can assemble or manufacture within a U.S. FTZ and then export their finished products to countries other than Canada or Mexico without paying duties. This not only lowers production costs, but also enhances the international competitiveness of U.S.-based operations.

By eliminating duties on goods that never enter U.S. commerce, U.S. FTZs encourage companies to use the U.S. as a base for global supply chains and distribution, driving export growth and supporting domestic jobs in logistics, production, and related services.

3. Management of start-up costs: U.S. FTZs also provide significant advantages for companies establishing new production facilities, particularly when the start-up requires importing expensive machinery and equipment.

Normally, duties on imported machinery would add substantial upfront costs before a facility even begins operations, creating a financial burden during the critical launch phase. By using a U.S. FTZ, however, companies can defer these duties until the production line becomes fully operational and the equipment is placed into use.

This deferral eases cash flow pressures, allows firms to allocate resources more efficiently toward hiring, training, and facility development—and ultimately helps businesses bring new U.S. manufacturing capacity online more smoothly.

4. Operational efficiencies: CBP allows streamlined procedures such as weekly entry filing (a single entry covering multiple shipments in a week) and direct delivery to zones, cutting fees and administrative friction. These mechanics routinely generate tangible savings.

5. Inverted tariff benefit: In ordinary times, manufacturers could elect to pay the duty rate of the finished article when lower than individual rates of components if the merchandise shipped from the FTZ as a finished good.

That option remains part of the statutory program, though, as discussed below, recent presidential actions have forced “privileged foreign” treatment on broad categories of imports, limiting the ability to reclassify to a lower finished-good rate for those items.

6. Scale and impact: U.S. FTZ use is not a niche phenomenon. In 2023, the latest data available, more than 550,000 U.S. workers were employed in 1,300-plus active FTZ operations.

That same year, zones handled nearly $949 billion in combined foreign and domestic merchandise and exported roughly $149 billion, accounting for 7.3% of total U.S. goods exports in 2023. Users span energy, pharma, autos, electronics, machinery, chemicals, and metals—evidence that the program supports both manufacturing and distribution at scale.

The 2025 policy backdrop: What changed—and why it matters inside a U.S. FTZ

The last eight months have brought overlapping trade actions with direct implications for U.S.  strategy. Three stand out:

            1. Reciprocal/global tariff frameworks

            2. Increases in Section 232 steel and aluminum measures

            3. The end of duty-free “de minimis” treatment for most low-value shipments.

Each intersects with U.S. FTZs in distinct ways.

Reciprocal tariffs and ‘privileged foreign’ status requirements: In April 2025, the White House issued an executive order imposing a 10% global “reciprocal” tariff and additional country-specific duties.

Critically for U.S. FTZ users, the order directed that covered articles admitted into FTZs on or after April 9, 2025, must be placed in privileged foreign (PF) status—locking in the tariff classification and rate that applied at the time of admission, regardless of subsequent manufacturing in the zone or future tariff actions while the goods are in the zone.

The practical effect: where a lower “finished-good” tariff classification used to be attainable by performing production in the U.S. FTZ, most products now lose that possibility if they fall under the reciprocal tariff scope.

The U.S. FTZ still defers duty and preserves other logistics efficiencies, but “tariff inversion” savings are curtailed for those products.

Section 232 steel/aluminum: Higher rates and broader scope: In June 2025, the administration increased and broadened Section 232 tariffs on steel and aluminum articles and derivatives, citing national security rationales. Trade advisories and logistics bulletins since then have noted expansions to cover derivative products and clarified how rates apply.

For U.S. FTZs, these duties are paid when merchandise is entered for U.S. consumption, but at the rate in effect when the goods were brought into the U.S. FTZ. And, in many cases, PF status removes the ability to mitigate them through classification as a finished article.

The FTZ still defers the duty clock and offers weekly entry and other compliance advantages, but companies should not expect Section 232 liabilities to disappear simply because goods pass through a zone. Still, most goods exported from the U.S. FTZ are not subject to duties, including Section 232 tariffs.

The end of de minimis (Section 321) and why U.S. FTZs are on e-commerce roadmaps: As of Aug. 29, 2025, the administration ended duty-free de minimis treatment for most small-value commercial shipments (previously up to $800). The shift has already caused carriers and retailers to adjust, and CBP has publicized enforcement measures to be taken.

While this change is not an FTZ policy per se, its market impact is pushing more cross-border e-commerce import flows toward U.S. FTZs so merchants can at least defer duties until a sale occurs, file weekly entries, and centralize compliance.

De minimis once allowed many brands to bypass traditional customs entries entirely; now, U.S. FTZs are one of the few scalable ways to manage the newly unavoidable duty and processing load.

Benefits that still hold up in 2025

Despite new constraints, the core economics of FTZ participation remain attractive in many scenarios:

            Inventory and cash management: Duty deferral is not trivial, especially now. For U.S. importers with long dwell times, seasonal builds, or unpredictable demand, delaying duty outlays until goods are actually sold can improve liquidity and reduce carrying costs.

            Exports and returns flows: Duties on foreign inputs are not owed on most direct exports from a U.S. FTZ, and returns can be handled in the zone without immediately triggering duties. That flexibility matters for reverse logistics, warranty triage, and remanufacturing programs.

            Compliance control: Zones operate under CBP supervision with inventory control and recordkeeping requirements. For companies grappling with layered Chapter 99 trade remedies, forced-labor holds, or sanctions screening, the U.S. FTZ environment can concentrate controls and documentation in one compliant hub.

To participate in the U.S. FTZ program, companies may either apply to the U.S. Foreign-Trade Zone Board to designate their own facility, which is then activated with U.S. CBP approval, or operate within an already-activated public zone managed by a third-party operator.

Activating a private site gives a company direct oversight of its zone procedures, inventory, and compliance responsibilities, which can be ideal for larger manufacturers or distributors with high trade volumes.

On the other hand, smaller or mid-sized businesses often choose to use an existing public warehouse or third-party U.S. FTZ facility, allowing them to access the same duty-saving benefits without the administrative burden of managing their own activation. This flexibility ensures that firms of all sizes can take advantage of the program.

Bottom line

FTZs are not a loophole—and never have been. They’re a compliance-intensive framework that Congress designed to support U.S. jobs and investment while maintaining customs control.

The 2025 wave of tariff policies—reciprocal duties, higher Section 232 rates, and the end of de minimis—has changed the U.S. importing process, and U.S. FTZs offer advantages while companies assess their tariff impacts. The central pillars of duty deferral, export duty exemption, and operational efficiency remain intact and, for many importers, more valuable than ever.

If you’re already in a U.S. FTZ, the task is to refresh your economic model with today’s PF status requirements and trade-remedy assumptions, tighten inventory/accounting controls, and look for savings in process (weekly entry, brokerage consolidation), not only in rates.

If you’re evaluating a U.S. FTZ for the first time—especially if you run high-volume, low-margin e-commerce or export a meaningful share of output—the program can deliver durable benefits in a policy environment where other options have narrowed.

The U.S. FTZ program was created with U.S. jobs in mind and has flexed with the rules of the day. Now, we simply asks operators to use that flexibility with sharper discipline.