Does the cost reduction feature of zone status translate into an import subsidy or a cause of imports?
No. Zones do not cause imports. In fact, the reverse is true. The increasing importance of international trade in the U.S. economy has caused an increase in the use of zones. Periodically, oversight agencies including the International Trade Commission and the General Accounting Office examine the impact of the U.S. Foreign-Trade Zones program. Congress has also held hearings on the subject. These periodic studies and reviews have not produced any information leading the conclusion that zones cause imports. The decision to import precedes the decision to use zones. Decisions about where to source various products and inputs is motivated by one or a combination of factors including: price, quality, and product availability. The “cost reduction feature” of zones relates to the cost of conducting business operations in the United States (distribution, manufacturing, and other non-manufacturing activities) that otherwise would be avoided by conducting these operations at a foreign site.
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