Title 19 — Customs DutiesRelease 119-73
§81c Exemption from customs laws of merchandise brought into foreign trade zone
Title 19 › Chapter CHAPTER 1A— - FOREIGN TRADE ZONES › § 81c
Summary
Merchandise can be brought into a foreign trade zone without having to follow U.S. customs rules while it stays there. Goods can be stored, shown, sold, taken apart, repacked, mixed with other goods, worked on, or made into new things in the zone. They can also be exported, destroyed, or sent into U.S. customs territory from the zone. If foreign goods are sent into U.S. customs territory, they must follow import laws and pay duties and taxes. If someone asks and the goods have not changed their tariff type, customs officials will appraise the goods under supervision and figure the duties. Duties on goods used to make other items are based on how much foreign material was used, with rules for waste and for dividing duties when one process makes several products. U.S.-made items with internal taxes paid may enter a zone and come back without new quotas, duties, or taxes if their identity is kept; if identity is lost, they can be treated as foreign. Goods taken into a zone only for export, destruction (except certain alcoholic beverages), or storage are treated as exported for drawback and related tax rules. Denatured or taxed distilled spirits may be used in a zone to make other products under special rules, and certain non-beverage products made there can get drawback like similar work done in the United States. For petroleum refinery work, the “time of separation” is the whole manufacturing period and values are averaged over that time, using approved methods to protect revenue. Equipment or parts brought into a zone to be used as production machinery do not owe duty until they are fully assembled, installed, tested, and actually used; the owner must certify this when the items enter and pay estimated duties when use begins.
Full Legal Text
Title 19, §81c
Customs Duties — Source: USLM XML via OLRC
(a)Foreign and domestic merchandise of every description, except such as is prohibited by law, may, without being subject to the customs laws of the United States, except as otherwise provided in this chapter, be brought into a zone and may be stored, sold, exhibited, broken up, repacked, assembled, distributed, sorted, graded, cleaned, mixed with foreign or domestic merchandise, or otherwise manipulated, or be manufactured except as otherwise provided in this chapter, and be exported, destroyed, or sent into customs territory of the United States therefrom, in the original package or otherwise; but when foreign merchandise is so sent from a zone into customs territory of the United States it shall be subject to the laws and regulations of the United States affecting imported merchandise: Provided, That whenever the privilege shall be requested and there has been no manipulation or manufacture effecting a change in tariff classification, the appropriate customs officer shall take under supervision any lot or part of a lot of foreign merchandise in a zone, cause it to be appraised and taxes determined and duties liquidated thereon. Merchandise so taken under supervision may be stored, manipulated, or manufactured under the supervision and regulations prescribed by the Secretary of the Treasury, and whether mixed or manufactured with domestic merchandise or not may, under regulations prescribed by the Secretary of the Treasury, be exported or destroyed, or may be sent into customs territory upon the payment of such liquidated duties and determined taxes thereon. If merchandise so taken under supervision has been manipulated or manufactured, such duties and taxes shall be payable on the quantity of such foreign merchandise used in the manipulation or manufacture of the entered article. Allowance shall be made for recoverable and irrecoverable waste; and if recoverable waste is sent into customs territory, it shall be dutiable and taxable in its condition and quantity and at its weight at the time of entry. Where two or more products result from the manipulation or manufacture of merchandise in a zone the liquidated duties and determined taxes shall be distributed to the several products in accordance with their relative value at the time of separation with due allowance for waste as provided for above: Provided further, That subject to such regulations respecting identity and the safeguarding of the revenue as the Secretary of the Treasury may deem necessary, articles, the growth, product, or manufacture of the United States, on which all internal-revenue taxes have been paid, if subject thereto, and articles previously imported on which duty and/or tax has been paid, or which have been admitted free of duty and tax, may be taken into a zone from the customs territory of the United States, placed under the supervision of the appropriate customs officer, and whether or not they have been combined with or made part, while in such zone, of other articles, may be brought back thereto free of quotas, duty, or tax: Provided further, That if in the opinion of the Secretary of the Treasury their identity has been lost, such articles not entitled to free entry by reason of noncompliance with the requirements made hereunder by the Secretary of the Treasury shall be treated when they reenter customs territory of the United States as foreign merchandise under the provisions of the tariff and internal-revenue laws in force at that time: Provided further, That under the rules and regulations of the controlling Federal agencies, articles which have been taken into a zone from customs territory for the sole purpose of exportation, destruction (except destruction of distilled spirits, wines, and fermented malt liquors), or storage shall be considered to be exported for the purpose of—
(1)the draw-back, warehousing, and bonding, or any other provisions of the Tariff Act of 1930, as amended, and the regulations thereunder; and
(2)the statutes and bonds exacted for the payment of draw-back, refund, or exemption from liability for internal-revenue taxes and for the purposes of the internal-revenue laws generally and the regulations thereunder.
