There is often a lack of detail as to what defines a Canadian Foreign Trade Zone (FTZ). It is typically understood that it is a designated area or zone where the purchase or import of raw materials, components or finished products is officially eligible for exemption from tariffs and taxes. Such materials and goods can generally be stored, processed or assembled in the FTZ for re-export (in which case taxes and duties generally would not apply) or for sale on the domestic market.
While most of this is true, it is important to note that a Canadian FTZ is not just a designated area or zone – it can extend to all of Canada’s domestic territory. For example, your business could utilize any type of storage facility, not necessarily a warehouse, that could be part of your office building or even a hotel conference room, depending on your immediate requirements. This storage facility would be licensed as a bonded warehouse by the Minister of Public Safety and Emergency Preparedness under subsection 91(1) of the Customs Tariff. We will cover more on the customs bonded warehouse program under programs offered by a Canadian FTZ.
Who Can Use a Canadian FTZ?
Resident and Non-Resident Importers
Both domestically-based businesses (resident importers) and internationally-based businesses (non-resident importers aka NRIs), that engage in import and export activities within Canada can utilize a Canadian FTZ as defined earlier. Whether you’re an established business aiming to optimize your operations or a new entrant looking for a competitive advantage, an FTZ offers a diverse range of opportunities.
What Are the Benefits of Using a Canadian FTZ?
There are a number of trade incentive programs that are offered within a Canadian FTZ which can benefit businesses by removing geographical barriers, reducing operating costs, preventing unnecessary transactions, and improving international competitiveness. We will proceed to outline the programs which are most commonly taken advantage of and their specific benefits, but also challenges.