The inverted tariff
Sometimes imported parts carry higher duty rates than the finished product made from them. That’s an inverted tariff — and zone manufacturers get to choose the lower rate.
How it works
When a company manufactures inside a zone with FTZ Board production authority, it can elect to pay duty on the finished good it ships — at the finished good’s rate — rather than on each imported component at that component’s rate. When components are taxed higher than the product, the election saves money on every unit, every day.
This isn’t an exotic edge case. Tariff schedules routinely tax intermediate goods above finished ones, and it’s why some of the largest FTZ users in the country are auto plants, electronics assemblers, and machinery manufacturers.
The math
A manufacturer imports $50 million a year in components carrying an average 6.5% duty — $3.25M in annual duties paid the ordinary way.
The finished product’s duty rate is 2.5%. Manufacturing in a zone and electing the finished-good rate, the company pays $1.25M instead — a saving of $2 million a year, recurring for as long as it produces.
The effect compounds with the other benefits: components awaiting production get deferral, finished goods that are exported pay nothing at all, and scrap generated in production is never dutied as the component it once was.
Who this fits
Any manufacturer using imported parts, materials, or subassemblies — especially in automotive, electronics, appliances, machinery, pharmaceuticals, and chemicals, where rate inversions are common. Production in a zone requires specific FTZ Board authority, so the conversation starts with your local grantee.
General education, not customs, legal, or financial advice. Figures are illustrative; actual rates depend on tariff classification and current trade actions.