(b)The exemption from the customs laws of the United States provided under subsection (a) shall not be available on or before December 31, 1992, to bicycle component parts unless such parts are reexported from the United States, whether in the original package, as components of a completely assembled bicycle, or otherwise.
(c)(1)Notwithstanding the provisions of the fifth proviso of subsection (a), any article (within the meaning of section 5002(a)(14) of title 26) may be manufactured or produced from denatured distilled spirits which have been withdrawn free of tax from a distilled spirits plant (within the meaning of section 5002(a)(1) of title 26), and articles thereof, in a zone.
(2)Notwithstanding the provisions of the fifth proviso of subsection (a), distilled spirits which have been removed from a distilled spirits plant (as defined in section 5002(a)(1) of title 26) upon payment or determination of tax may be used in the manufacture or production of medicines, medicinal preparation, food products, flavors, or flavoring extracts, which are unfit for beverage purposes, in a zone. Such products will be eligible for drawback under the internal revenue laws under the same conditions applicable to similar manufacturing or production operations occurring in customs territory.
(d)In regard to the calculation of relative values in the operations of petroleum refineries in a foreign trade zone, the time of separation is defined as the entire manufacturing period. The price of products required for computing relative values shall be the average per unit value of each product for the manufacturing period. Definition and attribution of products to feedstocks for petroleum manufacturing may be either in accordance with Industry Standards of Potential Production on a Practical Operating Basis as verified and adopted by the Secretary of the Treasury (known as producibility) or such other inventory control method as approved by the Secretary of the Treasury that protects the revenue.
(e)(1)Notwithstanding any other provision of law, if all applicable customs laws are complied with (except as otherwise provided in this subsection), merchandise which is admitted into a foreign trade zone for use within such zone as production equipment or as parts for such equipment, shall not be subject to duty until such merchandise is completely assembled, installed, tested, and used in the production for which it was admitted.
(2)The person who admits the merchandise described in paragraph (1) into the zone shall, at the time of such admission, certify to the Customs Service that the merchandise is admitted into the zone pursuant to this subsection for use within the zone as production equipment or as parts for such equipment and that the merchandise will be entered and estimated duties deposited when use of the merchandise in production begins.
(3)At the time use of the merchandise in production begins, the merchandise shall be entered, as provided for in section 484 of the Tariff Act of 1930 [19 U.S.C. 1484], and estimated duties shall be deposited with the Customs Service. The merchandise shall be subject to tariff classification according to its character, condition, and quantity, and at the rate of duty applicable, at the time use of the merchandise in production begins.
(4)For purposes of this subsection, the term “foreign trade zone” includes a subzone.
Legislative History
Notes & Related Subsidiaries
Amendment of SectionFor termination of amendment by section 107(c) of Pub. L. 108–77, see Effective and Termination Dates of 2003 Amendment note below. For termination of amendment by section 501(c) of Pub. L. 100–449, see Effective and Termination Dates of 1988 Amendment note below.
