How Foreign-Trade Zones Are Helping Navigate Unpredictable Holiday Season

What’s an FTZ — and Why It Still Matters

Foreign-Trade Zones have been part of America’s trade infrastructure for more than 90 years. Created by Congress in 1934, the program was designed to encourage U.S.-based activity — manufacturing, distribution and value-added operations — by allowing companies to operate as though they’re “outside” U.S. customs territory for duty purposes until goods actually enter the domestic market.

Today, nearly 200 active FTZs exist across the country, supporting thousands of companies in industries ranging from automotive to consumer electronics to pharmaceuticals.

Despite occasional misconceptions, U.S. FTZs are not loopholes, workarounds or exotic trade schemes. They are a longstanding, legally established mechanism that helps companies manage global commerce in a transparent and highly regulated environment. Every FTZ is overseen by U.S. Customs and Border Protection (CBP), adheres to strict inventory controls and undergoes regular compliance checks.

U.S. FTZs offer several key advantages. Companies can reduce and/or defer duties and use improved cash flow to offset other supply chain costs. Just as importantly, operating within a U.S. FTZ often streamlines logistics, allowing goods to be stored, assembled, repackaged or tested without triggering duty payments until they officially enter U.S. commerce.

While the structure of the U.S. FTZ program hasn’t changed dramatically over the decades, its relevance has. In an era defined by tariff volatility, supply chain uncertainty and increasingly globalized production networks, these zones now serve as a stabilizing tool in an environment where variables are constantly shifting. 

Pressure Points in Today’s Supply Chain

To understand why U.S. FTZs are proving so valuable this holiday season, it helps to look at the challenges companies are grappling with in real time.

Tariff shifts and uncertainty. Trade actions in 2025 have been abrupt and wide-ranging, with tariff adjustments announced just weeks, sometimes even days, before taking effect. For importers planning months-long production cycles, this unpredictability has magnified the cost of doing business.

Rising shipping costs and congestion. Capacity constraints remain an issue on major trans-Pacific routes, and geopolitical tensions can push carriers onto longer alternative paths.

Inventory balancing amid fluctuating demand. Consumer spending has become harder to predict. Retailers that over-ordered early in the year are now managing excess inventory, while others are scrambling to keep popular products in stock. This “too much or too little” dilemma has made timing more important and more complicated.

Industry data reinforces these trends. Several logistics platforms report that average lead times for imported goods remain 20–30% longer than pre-pandemic norms. Manufacturing surveys show continued caution around input prices and delivery reliability.

However, for companies operating within U.S. FTZs, these pressures land differently. Their ability to manage inventory without immediate duty implications, align shipments more strategically and cushion tariff impacts creates a fundamentally more flexible operating environment, which is what this holiday season demands.

The FTZ Advantage: Three Ways Companies Stay Ahead

Cost Control Amid Tariff Turbulence

When tariffs shift quickly, the math behind sourcing and manufacturing can swing just as fast. While U.S. FTZs don’t erase tariff exposure, they give companies practical tools to manage and time that exposure in a more controlled way.

Equally important, the ability to defer duties until goods leave the zone acts as a built-in buffer for cash flow, especially in a season when freight budgets are under strain. Many companies say this flexibility helps them absorb elevated transportation or warehousing costs without immediately pushing those increases onto customers.

This isn’t a workaround or an exception to the rules. It’s a stabilizing feature of U.S. trade law designed to give manufacturers and distributors a little more predictability when the broader trade environment becomes unpredictable.

Smarter Inventory and Logistics Management

Inventory management has become a strategic differentiator and U.S. FTZs give companies more control over both timing and process. Because goods in an FTZ aren’t subject to duties until they enter U.S. commerce, companies can store items longer, assemble products closer to shipment dates and adjust distribution plans in real time.

Consider an apparel retailer that receives holiday merchandise from multiple overseas suppliers. Without an FTZ, delays at one port could force the company to pay duties on partial shipments or rush certain products to market. Inside a zone, the retailer can consolidate shipments, relabel or repackage goods and ship nationally from a single point without triggering additional tariffs or duplicative fees. This improves both efficiency and accuracy, particularly during a season when consumer preferences can shift weekly.

