Port of New London (Credit: CT Examiner/Stroud)

Connecticut Inches Toward Foreign-Trade Zone Business Opportunities

Foreign-trade zones are an underused economic tool in Connecticut, but that could change as more companies begin to understand how they work and become aware of their potential benefits. 

The zones operate under the supervision of U.S. Customs and Border Protection and allow companies to manage the tariff or duty that is charged on imported materials or goods.

Foreign-trade zones were once tied to a geographical area, usually next to a U.S. Port of Entry, such as the location for Connecticut’s four foreign-trade zones — Bridgeport, New Haven, New London and Windsor Locks, which are all ports of entry. But the newer definition of a foreign-trade zone is an enclosed area operated as a public utility where raw materials and merchandise can be held or manufactured tariff-free until they are either imported into the U.S. or exported.

“The more accurate way to look at foreign-trade zones now is they are a regional tool that works as a grantee to businesses that want to operate inside a foreign-trade zone. A business can ‘tether’ to the foreign-trade zone grantee within its service district,” said Martha Klimas, the administrator for Foreign Trade Zone 76, located in Bridgeport. 

“It’s about thinking of it as a type of utility. It’s available if a business wants to use it,” he said. “It’s like internet access, if somebody needs the advantages of a foreign trade zone.” 

It is more accurate to refer to Connecticut’s foreign trade zones by their numbers than their locations, she said. The municipalities where the zones are based do not run the foreign trade zone located there, nor do businesses need to move to that municipality to be a part of that zone.

“You can’t call it ‘Bridgeport’s foreign trade zone, you have to call it FTZ 76 because it’s not Bridgeport’s FTZ. Again it’s a regional tool,” she said. 

There are 296 Foreign Trade Zones in the United States. In Connecticut, FTZ No. 71 is based in Windsor Locks, No. 162 is in New Haven and No. 208 is in New London. 

Dan Carstens, who performs administrative tasks for FTZ No. 71, echoed Klimas, emphasizing that foreign trade zones are a tool rather than a place. 

“It’s about thinking of it as a type of utility. It’s available if a business wants to use it,” he said. “It’s like internet access, if somebody needs the advantages of a foreign trade zone.” 

The Foreign-Trade Zones Act of 1934 was created to “expedite and encourage” foreign commerce in the U.S. and to increase the competitive edge of American businesses in the global economy by reducing tariffs on imported materials and exported manufactured products. The act was also meant to mitigate the negative impacts of the Smoot-Hawley Tariff Act enacted in 1930, which increased import duties to protect businesses and farmers in the United States. Congress amended the act in 1950 to allow manufacturing in foreign trade zones. In 1980, Congress amended the act so that manufacturers would pay tariffs on raw materials rather than on products manufactured in the zone.

Klimas, who said she has been working in Bridgeport for 15 years, said originally businesses would need to move to a location to obtain foreign trade zone benefits, but that changed in the last 10 to 15 years. 

“The goal is not to acquire real estate, the goal is acquire users, so our position is we can bring the zone to you,” she said. “If you have a company and you’re fine with your location, I’m fine with that. I am just a sponsor for you to get that designation. I’m the public entity that sponsors that FTZ benefit to your company wherever it’s located within my service area.” 

Klima said that none of her active foreign trade zones are in Bridgeport. Two of her designated sites are in Danbury and two active users have a number of designated sites including Wilton, Newtown, Danbury and Bethel. 

Business requirements and benefits

In a Feb. 26 presentation in Middletown, Tammy Hetrick, a licensed customs broker, of A.N. Deringer, Inc., of St. Albans, Vermont, explained the foreign trade zone requirements and potential benefits for businesses in the region.

Foreign and domestic merchandise may be moved into zones for operations not otherwise prohibited by law, including storage, exhibition, assembly, manufacturing and processing, Hetrick said. 

