With the White House’s new Executive Order, “Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits,” importers face new rules that change how Foreign Trade Zones (FTZs) and bonded warehouses can be used to manage tariffs. If your business relies on FTZs or U.S. bonded warehouses to defer or reduce tariff exposure, it’s crucial to understand these changes and to explore new strategies—such as utilizing a Mexico bonded warehouse—for maintaining flexibility and cost control.
Bonded Warehouse and Foreign Trade Zone Changes Under the New Executive Order
The new Executive Order includes a key provision:
“Subject articles, except those eligible for admission under ‘domestic status’ as defined in 19 CFR 146.43, which are subject to the duty specified in section 2 of this order and are admitted into a foreign trade zone on or after 12:01 a.m. eastern daylight time on April 9, 2025, must be admitted as ‘privileged foreign status’ as defined in 19 CFR 146.41.”
What does this mean for importers? Any product brought into a U.S. foreign trade zone after April 9, 2025, will be locked in at the tariff rate in effect at the time of entry. While you can still delay paying the duty by storing goods in a bonded warehouse or FTZ, you will not be able to take advantage of any future tariff reductions while the goods are stored. Once the goods enter U.S. commerce, they are subject to the original rate.
This is a significant shift. Previously, companies could bring goods into FTZs and potentially benefit from lower tariffs if trade negotiations led to a rate decrease while their products were stored. Now, that flexibility is gone for U.S. facilities.
What Is a Bonded Warehouse? What Is a Foreign Trade Zone?
A bonded warehouse is a secure storage facility regulated by Customs, allowing businesses to store imported goods without paying duties immediately. The bonded warehouse definition means that goods can remain in storage for up to five years, with tariffs due only when products are released into U.S. commerce.
A foreign trade zone (FTZ) is a special area within the U.S. considered outside Customs territory for duty purposes. Goods can also be transformed in a foreign trade zone.
Free Trade Zones and FTZs: Understanding the Differences
Free trade zones exist around the world and often function similarly to FTZs in the U.S. The free trade zone definition is broad, but for U.S. importers, the FTZ is the regulated, compliant method for managing duties. With the new Executive Order in place, FTZs now lock in the tariff rate at the time goods are admitted.
The Mexico Bonded Warehouse Advantage
Here is where the solution changes: Mexico bonded warehouses. Unlike U.S. FTZs and bonded warehouses, goods stored in a bonded warehouse in Mexico are not yet entered into U.S. commerce or locked into a specific U.S. tariff rate. This means that companies can move inventory from China to a Mexico bonded warehouse—such as those in Tijuana or Monterrey, MX, offered by SCS—and wait to import goods into the U.S. until the most favorable tariff rate is available.
With a Mexico bonded warehouse, you retain flexibility. If tariffs are renegotiated or rates drop, your products can enter the U.S. under the new rate. If tariffs increase, you still have the option to keep goods outside the U.S. until market conditions improve. This approach gives you the strategic advantage that U.S. FTZs and bonded warehouses can no longer provide under the new law.
How the Process Works
- Import from China: Goods arrive at a North American port, such as Manzanillo, then are transported in bond to a Mexico bonded warehouse (Tijuana or Monterrey).
- Storage in Mexico: Products are held in the Mexico bonded warehouse, not subject to U.S. tariffs or rates at this stage.
- U.S. Entry When Ready: When you’re ready, or if tariffs drop, you import the goods into the U.S., paying the tariff rate in effect at that time.
- Speed and Flexibility: This approach allows for rapid response to market changes while controlling costs and managing inventory more efficiently.
Why Partner with SCS for Your Bonded Warehouse Needs?
Supply Chain Solutions (SCS) operates bonded warehouses in the U.S. and Mexico, including Tijuana and Monterrey. Our team understands the new rules and can help you position your inventory for maximum flexibility. With a list of bonded warehouses across North America, including Miami, Houston, Savannah, Atlanta, and Charlotte, as well as strategic locations in Mexico, we help you adapt to changing regulations and maintain a resilient supply chain.
Ready to Stay Flexible in a Changing Tariff Environment?
Contact Supply Chain Solutions (SCS) to discuss how a Mexico bonded warehouse can help your business remain competitive and agile as trade rules change. Our experts will guide you through the new compliance landscape and build a solution tailored to your needs.
Frequently Asked Questions
What is a bonded warehouse and how does the new rule affect a bonded warehouse?
A bonded warehouse is a secure facility where goods are stored without paying duties immediately. Under the new rule, the tariff rate for goods in a bonded warehouse is fixed at entry, so you can’t benefit from future tariff reductions while goods are stored. Using a Mexico bonded warehouse can restore the flexibility to time your U.S. imports for the best rates.
What is a foreign trade zone and how does the new Executive Order impact foreign trade zones?
A foreign trade zone is a special area in the U.S. for tariff management. With the new Executive Order, goods entering a foreign trade zone must be admitted at the current tariff rate, losing the option to adjust to future rate changes. Mexico bonded warehouses offer a way to avoid this limitation.
What is a free trade zone and how is it different from a foreign trade zone under current rules?
A free trade zone is an area for duty-free storage or processing, but in the U.S., FTZs are the official program. Both now require goods to be entered at the current tariff rate, but a Mexico bonded warehouse keeps your goods outside U.S. rules—so you can still take advantage of future changes.
