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The Economic Impact of U.S. Foreign Trade Zones

by Mary Rooney | Jun 06, 2023

The United States International Trade Commission (USITC) released its final report on the U.S. Foreign-Trade Zone (FTZ) program and the impact of similar programs in Canada and Mexico on employment and cost-competitiveness on firms operating within U.S. FTZs. 

The USITC investigation, “Foreign Trade Zones (FTZs): Effects of FTZ Policies and Practices on U.S. Firms Operating in U.S. FTZs and under Similar Programs in Canada and Mexico,” was requested by the U.S. Trade Representative in December 2021 and released on May 15, 2023.  

To aid in the investigation, the USITC issued a questionnaire to companies producing in U.S. FTZs and used the results in its analysis. The volume of research and types of data collected around U.S. FTZs was unprecedented.

Highlights of the study findings include:

  • U.S. FTZs improve cost competitiveness: Primarily through duty reduction on shipments that make customs entry in the United States and duty exemption on direct export shipments. Firms producing in FTZs experienced duty cost savings of $1.2 billion in 2021 using these two features of the U.S. program.

  • FTZs drive U.S. employment and investment: According to the study, “U.S. FTZs may also have indirect impacts on U.S. firms that operate outside FTZs that supply goods or services to firms producing in U.S. FTZs. If FTZs incentivize the establishment or expansion of major manufacturing facilities, such as automotive assembly plants, supplier firms may cluster around those facilities and create additional employment and economic development within the region.”

  • “Indirect export shipments” is a missed opportunity for duty savings: This happens when shipments with foreign goods enter the U.S. customs territory for consumption before being sent to foreign markets.

  • Productions vs. Distribution in U.S. FTZs: Warehousing and distribution operations make up the majority of FTZ participating firms (90%). Production operations account for the majority of FTZ employment (80%).

Read the full USITC report on U.S. FTZs

Learn about the Greater Kansas City Foreign Trade Zone.

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