Editorial Notes
References in Text
The Tariff Act of 1930, referred to in subsec. (a)(1), is act
June 17, 1930, ch. 497, 46 Stat. 590, which is classified generally to chapter 4 (§ 1202 et seq.) of this title. For complete classification of this Act to the Code, see Tables. section 1001 and 1201 of this title, referred to in subsec. (a), which comprised the dutiable and free lists for articles imported into the United States, were repealed by Pub. L. 87–456, title I, § 101(a),
May 24, 1962, 76 Stat. 72, which act also revised the Tariff Schedules of the United States. The Tariff Schedules of the United States were replaced by the Harmonized Tariff Schedule of the United States which is not set out in the Code. See Publication of Harmonized Tariff Schedule note set out under section 1202 of this title. References in subsec. (a) to section and chapters of the Internal Revenue Code are references to section and chapters of the Internal Revenue Code, 1939, which was repealed by section 7851 of Title 26, I.R.C. 1954. The Internal Revenue Code of 1954 was redesignated the Internal Revenue Code of 1986 by Pub. L. 99–514, § 2, Oct. 22, 1986, 100 Stat. 2095. Corresponding sections of I.R.C. 1986 to section and chapters of I.R.C. 1939 referred to in the text are set out below. For provision deeming a reference in other laws to a provision of I.R.C. 1939, also as a reference to corresponding provision of I.R.C. 1986, see section 7852(b) of Title 26, I.R.C. 1986. section 203(a) of the United States-Chile Free Trade Agreement Implementation Act, referred to in subsec. (a), is section 203(a) of Pub. L. 108–77, which is set out in a note under section 3805 of this title. I.R.C. 1939I.R.C. 1986 § 1807Omitted Chapter 15§ 5701 et seq. Chapter 16§ 4591 et seq., § 4811 et seq. Chapter 17§ 4831 et seq. Chapter 21Omitted Chapter 23§ 4701 et seq. Chapter 24§ 4801 et seq. Chapter 25§§ 4181, 4182, and 5811 et seq. Chapter 26§ 5001 et seq. Chapter 32§ 4501 et seq. section 204 of the United States-Canada Free-Trade Agreement Implementation Act of 1988, referred to in subsec. (a), is section 204 of Pub. L. 100–449, which is set out in a note under section 2112 of this title.
Amendments
2020—Subsec. (a). Pub. L. 116–260 substituted “(subject to section 4534(e) of this title)” for “(subject to section 508(b)(2)(B) of the Tariff Act of 1930)” in seventh proviso. Pub. L. 116–113, which directed amendment of the flush text of subsec. “(a)(2)” by substituting “goods subject to USMCA drawback, as defined in section 4534(a) of this title” for “goods subject to NAFTA drawback, as defined in section 3333(a) of this title”, “a USMCA country, as defined in section 4502 of this title” for “a NAFTA country, as defined in section 3301(4) of this title”, and “USMCA” for “NAFTA” wherever appearing, was executed by making the substitutions in concluding provisions of subsec. (a), to reflect the probable intent of Congress. 2003—Subsec. (a). Pub. L. 108–77, §§ 107(c), 203(b)(5), temporarily inserted before period at end “Provided further, That no merchandise that consists of goods subject to Chile FTA drawback, as defined in section 203(a) of the United States-Chile Free Trade Agreement Implementation Act, that is manufactured or otherwise changed in condition shall be exported to Chile without an assessment of a duty on the merchandise in its condition and quantity, and at its weight, at the time of its exportation (or if the privilege in the first proviso to this subsection was requested, an assessment of a duty on the merchandise in its condition and quantity, and at its weight, at the time of its admission into the zone) and the payment of the assessed duty before the 61st day after the date of exportation of the article, except that the customs duty may be waived or reduced by (1) 100 percent during the 8-year period beginning on
January 1, 2004; (2) 75 percent during the 1-year period beginning on
January 1, 2012; (3) 50 percent during the 1-year period beginning on
January 1, 2013; and (4) 25 percent during the 1-year period beginning on
January 1, 2014”. See Effective and Termination Dates of 2003 Amendment note below. 1999—Subsec. (a). Pub. L. 106–36 struck out second period at end of last sentence. 1996—Subsec. (e). Pub. L. 104–295 added subsec. (e). 1993—Subsec. (a). Pub. L. 103–182, in provisions following par. (2), inserted second proviso relating to goods subject to NAFTA drawback, and in last proviso inserted “, if Canada ceases to be a NAFTA country and the suspension of the operation of the United States-Canada Free-Trade Agreement thereafter terminates,” after “That” and substituted “during the period such Agreement is in operation” for “on or after
