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Foreign Trade Zones

The Foreign Trade Zone (FTZ) Program was established by the U.S. Government in the 1930s to promote trade and commerce by reducing some of the costs and obstacles associated with U.S. trade laws. The FTZ program also provides incentives for companies to keep their manufacturing facilities in the U.S.

There are now 271 General Purpose FTZs in the U.S. 18 of which are in California. The Sacramento region’s FTZ is headquartered at the Port of Sacramento in West Sacramento. The FTZ also includes three subzones, which are operated by Gymboree Corp. in Dixon, Hewlett Packard in Roseville and Sacramento, and Ceronix Corp. in Auburn. The General Purpose FTZ includes the Port of Sacramento, the airport in Lincoln, and the airport in Chico.

FTZs provide the following significant advantages for Northern California importers: certain types of merchandise can be imported into the Zone without import duties; merchandise can be expedited through Customs; Zone users may store merchandise in an FTZ even if the goods are subject to quota restrictions; and Zone users may file only one Customs Entry application per week, rather than one per shipment. Given that companies outside the FTZ must pay a minimum processing fee of $25 on each entry, this represents a potentially large cost-savings for companies receiving multiple weekly shipments of high-value merchandise. According to Ceronix CEO Don Whitaker, his company benefits from all of the above-mentioned features of an FTZ. However, the main reason he applied for an FTZ subzone was to reap the benefits of the inverted tariff. His company imports display picture tubes from China and uses them to manufacture color video monitors for the gaming industry. By using an FTZ, he avoids paying a 15% duty on the imported components. The duty on color monitors is 0%. Therefore, the company’s final product is shipped out from the FTZ duty-free. Mr. Whitaker stated that if it weren’t for the advantages provided by the FTZ program, his company would have had to relocate its manufacturing to China. As it stands now, Ceronix is the only company in the U.S. that is manufacturing this type of commodity-level video monitors. Mr. Whitaker added, “I don’t know why more companies don’t use the Foreign Trade Zones!”

Visit the U.S. Department of Commerce website for a list of Foreign Trade Zones nearest you.