Navigating the Trade War Maze: FTZs, Bonded Warehouses and Tariffs

As global trade tensions intensify, businesses face the pressing challenge of shielding themselves from volatile tariffs—particularly on Chinese imports. In July 2025, companies have ramped up use of Foreign‑Trade Zones (FTZs) and bonded warehouses as strategic refuges to manage duty exposure, improve cash flow and retain flexibility.

What are FTZs and bonded warehouses?

Foreign‑Trade Zones (FTZs) are specially designated areas considered outside the Country's Customs territory. Firms can bring in goods—raw components or finished products—without paying duties until the items leave the zone for domestic consumption. If re-exported, no tariffs are ever due. Moreover, simple operations like storage, mixing, repacking, or assembly are permitted under customs supervision .

Why the sudden surge in popularity?

Amid a recent series of drastic tariff hikes, U.S. duties on Chinese goods ballooned to as high as 145 % in April 2025 under Section 301 tariffs  . Although a 90‑day truce in mid-May reduced tariffs to around 30 %, uncertainty persists  . This unpredictability has led companies to scramble for mechanisms that prevent over‑investing in duties at the worst possible time:

Bonded warehouses allow deferment of duty payments to align with sales, aiding cash flow—although rental rates have soared, in some cases quadrupling due to demand  .

FTZs offer the possibility to "lock in" prevailing tariff rates when goods are admitted, granting protection in case rates surge again after the reprieve ends  .

Reuters reports that U.S. businesses are racing to convert standard warehouses into bonded facilities: over 1,700 such warehouses exist, yet demand has overwhelmed capacity. Conversion typical costs—ranging from thousands to six-figure sums—and approval queues now take months rather than weeks  .

FTZ vs bonded warehouses: a comparison

Feature FTZ Bonded Warehouse

Cash‑flow Duty deferred until goods enter U.S. commerce Duty deferred until withdrawal

Export exemption No duties if re‑exported No duties if re‑exported

Processing allowed Storage, assembly, mixing under CBP license Storage, limited repackaging

Duty treatment Can elect inverted tariff at exit Regular duty at withdrawal

Time limit Indefinite retention allowed  Up to 5 years permitted 

Setup difficulty Lengthy approval, security protocols Also requires CBP approval, but simpler

In practice, FTZs offer deeper flexibility—ideal for firms that handle large volumes, want to manipulate or assemble goods, or anticipate frequent retesting of tariffs. Bonded warehouses, in contrast, are more straightforward to access and useful for simpler storage needs or slower-moving inventory.

Real-world trends in mid‑2025

A sharp pivot by importers towards FTZs has occurred. In May, businesses began shifting away from bonded storage to FTZs as tariff forecasts improved—but uncertainty remained too high  .

City distributions have been set up in FTZs. For instance, the Port of Houston operates FTZ 84—handling US $50 billion of merchandise in 2022 alone—giving firms access to duty shelter and manufacturing perks  .

Importers in sectors such as fashion, electronics and auto parts are investing in U.S.-based bonded and FTZ-enabled logistics, as a way to maintain competitiveness despite high tariffs  .

Navigating in‑bond and short‑term solutions

For those seeking a less permanent solution, bonded Container Freight Station (CFS) entries and in‑bond shipments allow goods to remain under customs control for brief periods (typically around 15 days) without duties—strategic for rerouting, staging, or short‑term deferrals  .

Strategic decision—how to choose?

Complexity, volume, cash‑flow needs, and operational flexibility define the choice:

High-volume importers needing manufacturing or assembly: opt for FTZ.

Smaller-scale, value-heavy goods with slower turnover: bonded warehouse may suffice.

LCL shipments or rerouting scenarios: in‑bond CFS offers a cost-effective stop‑gap.

Both FTZ and bonded strategies defer duties until revenue is generated. But FTZs add possibilities such as inverted tariffs (paying lower duty rates on finished goods), weekly entry consolidation, and even exemptions on waste or scrap. Bonded warehouses, while more limited, require less infrastructure and are simpler to adopt for conventional storage.

The wider picture

With trade policy oscillating, logistics tactical planning matters more than ever. A recent surge in shipments between China and the U.S.—up nearly 300 % in early May—puts pressure on port and warehouse capacity, shifting transport preferences toward rail and short‑haul trucking  . Meanwhile, firms that locked into bonded facilities or FTZs remain resilient against sudden regulatory shift.

Moreover, an unprecedented rush for bonded space—leading to rental costs four times higher than standard storage—signals that tariff strategy has become a cornerstone of supply‑chain planning  .

Final take

In today’s trade‑war era, FTZs and bonded warehouses are no longer niche instruments—they’re essential shields in a volatile customs landscape. Whether your business manufactures, re‑exports, stores high‑value goods or simply buys in bulk, a well‑crafted tariff‑deferral strategy can:

1. Protect margins by delaying duties until the optimal moment

2. Offer adaptability if tariff rates rebound

3. Improve cash‑flow alignment to sales

4. Support manufacturing or product assembly under supervision

As July 2025 progresses, companies face a choice: stay reactive to tariffs—paying upfront duties and risking losses—or adopt forward‑thinking customs strategies. For those in logistics, manufacturing, apparel, electronics or auto parts, FTZs and bonded facilities offer not just compliance but competitive advantage.