January 1, 1994, or such later date as may be proclaimed by the President under section 204(b)(2)(B) of such Act of 1988,”. 1990—Subsec. (b). Pub. L. 101–382, § 481, substituted “on or before
December 31, 1992” for “before
January 1, 1991”. Subsec. (c). Pub. L. 101–382, § 484F, designated existing provisions as par. (1), struck out “domestic” before “denatured distilled”, inserted provisions relating to withdrawal free of tax from a distilled spirits plant, and added par. (2). 1988—Subsec. (a). Pub. L. 100–449 temporarily inserted provision directing that, “with the exception of drawback eligible goods under section 204(a) of the United States-Canada Free-Trade Agreement Implementation Act of 1988, no article manufactured or otherwise changed in condition (except a change by cleaning, testing or repacking) shall be exported to Canada on or after
January 1, 1994, or such later date as may be proclaimed by the President under section 204(b)(2)(B) of such Act of 1988, without the payment of a duty that shall be payable on the article in its condition and quantity, and at its weight, at the time of its exportation to Canada unless the privilege in the first proviso to this subsection was requested.” See Effective and Termination Dates of 1988 Amendment note below. Subsec. (b). Pub. L. 100–418 substituted “
January 1, 1991” for “
June 30, 1986”. Subsec. (d). Pub. L. 100–647 added subsec. (d). 1986—Subsec. (c). Pub. L. 99–514 added subsec. (c). 1984—Subsec. (a). Pub. L. 98–573 designated existing provisions as subsec. (a), redesignated former pars. (a) and (b) as pars. (1) and (2), respectively, of subsec. (a), and added subsec. (b). 1970—Pub. L. 91–271 substituted references to the appropriate customs officers for references to the collector of customs wherever appearing. 1950—Act
June 17, 1950, amended section generally to remove the prohibition against, and to authorize specifically, manufacture and exhibition within a zone.
Statutory Notes and Related Subsidiaries
Effective Date
of 2020 Amendment Pub. L. 116–260, div. O, title VI, § 601(h), Dec. 27, 2020, 134 Stat. 2152, provided that: “This section [amending this section, sections 1311 to 1313, 1508, 1520, 1562, 1677f, 3472, 3473, 4531, and 4534 of this title, and sections 290m to 290m–5 and 290m–7 of Title 22, Foreign Relations and Intercourse, and enacting provisions set out as a note under section 3472 of this title] and the
Amendments
made by this section shall take effect on
July 1, 2020.” Pub. L. 116–113, title V, § 501(g), Jan. 29, 2020, 134 Stat. 69, provided that: “(1) In general.—Each transfer, redesignation, and amendment made by subsections (b) through (e) [amending this section and sections 1311 to 1313, 1562, 3333, and 4534 of this title] shall—“(A) take effect on the date on which the USMCA enters into force [
July 1, 2020]; and “(B) apply with respect to a good entered, or withdrawn from warehouse for consumption, on or after that date. “(2) Transition from nafta treatment.—In the case of a good entered, or withdrawn from warehouse for consumption, before the date on which the USMCA enters into force—“(A) the
Amendments
made by subsections (b) through (e) shall not apply with respect to the good; and “(B) the provisions of law amended by such subsections, as such provisions were in effect on the day before that date, shall continue to apply on and after that date with respect to the good.” [For definition of “USMCA” as used in section 501(g) of Pub. L. 116–113, set out above, see section 4502 of this title.] Effective and Termination Dates of 2003 AmendmentAmendment by Pub. L. 108–77 effective on the date the United States-Chile Free Trade Agreement enters into force (Jan. 1, 2004), and to cease to be effective on the date the Agreement ceases to be in force, see section 107(a), (c) of Pub. L. 108–77, set out in a note under section 3805 of this title.
Effective Date
of 1996 Amendment Pub. L. 104–295, § 31(b), Oct. 11, 1996, 110 Stat. 3537, provided that: “The amendment made by this section [amending this section] shall apply with respect to merchandise admitted into a foreign trade zone after the date that is 15 days after the date of the enactment of this Act [Oct. 11, 1996].”
Effective Date
of 1993 AmendmentAmendment by Pub. L. 103–182 applicable (1) with respect to exports from the United States to Canada on Jan. 1, 1996, if Canada is a NAFTA country on that date and after such date for so long as Canada continues to be a NAFTA country and (2) with respect to exports from the United States to Mexico on Jan. 1, 2001, if Mexico is a NAFTA country on that date and after such date for so long as Mexico continues to be a NAFTA country, see section 213(c) of Pub. L. 103–182, formerly set out as an
Effective Date
note under former section 3331 of this title.
