What is a Foreign Trade Zone and What Does the Bond Cover?

Posted on: July 1st, 2013 • In Bond Types

A foreign-trade zone is a secured area under U.S. Customs’ supervision that is generally considered outside United States territory (for commerce purposes) upon activation. A foreign-trade zone is typically located in or near a U.S. Customs port of entry and falls under the authority of that port.

Foreign and domestic merchandise may be moved into foreign-trade zones for operations including storage, exhibition, assembly, manufacturing, and processing. All foreign-trade zone activity is subject to public interest review and is subject to the laws and regulations of the United States, as well as those of the states and communities in which they are located.

When a principal is operating a foreign-trade zone U.S. Customs will require the principal to obtain a Foreign Trade Zone bond, or activity 301-4. The bond amount for the bond can only be determined by U.S. Customs; however, it is usually not less than $50,000. Based on the various different types of foreign-trade zone operations, the principal must receive specific approval from the local port to act in this capacity and must contact Customs prior to submitting a bond application. Although our office is not involved with the application process between Customs and the principal, we can assist a broker with most questions regarding this process prior to submitting the application on behalf of their client.

Customs has additional information on their website such as how to establish a foreign-trade zone, what operations are acceptable in the foreign-trade zone and more. A link to this website may be located here:

CBP: About Foreign-Trade Zones & Contact Info

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