There are places in the U.S. where tariff policy doesn’t apply the same way it does everywhere else. We’re talking select warehouses, designated sections in or near ports, even factories. Foreign Trade Zones were designed to give businesses some relief from tariffs almost a century ago. The Trump administration has rolled back some of that relief, but companies are still swarming to get in on them.

Back during the Great Depression, Congress allowed the creation of little magical kingdoms where tariffs didn’t apply. 

“People can bring things into a foreign trade zone, import them in, from all over the world with no duties paid at the moment,” said Jeff Tafel, president of the National Association of Foreign Trade Zones. 

Congress created these tariff sanctuaries because the U.S. then, as now, was behind a wall of tariffs — the Smoot Hawley Tariffs — some of them as high as 53%

“And during those times very similar to what we see right now, tariffs were making it difficult for U.S. businesses to compete on the global market,” said Tafel. 

So Congress wanted to cut businesses a break. But there were some catches. Once the goods leave a Foreign Trade Zone to go into the rest of the U.S., their tariffs do have to be paid. 

“Think of it like a waiting room,” said Tim Huizinga, director of warehousing solutions for Traffix, a logistics company that also helps firms set up FTZs.

“There is no limit on how long you can store it for,” said Huizinga. “So the deferral of those duties is really really big for a business in terms of managing their costs, cash flow.” 

It used to be that a company could choose to wait out high tariffs, and bring goods out when the rates might come down. But the Trump administration has ended that option. Tariffs are locked in now. The FTZs are, though, still giving companies needed time and flexibility. 

“At least hold the goods in the Foreign Trade Zone until their customer pays for the goods or agrees to pay for the extra cost of the duties,” said Porfirio Waters, president of Trade Flex Group, a customs broker and consultancy that helps companies set up and operate FTZs.

If a customer doesn’t wanna do that, the goods can just be sent back where they came from. The National Association of Foreign Trade Zones said in some regions there’s been a quadrupling of inquiries about FTZs. 

“Like, a couple weeks ago, I was on the phone from seven in the morning till nine at night, literally not stopped,” said Waters. 

Some companies use foreign trade zones by kind of becoming one — they can get their factory certified as an FTZ — that way they import parts tariff-free, assemble them into some new thing, and then when the final product comes out they pay a lower tariff or no tariff on it. 

“In automotive it’s very widely used because you can bring in different components, different raw materials, that may have a higher duty rate than the finished good that is produced,” said Waters. 

So a high tariff on parts comes down to a low tariff on whole cars. But the Trump administration has also removed that option. 

“The administration has inadvertently pulled the rug out from these companies, there’s over half a million U.S. workers that work in these zones,” said Jeff Tafel with the National Association of FTZs.

Without the ability to bring in parts duty-free, there’s less incentive to manufacture final goods here. Business models have been upended, not just by the changes to FTZs, but the unpredictability of it all. “This is something that’s impacting our customers across the board, regardless of whether they’re in oil and petrol, pharmaceuticals, vehicle parts, consumer electronics, vehicles, chemicals, you name it,” said Ray Grove with Thomson Reuters, which makes software to help companies operate FTZs.

Foreign trade zones can help with tariffs. They can’t do anything for uncertainty.