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How Small and Mid-Sized Manufacturers Can Leverage Foreign Trade Zones (FTZ) to Reduce Customer Tariff Exposure Amid Potential Tariff Increases

How SMMs Can Leverage Foreign Trade Zones (FTZ) Subzones to Mitigate MNE Tariff Exposure

In all my years, when asked of an SMM, I’ve not heard a good answer yet to the question: “Why don’t you operate part of your plant as a Foreign Trade Zone (FTZ) Sub-Zone?”. Most SMMs are unaware that a single floor or building on their current plant site - versus being in a large remote industrial park envisioned by most - can be operated with all of the advantages of a Foreign Trade Zone (FTZ).

In an unpredictable trade environment, Multinational Enterprises (MNEs) face mounting challenges from potential tariff increases and evolving trade policies. These shifts can significantly impact customer costs and supply chain efficiency, threatening competitiveness in both domestic and global markets.

However, Foreign Trade Zones (FTZ) provide SMMs with an effective tool to help to help their MNE customer reduce tariff exposure and mitigate the risks associated with sudden policy changes. By establishing FTZ subzones, SMMs can shield their operations and customers from increased tariff burdens, while improving cash flow and operational flexibility.

This blog explores how SMMs can strategically implement FTZ subzones to navigate potential tariff hikes, with actionable insights, a real-world case study, and immersive training opportunities.

What Are Foreign Trade Zones (FTZ) and Subzones?

Foreign Trade Zones (FTZ) are federally designated areas where businesses can store, process, and manufacture goods without immediate payment of duties. Subzones, tailored for individual companies, allow SMMs to align FTZ benefits with their unique operational needs.

SMMs operating in FTZ subzones can leverage these advantages to minimize customer tariff exposure, especially in the face of potential tariff increases:

Duty Deferral: Postpone duty payments until goods leave the FTZ for domestic use, creating financial breathing room for customers.

Duty Reduction: Take advantage of tariff rate reductions when the finished product classification has a lower duty rate than the imported components.

Elimination on Exports: Avoid tariffs entirely on goods exported directly from the FTZ, which benefits customers operating in global markets.

Inverted Tariff Avoidance: Reduce costs when component tariffs exceed finished goods tariffs.

Trade Policy Risk Mitigation: FTZ subzones offer protection against unexpected tariff increases, providing cost predictability for customers.

FTZ Training: Equipping SMMs to Navigate Tariff Challenges

Exclusive Opportunities for SMMs

At the upcoming ACCELERATE2025 conference, SMMs will gain the knowledge and tools needed to capitalize on FTZ subzones, empowering them to navigate the challenges of rising tariffs effectively. The session includes:

Comprehensive Training: Learn the fundamentals of FTZ subzones, including compliance, setup processes, and operational best practices.

Real-World Case Study: Hear from an SMM that implemented an FTZ subzone to shield its customers from increased tariffs, highlighting tangible outcomes and actionable lessons.

Hands-On Implementation Workshops: Engage in interactive exercises to develop a tailored FTZ strategy, from application to execution.

SMM Success Story: Proactively Responding to Tariff Increases

One SMM’s story will illustrate how operating in an FTZ subzone can proactively mitigate the effects of tariff increases. By reducing costs and ensuring consistent pricing, this manufacturer was able to maintain customer relationships and secure long-term business growth.

Attendees will walk away with insights into the practical steps for overcoming regulatory hurdles, managing inventory effectively, and communicating the value of tariff mitigation to their customers.

Why FTZ Subzones Are Essential for SMMs in 2024 and Beyond

As tariff policies shift, SMMs must stay ahead of the curve by integrating FTZ strategies into their operations. Leveraging subzones allows SMMs to:

1. Protect customers from cost surges due to tariff increases.

2. Build trust and stability in their supply chain relationships.

3. Increase their competitive advantage in domestic and international markets.

This training will prepare SMMs to proactively address tariff volatility, ensuring resilience and continued success in an evolving trade landscape.

Register for ACCELERATE2025 and engage in FTZ Training and Empower Your Business

With potential tariff increases on the horizon, this FTZ training session is a must-attend for SMMs looking to safeguard their operations and offer enhanced value to their customers. Gain access to expert insights, connect with industry leaders, and learn how to implement FTZ subzones tailored to your business needs.

Secure your spot at ACCELERATE2025—register now! The clock really is ticking.