U.S. FTZs also reduce administrative burdens. Weekly entry filings, improved inventory tracking, and consolidated customs processes help companies avoid delays that might otherwise lead to overtime labor costs or missed delivery windows. As shippers face ballooning lead times this year, these efficiencies aren’t just convenient; they’re decisive.

Resilience and Risk Mitigation

Perhaps the most underrated benefit of U.S. FTZs is resilience. When global shipping networks experience sudden disruptions — a port slowdown, a vessel re-route, or a regulatory change — companies operating within FTZs have more options.

Imagine a manufacturer awaiting parts from two continents. If one shipment is delayed, the company can continue processing other inventory within the zone while still receiving incoming goods without immediate duty payment. If a regulatory update changes documentation requirements, FTZ operators can adjust processes before goods formally enter the U.S. market. If unexpected congestion hits a major port, inventory stored in an FTZ closer to inland customers can keep the supply chain moving.

This year, many companies have used U.S. FTZs as a buffer against global unpredictability. The zones provide literal and operational space: space to regroup, replan and keep production and distribution running even when external conditions shift overnight.

Lessons for Supply Chain Leaders

Every year, interest in U.S. FTZ participation tends to rise during peak seasons, but the pattern is even more pronounced during periods of trade volatility. The reason is straightforward: FTZs address both immediate challenges and long-term strategic needs.

For companies considering whether to adopt or expand FTZ use, three factors matter most. First, conduct a cost-benefit analysis that accounts for tariff profiles, inventory levels, transportation patterns and projected demand. Second, understand the regulatory setup. While U.S. FTZs operate within a clear legal framework, they require coordination with local zone grantees, customs brokers and U.S. CBP. Third, ensure internal alignment. Finance, logistics and compliance teams all play a role in successful zone operations.

More broadly, we’re seeing encouraging trends in the evolution of the U.S. FTZ landscape. Digitization of zone operations, from inventory management systems to automated customs filings, is making participation easier and more transparent. Smaller and midsized companies, which once saw U.S. FTZs as tools only for major manufacturers, are increasingly adopting them to stabilize margins and manage growth.

Further, policymakers continue to recognize the FTZ program as a valuable component of America’s global competitiveness, offering consistency even as trade policy evolves.

A Stable Tool in an Unstable Trade Landscape

No one can predict exactly how global trade conditions will look in 2026. Tariffs may continue to shift, freight markets may tighten or ease, and geopolitical dynamics will almost certainly influence supply chains in new ways. But, some fundamentals won’t change, including the need for tools that allow companies to adapt rather than react.

U.S. FTZs have been delivering that stability for more than nine decades. They give companies space to plan, flexibility to manage risk and confidence to continue investing in U.S. operations, even when external forces create uncertainty.

As we look toward the new year, one takeaway is clear: resilience isn’t built during calm periods. It’s built during moments like this, when companies must navigate complexity with creativity and discipline. FTZs will remain central to that work, helping U.S. businesses create supply chains that are not only efficient but also sustainable, strategic and built to withstand whatever comes next.

Every holiday season brings some degree of stress to the supply chain, but 2025 has offered a perfect storm. Importers entered the fourth quarter facing elevated shipping demand, tariff shifts arriving with little warning and global transportation networks that still haven’t fully stabilized from years of disruption.

Shipment volumes typically spike 30–60% in peak season, while some freight lanes saw double-digit cost increases in just a matter of weeks. Companies that once counted on predictable schedules are now juggling rerouted vessels, shifting customs requirements and sudden surges in consumer demand.

Amid all of this, a quiet pattern has emerged. A meaningful number of U.S. manufacturers, distributors and retailers are moving goods more smoothly than their peers. Why? Because they’ve structured their operations to manage it. One of the most effective tools enabling this advantage is also one of the longest-standing: the Foreign-Trade Zone (FTZ) program.

This year’s holiday pressures have underscored a simple truth. Even in periods of instability, companies have agency, and the strategic use of FTZs is helping many avoid the worst of the congestion, delays and cost spikes that define the 2025 peak season.