Effective Date
of 1990 Amendment Pub. L. 101–382, title III, § 485(a), Aug. 20, 1990, 104 Stat. 712, provided that: “Except as otherwise provided in this title, the
Amendments
made by this title [amending this section and section 1309, 1313, 1466, and 1553 of this title and enacting provisions set out as notes under section 1309, 1466, and 1553 of this title], shall apply with respect to articles entered, or withdrawn from warehouse for consumption, on or after October 1, 1990.” Effective and Termination Dates of 1988 AmendmentAmendment by Pub. L. 100–449 effective on date the United States-Canada Free-Trade Agreement enters into force (Jan. 1, 1989), and to cease to have effect on date Agreement ceases to be in force, see section 501(a), (c) of Pub. L. 100–449, set out in a note under section 2112 of this title. Amendment by section 1783(f) of Pub. L. 100–418 applicable with respect to articles entered or withdrawn from warehouse for consumption, after Sept. 30, 1988, pursuant to section 1831(a) of Pub. L. 100–418.
Effective Date
of 1984 Amendment Pub. L. 98–573, title II, § 231(a)(3), Oct. 30, 1984, 98 Stat. 2990, provided that: “The
Amendments
made by paragraph (2) [amending this section] shall take effect on the fifteenth day after the date of the enactment of this Act [Oct. 30, 1984].”
Effective Date
of 1970 AmendmentAmendment by Pub. L. 91–271 effective with respect to articles entered, or withdrawn from warehouse for consumption, on or after Oct. 1, 1970, and such other articles entered or withdrawn from warehouse for consumption prior to such date, or with respect to which a protest has not been disallowed in whole or in part before Oct. 1, 1970, see section 203 of Pub. L. 91–271, set out as a note under section 1500 of this title.
Transfer of Functions
For
Transfer of Functions
, personnel, assets, and liabilities of the United States Customs Service of the Department of the Treasury, including functions of the Secretary of the Treasury relating thereto, to the Secretary of Homeland Security, and for treatment of related references, see section 203(1), 551(d), 552(d), and 557 of Title 6, Domestic Security, and the Department of Homeland Security Reorganization Plan of November 25, 2002, as modified, set out as a note under section 542 of Title 6. For establishment of U.S. Customs and Border Protection in the Department of Homeland Security, treated as if included in Pub. L. 107–296 as of Nov. 25, 2002, see section 211 of Title 6, as amended generally by Pub. L. 114–125, and section 802(b) of Pub. L. 114–125, set out as a note under section 211 of Title 6. Floor Stocks Tax Treatment of Articles in Foreign Trade ZonesNotwithstanding this chapter, articles located in a foreign trade zone on the
Effective Date
of increases in tax under specific
Amendments
by Pub. L. 101–508 subject to floor stocks taxes under certain circumstances, see section 11218 of Pub. L. 101–508, set out as a note under section 5001 of Title 26, Internal Revenue Code. Plan
Amendments
Not Required Until January 1, 1989For provisions directing that if any
Amendments
made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1801–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of Title 26, Internal Revenue Code.
Executive Documents
Transfer of Functions
All offices of collector of customs, comptroller of customs, surveyor of customs, and appraiser of merchandise in Bureau of Customs of Department of the Treasury to which appointments were required to be made by President with advice and consent of Senate ordered abolished with such offices to be terminated not later than
December 31, 1966, by Reorg. Plan No. 1 of 1965, eff.
May 25, 1965, 30 F.R. 7035, 79 Stat. 1317, set out as a note under section 1 of this title. All functions of offices eliminated were already vested in Secretary of the Treasury by Reorg. Plan No. 26 of 1950, eff.
July 31, 1950, 15 F.R. 4935, 64 Stat. 1280, set out in the Appendix to Title 5, Government Organization and Employees.
Reference
Citations & Metadata
Citation
19 U.S.C. § 81c
Title 19 — Customs Duties
Last Updated
Apr 6, 2026
Release point: 119-73