To offset the rising prices of tariffs and commerce struggle uncertainty, corporations are utilizing U.S. Customs-sanctioned international commerce zones (FTZs) and bonded warehouses to delay or cut back product taxes.
FTZs have a protracted historical past relationship again to a earlier interval of commerce battle, created in the course of the Nice Melancholy by Congress to encourage worldwide commerce and enhance exports at time when the Smoot-Hawley tariffs have been as excessive as 53%.
Corporations importing uncooked supplies, semi-finished, or parts from international international locations to an FTZ or bonded warehouse are basically in a tariff bubble, that means once they enter the U.S. they’re saved duty-free.
As soon as inside an FTZ, a product might be assembled or modified. Duties are solely collected after a product leaves the zone and enters U.S. commerce. Merchandise might 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 response to U.S. Customs.
For corporations caught within the crossfire of Trump’s commerce struggle, preserving money is king.
By delaying responsibility funds, “FTZs and bonded warehouses basically frees up an organization’s money move,” stated Jason Strickland, director of gross sales at logistics agency Givens. “There may be additionally the additional benefit that if a product is manufactured in an FTZ and is re-exported overseas, no responsibility funds are incurred in any respect.”
Givens Logistics, Chesapeake, Virginia, Might 2025.
Shawn Baldwin | CNBC
Earlier than the 2025 international commerce struggle, corporations that manufactured merchandise in an FTZ had what is called an “inverted tariff” profit. Meaning the corporate had the choice of paying a decrease responsibility fee 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. Based on the World Free Zones Group, FTZs have been additionally utilized by Pfizer whereas it was growing the Covid vaccine. This system enabled Pfizer to provide pictures with out incurring further duties on the medicine’ parts and retailer the vaccine till it obtained FDA approval.
However President Trump ended that rule by the use of current government 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 change into an enormous drawback, leading to thousands and thousands of {dollars} in further tariffs.
“Our product is mainly like baking a cake,” stated Helen Torkos, president of Regent Tek. “For those who’re lacking one ingredient, you’ll be able to’t make that cake. We can not 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 obtainable to us.”
With out the good thing about the FTZ inverted tariff, many corporations rapidly shifted to bonded warehouses. Strickland described the demand to CNBC as being by way of the roof.
Corporations can import merchandise in a bubble underneath a better tariff fee, and retailer with out paying duties. However not like 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 fee.
“On the finish of the day, the objective is to guard your money move,” Strickland stated. “You do not wish to usher in all of your items and spend your money move in opposition to tariffs that might not be right here in, , six weeks, six months, should you can defer till the market is able to devour these items. I feel that is a win-win.”
Watch the complete video above to study extra about these commerce struggle tariff hideouts.
