FTZ Terms


ALTERATION – 1) A change in the boundaries of an activated zone or sub-zone; 2) Activation of a separate site of an already activated zone or sub-zone with the same operator of the same part; 3) The relocation of an already activated site with the same operator.

CONSTRUCTIVE TRANSFER – A legal fiction that permits acceptance of a customs entry for merchandise in a zone before its physical transfer to the customs territory.

CUSTOMS TERRITORY – The territory of the U.S. in which the general tariff laws of the U.S. apply. U.S. Customs territory includes the states, the District of Columbia and Puerto Rico minus any areas within the boundaries of Foreign Trade Zones.

DRAWBACK – Import duties or taxes repaid by a government, in whole or in part, when the imported goods are re-exported or used in the manufacture of exported goods.

FIRST IN-FIRST OUT (FIFO) – An accounting method based on the assumption that older stock is disposed of first. This requires merchandise to be fungible without regard to the source (e.g., foreign or domestic) and a perpetual inventory system that identifies the merchandise by a unique identifier number to distinguish the goods from all other goods.

FOREIGN-FIRST (FOFI) – An accounting method based on the assumption that foreign status merchandise is disposed of first. For example, if 100 domestic units and 100 foreign units are commingled in a zone, the first 100 units withdrawn would be identified as the foreign units.

FOREIGN TRADE ZONE – An isolated, enclosed and policed area operated as a public utility, in or adjacent to a port of entry, furnished with facilities for lading, unlading, handing, storing, manipulating, manufacturing and exhibiting goods and for reshipping them by land, water or air. Any merchandise, except that which is prohibited by law or other applicable regulations, may be brought into a zone without being subject to the customs laws of the United States and may be stored, exhibiting goods and for reshipping them by land, water or air. Any merchandise, except that which is prohibited by law or other applicable regulations, may be brought into a zone without being subject to the customs laws of the United States and may be stored, exhibited, manufactured, mixed or manipulated in any manner as provided by applicable laws and regulations. Merchandise is subject to customs duties if it is sent into customs territory from the zone. It may escape such duties if it is exported from or destroyed in the zone.

FOREIGN TRADE ZONES BOARD – Established to carry out the provisions of the Foreign Trade Zone Act, the board consists of the Secretary of Commerce, the Secretary of the treasury and the Secretary of the Army.

GRANTEE – A corporation to which the privilege of establishing, operating and maintaining a Foreign Trade Zone has been granted by the Foreign Trade Zones Board.

INVERTED TARIFF STRUCTURE – Imported parts are dutiable at higher rates than the finished product into which they are incorporated.

MANIPULATION – As defined in Section 562 of the Tariff Act, processing wherein merchandise is packed, unpacked, repacked, cleaned, sorted, graded or otherwise changed in condition. The precise distinction between manipulation and manufacturing is subject to interpretation and has a long history of case law.

MANUFACTURING – The FTZ Board has defined it as any process that results in a change in customs classification of the merchandise, and therefore, requires prior clearance from the Board pursuant to the manufacturing conditions in specific Foreign Trade Zone grants. The U.S. Customs Service determines what constitutes manufacturing on a case-by-case basis, distinguishing it from other operations such as manipulation, processing, production and blending.

MERCHANDISE – Includes goods, wares and chattels of every description, except prohibited merchandise, building materials, production equipment and supplies for use in operation of a zone.

OPERATOR – A corporation, partnership or person that operates a zone or sub-zone under the terms of an agreement with the grantee. A grantee may act as its own operator.

REACTIVATION – A resumption of the activated status of an entire area that was previously deactivated without any change in the operator or the area boundaries, as opposed to an alteration (boundaries are different) or an activation (operator is different).

SUB-ZONE – A special purpose zone established as part of a zone project for a limited purpose that cannot be accommodated within an existing zone.

USER – A person or firm using a zone for storage, handling or processing of merchandise. NOTE: An operator may authorize a user to maintain its own inventory system and manual: however, the operator remains responsible to customs for the system unless the user posts its own operator’s bond.

ZONE PROJECT – All of the zone and sub-zone sites under a single grantee, normally a single port of entry.

ZONE STATUS – The status of merchandise admitted to an FTZ, i.e., domestic (D), nonprivileged foreign (NPF), privileged foreign (PF), or zone restricted (ZR) status.


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