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International Trade

Foreign-Trade Zones Program

The Foreign-Trade Zones (FTZs) Program was authorized by Congress in 1934 (FTZ Act - 19 USC 81a-81u) and is used to help encourage value-added activity at U.S. facilities in competition with foreign alternatives by allowing delayed or reduced duty payments on foreign merchandise, as well as other savings. Foreign-Trade Zone No.153, established in San Diego, California on October 19, 1988 (pursuant to the Foreign-Trade Zones Board Order #394 and published in 53 Federal Register 41616), is administered by the City of San Diego as the Zone Grantee for the San Diego FTZ program.

Benefits of the Foreign-Trade Zones Program

In the global marketplace, many companies consider moving to foreign facilities to reduce costs. The benefits of the Foreign-Trade Zones Program may be the competitive advantage that companies need to keep their manufacturing or distribution operations in the United States. These include:

  • Duty Deferral - Delayed payment of duties on goods that enter the U.S. market
  • Duty Exemption - No duties on imported goods that are later re-exported
  • Inverted Tariff - Manufacturing-specific benefits – can include reduction of duties if a lower tariff rate applies to the finished product leaving the zone than the tariff rates that would have applied on the foreign components.
  • Logistical Benefits - Reductions in merchandise processing fees due to a single customs "entry" (pay one fee) per week rather than making multiple entries during the course of a week
  • Other Benefits - Elimination of duties on waste, scrap and rejected or defective parts

Other Advantages

  • Enhancing Competitiveness - By reducing costs, FTZs level the playing field and improve U.S. competitiveness. FTZs can help businesses reduce production, transaction, and logistics-related costs by lowering effective duty rates, allowing special entry procedures, and encouraging production closer to market. Reducing costs through FTZ use can lead to more competitive U.S. operations, thereby helping to maintain U.S. activity and jobs.
  • Creating/Retaining Jobs and Encouraging Investment - By helping local employers remain competitive, zones can contribute to maintaining or boosting employment opportunities. Also, lower FTZ-based production costs encourage increased investment in U.S. facilities.

About the Foreign-Trade Zones Program

  • Retail sales are prohibited within a zone site
  • The FTZ Act prohibits residence within a zone site
  • With the exception of formal customs entry procedures, all other local, state and federal laws and regulations apply (including labor and immigration laws)
  • FTZs remain under the direct supervision of U.S. Customs and Border Protection
  • FTZs are within the territory of the U.S. and merchandise stored in a FTZ is considered imported into the U.S. but exempt from U.S. Customs' tariffs.

How to participate in the Foreign-Trade Zones Program

A company begins the application process by contacting the Grantee (City of San Diego). After site approval by the FTZ Board and completion of the U.S. Customs and Border Protection application process which includes background investigations, the company can start FTZ operations upon activation by U.S. Customs.

Types of Companies Using the Foreign-Trade Zones Program

Large and small companies alike use the Foreign-Trade Zones Program: 70 percent of users are small businesses. These companies defer, reduce or eliminate U.S. Customs duties and fees. Such companies include importers, manufacturers, distributors, assemblers of products, and exporters of imported merchandise and/or products containing imported merchandise. Small companies without warehouse facilities can contract with an approved Foreign Trade Zone No. 153 third party logistics company. A company that does not import foreign products will not benefit from participating in the Foreign-Trade Zones Program.

Where are FTZ companies located ?

A company can apply for their facility to receive FTZ zone site designation at any location within the FTZ No. 153 Service Area. The Service Area includes all 18 cities within San Diego County and the south west corner of Riverside County.

Grantee Contact

Adrienne Turner, Foreign-Trade Zones Program Administrator, City of San Diego, Economic Development Department,1200 Third Ave., Suite 1400, San Diego, CA 92101 (619) 236-6364 or aturner@sandiego.gov

More Information

Other sources of information for the Foreign-Trade Zones Program include: