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Businesses have sharply increased shipments of imported goods into duty-free “foreign trade zones” as they make use of a Great Depression-era policy to get around US President Donald Trump’s erratic trade tariffs.
Warehouse operators said customers had been rushing to stock more goods inside approved facilities that temporarily exempt businesses from paying tariffs, under laws originally introduced to mitigate the fallout from US protectionist policies in the 1930s.
Organisations overseeing foreign trade zones have reported that interest is between two and four times higher since Trump returned to the White House in January, said Jeffrey Tafel, president of the National Association of Foreign-Trade Zones.
On what Trump has dubbed “liberation day”, the president is on Wednesday expected to announce a suite of new trade measures. From Thursday the administration also plans to implement a previously announced proposal for 25 per cent tariffs on most car imports.
Greg Nichols, head of customs services at DHL, said: “We’ve seen a huge uptick of companies that are interested in” foreign trade zones. The German warehouse operator said it offered 14 secured sites across the US, often near ports of entry.
Although these sites were often more expensive to use than conventional warehouses, they offered the “opportunity to hold inventory in a bonded state close to where you need it, but to potentially be able to wait out the tariff situation to see if it changes”, Nichols added.
Tafel said the Trump administration’s “ongoing and unprecedented executive orders on trade and tariffs [are] driving much of the increased interest”.
Once goods are in the zones, businesses may later decide to move them into the US market and pay any tariffs that apply, or export products back out of the country without paying taxes.
They can also import multiple parts for assembly inside foreign trade zones, only paying a tariff on the final product when it is sent to the US market.
The increased use of the zones, which NAFTZ said were located in every US state, is the latest example of businesses rushing to navigate Trump’s trade threats, which they believe may still be reversed.
The US president has in recent weeks threatened blanket tariffs on goods imported from a number of trading partners, while repeatedly delaying and backtracking on his threats.
Since the US enabled the creation of foreign trade zones in 1934, after the country’s Smoot-Hawley tariffs of 1930 exacerbated the global Great Depression, there are now 261 such areas overseen by organisations including state and port authorities.
Many multinationals, including BMW and Airbus, have previously received permission to manufacture within these zones. But it typically took between six and nine months to obtain approval for a new site, said an executive at a logistics group with multiple approved warehouses, who asked not to be named.
He said his company was therefore experiencing a “significant increase” in demand, receiving up to a dozen calls from customers each week about its approved facilities.
The executive said that, even during Trump’s first term, interest in foreign trade zones was limited, as businesses were generally given more time to prepare for new tariffs.
Now Trump’s more rapid rollout of trade restrictions through executive orders is prompting businesses to seek “more flexibility and control” by stockpiling goods at risk of being caught.
These goods included car parts, pharmaceutical products and air conditioning units, the executive said.
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Tafel said that continued interest in foreign trade zones would “depend entirely on how the newly announced tariffs are implemented” and any curbs on using these areas. But he added that NAFTZ’s upcoming annual Spring Seminar in Georgia in May was “trending towards being the best attended ever” based on the numbers that have already signed up.
Ahead of the “liberation day” tariffs, one logistics executive said he was “confident that [carmakers] will be assessing” whether they can get authorisation to manufacture in foreign trade zones.
Nichols said DHL was hearing about “increased interest” in manufacturing in these zones, and added that the logistics group was considering increasing its number of approved warehouses.
“It’s an active discussion . . . there could be a real need for additional zones.”