In the zone, the usual Customs Border Patrol entry procedures and payments of duties are not required on foreign merchandise until it enters U.S. territory for domestic consumption. The importer usually has a choice of paying either the duty applicable to the original foreign materials or the finished product, which is known as the inverted tariff methodology, according to Hetrick’s presentation. 

The zone can provide a competitive advantage through duty deferral because merchandise is not subject to U.S. duty or excise tax while in the zone. Businesses can also avoid paying duties by exporting the imported goods from the zone. 

Businesses are required to demonstrate strict control over processes and documentation. Customs officers can drop in at any time to check operations and inventory, said Hetrick. 


The seminar was attended by about 42 participants and was sponsored by the U.S. Department of Commerce, Connecticut Economic Resource Center, Connecticut District Export Council and FTZ 71.

Site frameworks

For a business, using a foreign trade zone is a two-step process involving two federal agencies. The authority to designate a FTZ site comes from the Foreign-trade Zones board. Then the company must receive an activation from Customs and Border Patrol. 

Foreign-trade zone grantees, such as No. 76, are established with a traditional site framework, meaning that each new business user must be authorized by the Foreign-trade Zones Board, a federal agency. 

However, in January 2009, the Foreign-Trade Zones board adopted the “alternative site framework” model that pre-designates the zone’s entire service area so that new businesses do not need to be authorized by the  Foreign-trade Zone board, said Klimas.

When asked about the foreign-trade zones during a phone call on March 11, Jim Watson, Director of Legislation, Regulations and Communications for the Connecticut Department of Economic and Community Development replied that “my department is not involved with foreign trade zones at the moment.” 

“That changed the ‘mind-think’ about this. It’s not to drive business into an area but to bring a benefit to existing businesses,” she said. 

With the alternate site framework, companies are still required to perform step two, the activation from Customs and Border Patrol. 

Klimas said she has started the process to convert FTZ 76 to the alternate site framework. “I expect us to be taking in more users over the next few years,” she said. 

New London is also in the process of converting from a traditional site framework to an alternate site framework that would encompass all of New London County.  

Jobs, state and local taxes

In an FTZ, companies that import materials, produce merchandise with those materials and export that merchandise, pay local and state taxes and provide jobs, said Klimas. 

“We like it because the businesses here that produce [items] here and re-export them, that’s good for us and there’s probably someone in another country saying, ‘You’re sending all our jobs to the United States,’” she said. “Some of tariffs were reduced because the end product had a lower tariff rate than the raw materials … but the point is the jobs were here and the local and state tax revenues were here.” 

Even with the advantages, involvement at the state level is minimal. When asked about the foreign trade zones during a phone call on March 11, Jim Watson, Director of Legislation, Regulations and Communications for the Connecticut Department of Economic and Community Development replied that “my department is not involved with foreign trade zones at the moment.” 

Anne Evans, district director of the U.S. Department of Commerce International Trade Administration, said Connecticut should look to zones like Quonset Business Park in Rhode Island as a model.

“Maybe this is something years ago we should have paid more attention to. Now, with a lot of the pier development, we have a lot of opportunities. We’re in the absolute right place to grow our trade zones now,” she said.

“They have a wonderful FTZ, it’s phenomenal. Ocean State Job Lot is there, it would be wonderful for Connecticut to copy that,” she said by phone on March 10. 

Evans said that distribution companies are known to create jobs in foreign trade zones. 

“One of the inward investment things we should be looking at is nonperishable food imports, like Italian foods. These come into warehouses in FTZs in Boston and New York.They could be in CT in between. It’s an Ocean State job Lot way of looking at life and we can’t attract that until we have the FTZ, that’s how those jobs get here,” she said. 

She said the seminar on Feb. 26 was the first step in educating businesses around the state. 

“Maybe this is something years ago we should have paid more attention to. Now, with a lot of the pier development, we have a lot of opportunities. We’re in the absolute right place to grow our trade zones now,” she said.


A previous version of this story stated that MetroHartford Alliance co-sponsored the FTZ event in Middletown. They didn’t.

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