Exploring the Benefits of Free Trade Zones for Tariff Reduction Strategies

According to a recent publication by QAD Inc., navigating the complex landscape of tariffs is just one of the many advantages that foreign trade zones (FTZs) offer, alongside duty deferral. Maddi Krieger, an FTZ solution engineer at the company, highlights how these zones can substantially impact businesses.

Krieger points out that the implications of tariffs differ when comparing FTZs to bonded warehouses.“Businesses are eager to explore ways to lessen their tariff burdens, and they often weigh these two options,” she explains. “In an FTZ, you don’t pay duties upfront; goods arrive directly at your facility and duties are only due when they exit. On the other hand, while bonded warehouses operate similarly, they lack versatility since you can’t mix different types of merchandise.”

She emphasizes that space in warehouses is often limited and efficiency is key: “We can’t afford to isolate certain products or create barriers within our storage areas. Plus, there’s a five-year limit on how long goods can stay in a bonded warehouse before needing removal.”

In contrast, Krieger notes that items stored in an FTZ can remain indefinitely: “While there may be some costs later on, having the freedom to store and mix products as needed is invaluable.”

With tariffs constantly shifting—sometimes daily—a bonded warehouse might suit those who need rapid turnover for their inventory.Though, many companies are leaning towards FTZs for more sustainable solutions amid this fluctuating tariff climate. As Krieger puts it: “Businesses worry about passing costs onto consumers; thus keeping inventory longer in these facilities could indeed help manage those tariff impacts.”