In today’s unpredictable trade environment, with tariffs spiking and global supply chains under pressure, businesses are scrambling to protect their bottom lines. If you’re a company in Southern Arizona, there is a powerful tool you might be overlooking: the Foreign-Trade Zone (FTZ). This program can help you mitigate the risk of rising tariffs, cut costs, and stay competitive. Let’s dive into what FTZs are and why they’re a game-changer for Southern Arizona businesses in today’s tariff-afflicted market.

What Is a Foreign Trade Zone?

A foreign-trade zone is a designated location in the United States where companies can utilize special procedures that encourage U.S. activity and value-added production, competing with foreign alternatives, by allowing delayed or reduced duty payments on imported merchandise, as well as other benefits.

A site that has been granted zone status may not be used for zone activity until the site has been separately approved for FTZ activation by local U.S. Customs and Border Protection (CBP) officials, and the zone activity remains under the supervision of CBP. FTZ sites and facilities remain within the jurisdiction of local, state or federal governments or agencies.

From the standpoint of tariffs, the U.S. Customs and Border Protection (CBP) treats FTZs as if they were outside of the United States. According to the CBP, almost any legal merchandise, foreign or domestic, can enter an FTZ. Duties only kick in when goods enter U.S. commerce. Placing merchandise subject to a quota into an FTZ does not circumvent applicable quotas. Even so, such products or components may remain there until the quota is lifted. There are a few exceptions, so be sure to check the CBP website for details. 

Key Benefits in a Tariff-Afflicted Market

US Congress created FTZs in 1934 to mitigate economic damage caused by the Smoot Hawley Tariffs, and they are just as relevant today. With recent tariff hikes — 25% on goods from Canada and Mexico or up to 145% on Chinese imports — businesses face skyrocketing costs. FTZs offer a way to fight back. Here’s how they deliver value in a tariff-weary world:

• Duty Deferral or Elimination — Companies don’t pay tariffs until goods enter U.S. commerce — or not at all if the goods are re-exported. This is huge for Southern Arizona companies like Intel or Honeywell Aerospace, who can hold off on duties for high-tariff components and free up cash flow. 
• Supply Chain Flexibility – FTZs allow companies to hold inventory without immediate duty payments, providing flexibility to respond to fluctuating demand or overnight trade policy shifts.  Southern Arizona’s logistics hubs, like the Port of Tucson, make this even easier, enabling just-in-time inventory practices.
• Reduced Processing Costs – FTZs allow companies to consolidate multiple shipments under one customs entry and reduce merchandise processing fees (MPFs). For a company handling 10 weekly shipments of $150,000 each, that’s a potential savings of more than $225,000 a year. Fewer entries also mean less paperwork and faster clearances.
• Protection Against Future Tariff Suprises — In a time when tariff rates and policies can change with little warning, FTZ’s offer a financial shield.  Use them to store goods duty-free and wait out policy shifts or re-export to avoid duties altogether.
• Southern Arizona: The Perfect FTZ Hub — Southern Arizona is uniquely positioned to maximize FTZ benefits, thanks to its location, industries, and infrastructure. Here’s why:
  • Prime Location for Cross-Border Trade: With the Nogales port of entry and proximity to Mexico, Southern Arizona is a USMCA trade powerhouse. Companies like Avnet or Microchip Technology can leverage FTZs to streamline imports and exports, dodging duties on goods headed south.
  • Tax Breaks: The State of Arizona allows for a property tax reclassification in an activated FTZ. Any property in Pima County can be designated as an FTZ but will need to negotiate with the taxing entities on a property tax abatement. 
  • Industry Powerhouse: Southern Arizona’s aerospace, defense, optics, medical devices, and automotive sectors thrive with FTZs. For instance, Intel’s Chandler FTZ supports 10,000 jobs and $50 million in local investments, while companies like Orbital Sciences use FTZs to manage high-volume imports efficiently.
  • Logistics Advantage: The Port of Tucson and Nogales streamline cross-border logistics, cutting delays and costs. FTZs enable faster customs processing, perfect for just-in-time operations.

Ready to Explore FTZs? They are more than a cost-saving tactic — they’re a strategic edge for Southern Arizona businesses navigating today’s tariff chaos. From duty deferral to tax breaks and streamlined logistics, FTZs offer a path to stability and growth. Don’t let tariffs hold you back — take control with an FTZ today! Contact us to learn about the FTZ application process and how to get your facility approved in Southern Arizona. Call (520) 299-3400 or email  info@cretucson.com.