For third-party logistics (3PL) providers, tapping into international markets can be extremely rewarding, yet it requires proper due diligence and market research to take the first step.

With approximately 60% of U.S. manufacturers sourcing raw materials internationally, there’s a high demand for warehousing solutions that support importers and exporters. However, choosing between establishing a Foreign Trade Zone (FTZ) or operating as a customs bonded warehouse requires careful consideration of market demand, facility capabilities, and regulatory requirements.

Understanding Customs Bonded Warehousing

A bonded warehouse is a secured facility where importers can store goods without having to immediately pay the tariff duties. This allows importers to preserve their cash flow and wait until their products actually are sold or at least released from the warehouse facility. This payment deferral is crucial for importers who need more time to move goods to customers before the duties are due.

This arrangement allows for delayed duty payments on goods awaiting re-export. Goods that are re-exported from the bonded warehouse are exempt from duties, helping importers reduce costs significantly.

To establish a bonded warehouse, providers must work with U.S. Customs and Border Protection (CBP) and secure a bonded warehouse license, ensuring compliance with strict security and reporting standards. Additionally, regular inspections and recordkeeping are required to maintain compliance with CBP regulations.

The Role of Foreign Trade Zone Warehousing

An FTZ operates as a designated area considered outside U.S. Customs territory. Goods can be assembled, manufactured, or stored in an FTZ without incurring duties until they leave the zone and enter domestic commerce. If re-exported, no duties are paid. 

If you’re an FTZ warehouse near a manufacturer that needs to re-export to multiple countries, it can make for an excellent partnership opportunity. By offering a streamlined, duty-free solution, you can provide immense value to manufacturers, reducing costs and enhancing their global reach. 

Setting up an FTZ involves coordination with local port authorities, and obtaining approval from the Foreign Trade Zones Board. The process requires compliance with zoning, security, and operational regulations, which often vary by location.

Key Factors to Consider

For 3PL providers, deciding between FTZ and bonded warehousing is going to depend heavily on market demand and facility capabilities. Manufacturers requiring space for product assembly are well-suited to FTZ facilities, but these operations typically require larger, dedicated areas. If your warehouse cannot accommodate such requirements, bonded warehousing may be the better option, especially since goods stored in bonded warehouses are generally palletized, and don’t require assembly or repackaging.

Market demand also plays a critical role. In regions like South Florida, where Port Everglades and Port of Miami handle high volumes of international trade, the demand for bonded warehousing is significant. Meanwhile, inland regions with more manufacturing activity but less importers may benefit more from FTZ warehousing.

Comparing Setup Processes

Establishing a customs bonded warehouse is generally faster and less complex than setting up an FTZ.

After submitting the necessary application (CBP Form 300) and passing an inspection, bonded warehousing focuses on maintaining accurate records, meeting facility security standards, and securing a financial bond.

FTZ warehousing, on the other hand, involves additional layers of regulatory approval. Providers often navigate zoning approvals, public notices, and sometimes conduct economic impact analyses and environmental reviews. These complexities make FTZ set up a longer and more resource-intensive process.

A Practical Example

Let’s say a logistics company has a facility in Midwest Indiana, a region with a strong manufacturing base, including government-contracted engineering firms. This location could be a great fit for an FTZ warehouse, in order to support local manufacturers sourcing goods internationally. However, due to its inland position, and the nearest port being in New Jersey, there isn't much demand for customs bonded warehousing. In contrast, operations near the Port of Long Beach see much higher demand from importers, which makes customs bonded warehousing a higher priority there, before considering the setting up of an FTZ at Long Beach.

Making the Right Choice

Adding FTZ or bonded warehousing capabilities can have a huge impact for 3PL providers, particularly in areas with high volumes of international trade. Deciding which one to start with is often going to come down to your particular market and the types of clients you want to attract. Success depends on thorough market research, a clear understanding of setup requirements, and effective compliance management.

For facilities near major ports, these services can unlock new opportunities, attract a broader client base, and drive revenue growth. The key is to start by consulting local port authorities and regulatory bodies to ensure a smooth and compliant setup process.

Derick McQuaide is Business Development Executive at Accurate Trailers.