Foreign Trade Zones (FTZ), also called Free Duty Zones in some countries, are secured locations designated by the US Department of Commerce. FTZs are usually located near the Port of Entry (i.e., FTZ#271 is close to Chicago Port) and are considered outside the US customs territory. Both domestic and foreign companies operating within an FTZ are privileged to pay significantly less import tax and receive many other incentives.
The Foreign-Trade Act was passed in 1934. Since then foreign trade zones have become valuable assets for the American companies engaging in import and export business, as well as foreign companies seeking to enter the U.S. marketplace. According to the annual report released in 2019, there are 193 activated FTZ programs across the United States. FTZ#271 was one of the first FTZs approved by the United States Department of Commerce.
In general, merchandise imported into an FTZ benefits from simplified customs entry protocols and less/no import duties. Merchandise is subject to import duty and tax once it transfers from FTZ. Merchandise without entering the U.S. market is not subject to US import duty or other taxes.