Friends,

I wanted to start with an encouraging update: Jeff recently shared that NAFTZ membership has reached 816 - a new record for this point in the year. This milestone speaks not only to the ongoing relevance of the FTZ program, especially in today’s tariff environment, but more importantly, to the outstanding efforts of so many—Jeff, Melissa, Victoria, Kris, and the Membership Committee, led by Tanna Zingula. Thank you all for your dedication and hard work.

While many of my recent monthly messages have focused on broader trends and major advocacy efforts, this month I’d like to take a different approach. I’m focusing on a narrower—but frequently asked about—topic. I hope you find the insights helpful!

FTZs vs. Bonded Warehouses

Over the past few months, we’ve received many questions about the differences between Foreign-Trade Zones (FTZs) and Bonded Warehouses. While both offer duty deferral benefits, they operate under distinct regulatory frameworks with important differences. Below are five key distinctions and considerations:

1. Tariff Treatment
FTZ and bonded warehouse admissions are subject to different tariff timing rules. For FTZs, goods subject to trade remedies or punitive tariffs must generally be admitted in Privileged Foreign (PF) status, meaning the applicable tariff rate is locked in at the time of PF designation. When the goods are later entered into U.S. commerce, the tariff due reflects that rate in effect on the date of PF-status election. In contrast, for bonded warehouses, duties are assessed based on the rate in effect at the time of withdrawal from the warehouse. Please note that there are exceptions (e.g., antidumping/countervailing duties) and the possibility of changes through future Executive Orders or regulatory updates.

2. Treatment of Domestic Merchandise
FTZs allow for the co-mingling of foreign and domestic merchandise within the activated area, offering greater operational flexibility. In bonded warehouses, domestic merchandise is generally not permitted, and co-mingling with foreign merchandise is prohibited. Additionally, CBP typically requires a secure, designated area (often a caged section) for storing goods in bonded warehouses. While CBP applies security standards to both environments, the infrastructure expectations for bonded warehouses are often much more stringent.

3. Storage and Operational Flexibility
Merchandise can be stored in an FTZ indefinitely. In contrast, goods in a bonded warehouse are limited to a maximum storage period of five years. Furthermore, bonded warehouse operations are often subject to stricter inventory handling requirements—CBP may not allow partial withdrawals or "pick and pack" operations, instead requiring the full quantity on the original bill of lading to be withdrawn at once.

4. Manufacturing and Other Program Benefits
With prior approval from the FTZ Board, companies may conduct manufacturing or production activities within an FTZ. Such activities are generally not permitted in bonded warehouses, except under limited exceptions. In addition to manufacturing-related advantages, FTZs also offer unique benefits not available through the bonded warehouse program, including weekly entry processing and potential exemptions from certain state and local taxes.

5. Where to Learn More
Both FTZs and bonded warehouses involve detailed regulatory requirements. This summary is not comprehensive, and we encourage you to consult the appropriate regulations and policy manuals:

• FTZs: 19 U.S.C. § 81, 15 CFR Part 400, 19 CFR Part 146, and the CBP FTZ Manual
• Bonded Warehouses: 19 CFR Part 144 and the CBP Bonded Warehouse Manual

On a personal note, I’m excited to share that I’ve recently started a new role as co-leader of the Trade & Customs practice at Kroll. My position on the Executive Committee and Board of Directors, as well as my overall commitment to NAFTZ (and all our FTZ community) remains unchanged. You can now reach me at my new email (james.grogan@kroll.com) or on my cell at 512-922-4697. Looking forward to seeing you all in Savannah!