What is a Foreign-Trade Zone (FTZ) Warehouse? 

Retailers and brands that import goods into the US face complex and costly customs and duty requirements in order to store and sell imported inventories. This can create cash flow issues as well as reducing overall logistics flexibility across a retailer’s operations. 

Additionally, US tariff policies are evolving, including the revoking of a key de minimis tax exemption as of August 2025. These changes are rewiring buying behavior and forcing retailers to seek new ways to navigate policy changes and increases in import costs.  

One option that many retailers are considering: Foreign-Trade Zone warehouses. 

Let’s dive into the definition of Foreign-Trade Zone warehouses, how they work, and how retailers benefit from leveraging them for US and international eCommerce. 

A Foreign-Trade Zone (FTZ) warehouse is a secure, designated area in the US that exists outside of US customs territory. It is under US Customs and Border Protection (CBP) supervision. This lets retailers import and hold inventory in the US without paying applicable duties when the goods enter the country. Instead, the associated duties are paid after the inventory is sold. Retailers can use FTZs strategically to manufacture, store, repackage, and inspect goods before paying associated duties. They only pay when the inventory is sold within the US market.  

Typically, FTZ warehouse facilities are located near ports, industrial hubs, or airports where large numbers of goods are imported. This reduces the time, resources, and associated costs required to import, ship, and store inventories. 

The authority to create Foreign-Trade Zones was established under the US Foreign-Trade Zones Act of 1934 and is administered by the Foreign-Trade Zones Board overseen by the Department of Commerce. The Act is administered via two sets of regulations: FTZ Regulations and CBP Regulations, with CBP supervising all US-based FTZ facilities. 

Retailers import goods and ship them to an FTZ warehouse, where they exist in a “duty suspension” state legally outside of customs territory. Shipments will arrive under CBP supervision, but they do not incur duties. Once in an FTZ warehouse, retailers maintain control over inventories while retaining the flexibility created by not having to pay duties up front. 

A customs bonded warehouse is a government approved and licensed warehouse where imported goods can legally be stored for up to five years with duties suspended. Imports enter in-bond under CBP supervision.  

Importantly, retailers cannot distribute or fulfill goods out of a bonded warehouse, whereas they can sell, distribute, and fulfill orders out of an FTZ warehouse. And compared to a bonded warehouse, where goods can only be stored for five years, retailers can store goods indefinitely without requiring customs entry or duty payment. 

Retailers should consider an FTZ warehouse over a bonded warehouse if: 

Bonded warehouses are best for seasonal imports of high tariff goods but are not suitable for complex manufacturing, distribution, or fulfillment operations.  

Rising tariffs and changes to de minimis mean eCommerce brands importing goods into the US need new strategies to remain competitive. An FTZ warehouse offering helps brands stay flexible and efficient while delivering real savings when it matters most.  

With an FTZ warehouse, retailers can: 

If a retailer intends to operate an FTZ warehouse, they will need to work within strict federal guidelines via the Foreign-Trade Zones Board and US Customs and Border Protection. They will need to legally establish and then activate operations at the warehouse. This requires a detailed legal application, proposal indicating public benefit, operating blueprints, security details, financial information, and support letters from the local community. Typically, the process requires 10-12 months for environmental assessments, internal reviews, and relevant public hearings. Once approved, the CBP will activate the site over another 3-6 months.  

It should be noted that setting up and managing an FTZ warehouse requires significant capital investment, as well as in-depth knowledge of the regulation and compliance requirements needed to activate and manage the site. 

Retailers must maintain certain security measures when managing an FTZ warehouse. The facility will require fencing, surveillance, alarm systems, and controlled access. CBP can conduct both scheduled and surprise inspections. 

Additionally, all personnel will require background checks, as well as specific training and drug testing. 

Retailers and brands must maintain precise inventory management within an FTZ warehouse. Customs and Border Protection require real-time visibility across goods to determine origin and current status. Brands will need to leverage a modern warehouse management system (WMS) to manage inventories and provide the necessary documentation to officials. 

While retailers can set up their own FTZ warehouses, they can also work with third-party logistics (3PL) providers to simplify the entire import and fulfillment process. For many retailers, this option is the most optimal, since it lets them focus on core competencies and outsource the complex process of setting up and managing their FTZ warehouses. 

The benefits of working with a 3PL partner include: 

Goods can remain in an FTZ warehouse indefinitely, unlike the five-year limit imposed on bonded warehouses. 

Retailers can work with third-party logistics (3PL) providers to simplify the entire FTZ warehouse import and fulfillment process. For many retailers, this option is the most optimal, since it lets them focus on core competencies and outsource the complex process of setting up and managing their FTZ warehouses. Brands can research and evaluate trusted 3PLs online, via an RFP process, through referral, or by connecting directly with potential partners. 

A third-party logistics (3PL) provider is a warehousing, distribution, and fulfillment partner offering services designed to help growing retailers store and transport their inventories. A Foreign-Trade Zone (FTZ) warehouse is a secure, designated area in the US that exists outside of US customs territory. 

Some 3PLs manage FTZ warehouses as part of their solution offerings. For example, Radial offers FTZ warehouse services. 

If a retailer intends to operate an FTZ warehouse, they will need to work within strict federal guidelines via the Foreign-Trade Zones Board and US Customs and Border Protection. They will need to legally establish and then activate operations at the warehouse. This requires a detailed legal application, proposal indicating public benefit, operating blueprints, security details, financial information, and support letters from the local community. Typically, the process requires 10-12 months for environmental assessments, internal reviews, and relevant public hearings. Once approved, the CBP will activate the site over another 3-6 months. 

Retailers must maintain certain security measures when managing an FTZ warehouse. The facility will require fencing, surveillance, alarm systems, and controlled access. CBP can conduct both scheduled and surprise inspections. 

Additionally, all personnel will require background checks, as well as specific training and drug testing.