Tariffs have long been a part of global trade, but now, for many importers, they’re a moving target that can erode margins overnight. That’s why more businesses are seeking strategic ways to control costs, including Foreign Trade Zones (FTZs) and bonded warehouses.
Sometimes people see FTZs as loopholes, but they are legitimate and strategic tools for managing costs in a compliant way and improving flexibility. At Source Logistics, we operate both FTZ and bonded warehouse facilities across the U.S. Our 425,000-square-foot Laredo facility, for example, recently gained FTZ status to help importers manage tariff volatility more effectively.
We’ve seen firsthand how these models can help companies turn tariff volatility into a competitive advantage when used in the right way.
What is an FTZ?
An FTZ is a secure area located near a U.S. port of entry but considered technically outside U.S. customs territory for tariff purposes. That means businesses can import goods, store, assemble, or repackage them, and only pay import duties when the goods actually enter the U.S. market. If businesses decide to re-export those goods, they never pay U.S. tariffs at all.
Businesses can bring components into FTZs, and can choose to pay duty on the components or the finished item, whichever rate is lower. This is known as the inverted tariff benefit, and is often overlooked, but it can make a difference for businesses doing light assembly or packaging within the U.S.
Setting up an FTZ isn’t simple. It requires licencing, audits, background checks, and approval from local government and U.S. Customs and Border Protection (CBP). When the scale is right, however, the savings and operational control more than justify the investment.
What’s the difference between FTZs and bonded warehouses?
FTZs and bonded warehouses share some similarities, but they serve different needs.
A bonded warehouse lets businesses import goods and defer paying duties for up to five years. It’s ideal for finished products like electronics or packaging materials, which may be stored before distribution. They tend to suit companies importing finished goods that want to manage timing and cash flow around duties.
An FTZ offers far greater flexibility. Businesses can hold goods indefinitely, carry out light manufacturing or assembly, and benefit from inverted tariffs. FTZs are best for businesses importing parts or materials that will be assembled or modified before sale.
> Real-world example 1: A furniture retailer with a cross-border strategy
One of our customers is a large furniture retailer that manufactures in Mexico and distributes across North America. Using our FTZ in Laredo, Texas, they import furniture components and finished items into the U.S.
Here’s how it works: Furniture from Mexico enters the FTZ and is stored duty-free. When items are shipped into the U.S. market, duties are paid at that point. Goods re-exported to Canada never incur U.S. tariffs at all.
This flexibility gives the retailer total control over when and where duties apply, helping them manage costs, cash flow, and demand fluctuations across regions.
> Real-world example 2: Hedging against tariffs with a bonded warehouse
Another customer is an aluminum can manufacturer importing raw cans from Asia. Tariffs on aluminum have fluctuated sharply over the past few years, making budgeting and pricing difficult.
We helped this customer establish a bonded warehouse near the Port of New York/New Jersey. Instead of clearing shipments immediately and paying duties upfront, they store inventory under bond and clear it gradually based on production schedules.
That approach allows them to delay duty payments for up to five years, align customs clearance with manufacturing demand, and adjust shipments if tariffs change.
Essentially, they’ve created a tariff hedge, allowing flexibility to adapt to policy swings without disrupting production.
When does an FTZ make sense?
FTZs require planning, setup costs, and ongoing compliance, so they’re not right for every business. But when the volume and value of goods are high, they can deliver a strong return.
Industries that benefit most include automotive and electronics, where components come from multiple countries; pharmaceuticals and healthcare, with high-value imported materials; and retail and consumer goods brands managing large volumes across borders.
As a rule of thumb, if tariff exposure is substantial and a business is holding inventory for more than a few weeks, it’s worth exploring whether an FTZ or bonded warehouse could improve total landed cost.
Transportation typically makes up around ten times the cost of warehousing, so where and how inventory is stored can dramatically affect overall economics.
The future of tariff strategy
There are roughly 200 active FTZs in the U.S. today, and demand is growing as global trade patterns evolve. What was once seen as an obscure customs program is now becoming a serious resilience strategy.
FTZs and bonded warehousing can be daunting from the outside, but having the right partner on side can ease the process. At Source Logistics, we’re seeing more clients use FTZs and bonded warehouses not just for duty savings, but to simplify their operations, improve cash flow, and strengthen supply chain flexibility.
For importers navigating uncertain tariff environments, FTZs and bonded warehouses offer a clear way to regain control. They’re legitimate, government-regulated tools that reward good planning and strong logistics partnerships.
Contact us if you’re considering how these models could work for your business.