Understanding the basics of Foreign-Trade Zones and the value they provide is a must for any business looking to excel in international trade and looking to enhance its processes by optimizing costs, time and resources.
With 197 active FTZs across the United States employing over 500,000 American workers, these zones have become critical hubs for international commerce and companies, according to the National Association of Foreign-Trade Zones.
This guide walks you through every step of the FTZ application and activation process. From determining eligibility to meeting ongoing CBP compliance requirement.
What Is the FTZ Application and Activation Process?
The FTZ implementation journey involves two distinct but interconnected processes: application to the FTZ Board and activation with U.S. Customs and Border Protection (CBP).
Many companies underestimate the documentation requirements for both agencies. While the FTZ Board focuses on economic impact and zone boundaries, CBP scrutinizes security protocols, inventory systems, and compliance procedures.
This approach requires planning and coordination, and the entire process typically spans 9-12 months before you can begin operations.
Let’s break down each step to ensure your FTZ implementation succeeds.
Step 1 – Determine Eligibility for an FTZ
First, you need to confirm your business qualifies for FTZ benefits and determine which type of zone best suits your needs.
Which businesses qualify?
FTZs benefit a wide range of businesses involved in international trade, including:
- Importers and exporters
- Manufacturers and processors
- Third-party logistics providers
- Distribution and warehousing operations
Choosing between a General-Purpose Zone, Subzone, or ASF
Your FTZ structure options include three primary designations:
- General-Purpose Zone: Operate as multi-user facilities in industrial parks or ports, ideal for smaller operations or those needing flexibility.
- Subzone: A site-specific designation for large manufacturers requiring customized solutions. Companies can establish subzones at existing facilities without operational relocation, maintaining current logistics while gaining FTZ benefits.
- Alternative Site Framework (ASF): A streamlined approach allowing faster approval for sites within a designated service area. The right choice depends on your operational needs, location, and long-term trade strategy.
Step 2 – Prepare and Submit the FTZ Application
Requirements from the FTZ Board
Your application must include:
- Detailed business plan showing economic justification
- Site plans and facility descriptions
- Letters of support from local authorities
- Application fee payment
- Information about proposed activities
- Economic impact analysis
For ASF applications, the process is streamlined with fewer requirements, making it an attractive option for companies.
Documentation checklist
Prepare these essential documents:
- Fill the Form 214c for general-purpose zone applications
- Fill Form 214b for subzone applications
- Site maps and facility diagrams
- Proof of property ownership or lease agreements
- Letters of support from local economic development agencies
- Operator agreement with zone grantee
- Detailed business plan showing FTZ benefits
- Customs bond information.(required later during CBP activation)
EP Logistics can assist with preparing these documents through our customs brokerage expertise, ensuring all requirements are met the first time.
Step 3 — Understanding the FTZ Approval Timeline
FTZ approval timelines vary based on application type and operational complexity.
Standard applications typically take 10-12 months for processing, while ASF applications may be approved in 4-5 months. However, according to the U.S. FTZ Board’s case processing guidelines, production authority requests can add additional time.
Standard vs. ASF Timelines
Traditional Application Process:
- Production Authority: 10-12 months
- Manufacturing Subzone: 8-10 months
- Distribution Subzone: 5-7 months
- Boundary Modification: 3-4 months
Alternative Site Framework (ASF):
- Usage-Driven Site: 30-45 days
- Magnet Site: 30-45 days
- Boundary Modification: 30 days
Step 4 — Activate the FTZ with the U.S. Customs and Border Protection (CBP)
Once you receive FTZ Board approval, you must activate the zone with CBP before beginning operations. This process is equally important than the initial application.
CBP Activation Requirements
To activate your FTZ with CBP, you’ll need:
- Completed CBP Form 214 for activation
- Operator’s agreement with the zone grantee
- Detailed procedures manual
- Site security assessment and plan
- Detailed inventory control procedures
- Letter of concurrence from the zone grantee
- Background checks for key personnel
- Customs bond ($50,000 minimum)
CBP will perform a comprehensive site inspection prior to granting approval for activation
Inventory Control System Requirements
Your inventory system must meet strict CBP requirements, including:
- Real-time tracking of all merchandise
- Ability to distinguish between domestic and foreign status goods
- Audit trail capabilities for all movements
- Tracking of manufacturing inputs and outputs
- Ability to generate required CBP reports
- Reconciliation with CBP documentations
Many companies underestimate the requirements for FTZ inventory systems. EP Logistics’ warehousing solutions include FTZ-compliant inventory management systems that meet all CBP requirements.
