A foreign trade zone is treated as outside U.S. customs territory for duty purposes. Foreign merchandise admitted to the zone may be stored, manipulated, assembled, manufactured or re-exported without payment of duty; duty attaches only when goods enter U.S. commerce. The operator of the zone posts an Activity Code 4 bond to guarantee compliance with every regulation that makes that privilege work.
The conditions are at 19 CFR § 113.73 (foreign trade zone operator bond conditions), and they reach recordkeeping, security, merchandise accounting and Importer Security Filing obligations attached to zone admissions.
Who must post it
- Operators of general-purpose FTZ sites.
- Operators of subzones and usage-driven sites, including manufacturers running production under zone status.
- Third-party logistics providers operating zone sites for clients.
What the bond guarantees
- Receipt, custody, accounting and reporting of all zone merchandise.
- Payment of duties, taxes and liquidated damages on merchandise removed from the zone without proper entry or unaccounted for.
- Compliance with zone security, inventory-control and ISF requirements.
How CBP sizes it
- Continuous only.
- Sized under CBP's bond-amount guide to the operator's zone activity, throughput and inventory at risk.
- High-throughput manufacturing subzones are sized materially above storage-only sites.
Practitioner notes
- Zone operators are the ISF importer for merchandise admitted to the zone; the Activity Code 4 bond carries that obligation.
- Companies operating zone sites for others should confirm which party is the operator of record, because that party is the principal on the bond.
- Inventory-control system deficiencies are the usual precursor to a claim; annual reconciliation discipline is the best protection.
Frequently asked questions
Do I need Activity Code 1 as well as Activity Code 4?
Often, yes. The zone operator bond covers zone operations; entries of merchandise from the zone into U.S. commerce are made under an importer bond.
Is a single transaction FTZ bond available?
No. Activity Code 4 is continuous only.
Who is the principal when a 3PL runs the zone?
The operator of record designated to CBP and the FTZ Board, which is usually the 3PL.
Primary sources
