Celebrating National Manufacturing Month: The Crucial Role of U.S. Foreign-Trade Zones

As we celebrate National Manufacturing Month, we want to recognize the significant role that U.S. Foreign-Trade Zones (FTZs) have played and continue to play in bolstering U.S. manufacturing. FTZs provide a dynamic opportunity for American manufacturers to enhance their international competitiveness by allowing them to defer or eliminate customs duties on imported production inputs, streamline their supply chains, and improve cash flow. In the sections below, I provide recent examples of the role manufacturers play in the U.S. FTZ program and the ways NAFTZ is working to promote those operations.

Recent Manufacturing Statistics

According to the latest FTZ Board annual report, 83% of total U.S. FTZ employment is tied to production operations, representing over 450,000 jobs in 2023. Of the $949 billion in FTZ merchandise received, 62% was destined for production operations. What’s even more striking is that 80% of the inputs that production FTZs utilize are sourced from U.S. domestic providers. This substantial proportion of domestic content emphasizes the program's focus on using local resources and inputs, indicating that the U.S. FTZ program is deeply rooted in maximizing domestic production and leveraging the strengths and capabilities of the U.S. market. These statistics effectively dispel any misperceptions about the program serving solely to avoid duties, highlighting its true essence as a driver of domestic economic growth and American job creation.

The 2023 USITC report on FTZ competitiveness highlighted many of these same trends in the manufacturing sector. Notably, the USITC reported that U.S. FTZ production operations have a positive "cluster" effect on economic development, emphasizing that the U.S. FTZ program can play a major "anchor" role in supporting new manufacturing investment. This "anchor" role leads to downstream economic benefits throughout a project’s supply chain, extending to a variety of suppliers, customers, and service providers.

U.S. FTZ Manufacturers Come from Diverse Sectors

A wide array of manufacturing sectors benefit from the U.S. FTZ program. Based on the FTZ Board annual report statistics, the top production sectors for 2023 included Pharmaceuticals, Vehicle Parts, Crude Oil/Petroleum Products, Consumer Electronics, and Machinery and Equipment. While these are the leading sectors, it is equally impressive that 28 distinct industry sectors are represented in the data, including Chemicals, Medical instruments, Food products, and Cosmetics.

These industries are harnessing the advantages of FTZs to innovate and remain competitive in a global market. The data indicates that companies operating within U.S. FTZs have shown remarkable resilience, adapting quickly to market changes and increasing their production capabilities. This adaptability is especially critical as manufacturers respond to shifts in consumer demand, tariff impacts, and global supply chain disruptions.

NAFTZ’s Advocacy Approach to Manufacturers

In alignment with our commitment to enhancing U.S. manufacturing, this year we established a dedicated Manufacturing Advocacy Working Group led by industry veteran Jason Ricketts of Nissan North America. This group is focused on promoting policies that strengthen the U.S. FTZ manufacturing sector, ensuring that FTZs remain a viable option for companies looking to optimize their production operations. No doubt that this group will play a pivotal role in helping us navigate ongoing parity challenges for U.S. FTZ manufacturers, such as USMCA restrictions and punitive tariff treatment.

A notable recent initiative is the letter sent by the NAFTZ during the public comment period for a recent production application, expressing support for U.S. FTZ production authority in the renewables sector. This initiative underscores the growing recognition of U.S. FTZs as a catalyst for innovation and sustainability in manufacturing. As the U.S. shifts toward cleaner energy solutions, FTZs can play a crucial role in supporting this transition by facilitating the import of materials and components needed for renewable energy technologies. I hope we will continue to lead the charge in advocating for increased U.S. FTZ usage in emerging technology sectors.

Looking Ahead

In light of recent trends in reshoring and nearshoring, the importance of U.S. FTZs cannot be overstated. As more manufacturers bring jobs and investments back to the U.S., FTZs should be leveraged to maximize efficiency and reduce costs. By prioritizing the U.S. FTZ program, we can enhance the competitiveness of U.S. manufacturing and ensure that our industries are well-positioned to meet future challenges. Embracing FTZs will be pivotal in realizing a robust, innovative, and sustainable manufacturing landscape in the United States.

So, you never thought you’d celebrate it—but Happy National Manufacturing Month! Be sure to thank your friends and colleagues for their contributions to the U.S. FTZ program.