Weekly Entry Filing (Type 06 / 19)
One of the key benefits of FTZ operation is the ability to file weekly entries instead of per-shipment entries.
This process needs:
- Implementing systems for tracking all admissions
- Coordinating with Experts in Logistics Solutions and Customs Brokerage Services
- Understanding HTS classification requirements
- Establishing procedures for weekly entry filing
- Training staff on proper documentation
e214 Admission Process
The e214 electronic admission process requires the following:::
- Electronic filing of CBP Form 214
- Proper zone admission procedures
- Reconciliation with inventory systems
- Documentation of merchandise status
- Coordination with carriers and suppliers
Security and C-TPAT-Related Standards
CBP places heavy emphasis on security for FTZ operations, including:
- Procedural security protocols
- Carrier and supplier security verification
- C-TPAT alignment (not required)
- Physical security measures (fencing, cameras, access controls)
- Personnel security procedures
- IT systems security
Step 5 — FTZ Compliance Obligations (Ongoing Requirements)
Recordkeeping and reporting mandatory rules
- FTZ operators must maintain comprehensive records, including:
- Annual reports to the FTZ Board
- Customs entry documentation
- Annual reconciliation reports
- Zone-to-zone transfer records
- Inventory control records (5-year retention)
- Admission and transfer documentation
- Manufacturing records (if applicable)
CBP Audits and Enforcement
CBP conducts regular compliance reviews of FTZ operations:
- Focused Assessments examining overall compliance
- Quick Response Audits for specific issues
- Prior opportunities for self-reported violations
- Compliance Improvement Programs
Preparing for these audits requires ongoing internal reviews and well-documented compliance procedures
Penalties for Non-Compliance
FTZ compliance failures can result in significant penalties:
- Monetary penalties (up to double the loss of lawful duties)
- Personal liability for officers in cases of fraud
- Potential criminal charges for willful violations
- Suspension of FTZ privileges
- Revocation of FTZ status
Common Mistakes When Applying for or Activating an FTZ
Some companies encounter obstacles during the FTZ implementation process such as:
- Underestimating the timeline for approval and activation
- Improper zone-to-zone transfers
- Inadequate recordkeeping systems
- Failure to file required reports
- Not securing proper customs bonds
- Insufficient inventory control systems
- Inadequate security measures
- Incomplete procedures documentation
- Failure to train personnel properly
- Misunderstanding merchandise status requirements
Avoiding these requires thorough planning and often specialized expertise in FTZ operations.
How EP Logistics Simplifies FTZ Implementation and Activation
EP Logistics offers comprehensive solutions to streamline your FTZ journey, including:
Access to established FTZ 68 facilities in El Paso
EP Logistics operates an FTZ in El Paso, enabling importers and manufacturers to defer, reduce, or eliminate U.S. duties while enhancing cross-border operations with Mexico through integrated customs brokerage and warehousing services. e Take advantage of our strategically located logistics company el paso and our expertise incross-border trade to ensure a smooth transition of your goods between Mexico and U.S.A.
Our specialized services include:
- Integrated customs brokerage services
- Cross-border expertise for U.S.-Mexico operations
- Staff training and procedure development
- Ongoing compliance monitoring
- Pre-configured inventory control systems
Accelerate FTZ Activation with the Right Expert Partner
The FTZ application and activation process is complex. While the standard timeline can stretch 6-12 months, working with an established FTZ operator like EP Logistics can reduce this timeframe.
With a clear understanding of what FTZ benefits are, and the implementation process, companies can accelerate activation and reduce compliance risks
That is why when thinking about the movement of your goods across borders, there’s no better option than EP Logistics, give us a call and find out how simple your operation can be in the hands of a recognized expert in the area, with over 20 years of experience, numerous certifications, and a strong reputation in international trade across both the U.S. and Mexico.
Contact EP Logistics today to discuss how we can accelerate your path to FTZ operation while ensuring full compliance with all regulatory requirements.
