Foreign Trade Zone Programs

Windsor-Essex is designated as a Foreign Trade Zone (FTZ), which allows tax and tariff exemptions to promote cross-border business and production. Invest WindsorEssex leads the Foreign Trade Zone programs for the region and is a one-stop-shop for information on Canada’s FTZ policies and programs.

What is a Foreign Trade Zone?

A Foreign Trade Zone is an official designation that refers to a specific location within a country and allows for tariff and tax exemptions on the purchase or importation of raw materials, components or finished goods. These materials and goods can generally be stored, processed or assembled in the FTZ for re-export or for entry into the domestic market.

If materials or goods are re-exported, taxes and duties generally would not apply. If these materials or goods are developed to enter the domestic market, taxes and duties would be deferred until the time of entry.

FTZ programs

Explore the FTZ programs available. Contact us and we can help you navigate the process and access these program benefits.

The Duties Relief Program allows businesses to import goods into Canada without having to pay customs duties as long as the goods were either stored, processed or used to manufacture other goods and then later exported.

The Drawback Program allows businesses to apply for a refund of customs duties paid on imported goods that are later re-exported or destroyed under Canada Border Services Agency (CBSA) supervision.

The Customs Bonded Warehouse Program allows importers to store imported or domestic goods destined for export in their own private licensed or publicly licensed CBSA customs bonded warehouse without having to pay customs duties and other import duties or taxes including the GST.

The Export Distribution Centre Program removes the requirement to pay GST/HST on imported goods and some domestic goods. It is intended to benefit export-oriented businesses that store or process goods and then re-export those goods.

The Exporters of Processing Services Program relieves participants of the requirement to pay the GST/HST on imported goods belonging to non-residents, as long as these goods are imported for processing, distribution or storage and are later exported.

Benefits and advantages

The FTZ offers a variety of benefits and advantages for businesses.

Invest WindsorEssex provides support on the programs and policies related to the FTZ. This includes accessing streamlined information on FTZ programming. We can be your main contact for accessing regulatory information from the following agencies:

FTZ programs can help reduce costs to manufacturers. For example, they can:

  • Help your company manage inventory and cash flow by offering programs that reduce or refund import duties on products that are later exported
  • Relieve export-oriented companies from paying GST and HST on products that will be exported

The FTZ promotes integration of subject matter experts across southern Ontario with foreign markets and global value chains. This makes it easier for companies looking to export and expand into global leaders.

Frequently asked questions

View the frequently asked questions specifically about the Windsor-Essex Free Trade Zone.

Our plan is to:

  • Create international awareness of Windsor-Essex’ strategic geographic location for conducting international trade activities
  • Promote our area’s amazing products and services that are ready for export
  • Promote our region’s world-class facilities, transportation and logistics and international trade services providers that are ready to cater to the needs of foreign businesses looking for assistance in their North American market penetration strategy

Aside from the goal of retaining and expanding current Windsor-Essex businesses and helping them to be more competitive in the global marketplace, the FTZ will offer world-class personalized concierge services to international investors and businesses seeking to relocate or start new operations in our region.

The successful attraction of new investment will in turn serve the interests of the whole community because we will have successfully created new jobs, improved infrastructures and increased our tax base.

Similar to a tourist information centre, we will provide information on Canada’s FTZ policies and programs and area service providers. We will offer “Personalized concierge-style services” that may include one-on-one consultations, information sessions, training seminars, etc. to businesses that are located in or have expressed an interest in locating their activities within our service area or are looking to use local service providers or buy local products.

If you already use a customs broker, you should continue to do so.

Yes, the Obsolete or Surplus Goods Program may be of interest to local businesses that purchase products from Canadian suppliers who have imported the products. The purpose of the Obsolete or Surplus Goods Program is to assist Canadian industry in competing internationally by reducing exportation costs on valueless goods that will not enter the domestic market. By allowing the destruction of obsolete or surplus goods, the necessity to export the imported goods in order to qualify for a drawback is removed. This eliminates the shipping costs associated with exporting valueless goods.

Export-oriented manufacturers, processors and producers can use these programs. This means, Canadian-based production activities can be performed on imported inputs without having to pay duties and taxes, as long as the finished or further processed products are exported within a certain time limit. Typically, two to four years after the importation of inputs.

Import-oriented businesses can benefit from Canada’s private or public customs bonded warehouses and bonded third-party logistics (3PL) service providers. These businesses export and store their goods in Canada for the purpose of subsequently selling them in North America, and include:

  • Manufacturers, processors and producers
  • Distributors
  • Wholesalers and retailers including small and medium-sized enterprises (SMEs) and home-based businesses and artisans
  • Foreign-based businesses (non-resident importers)

Any type of business can import goods and store them in these FTZ-bonded facilities for a period of up to four years, without having to pay import duties or taxes including GST, until the goods are ready to be:

  • Shipped within Canada
  • Used in Canada
  • Entered into further processing

If, however, the goods are directly shipped from the bonded facility to a destination outside of Canada, then, no duties or taxes are ever owed or payable to the Canada Border Services Agency (CBSA).

International event organizers and local facilities that may host conventions, exhibitions or trade shows may be issued temporary customs bonded warehouse licenses for a specific location that will house imported goods to be displayed at such events. Such goods may include products on display and products that form part of the display such as:

  • Stands
  • Tables
  • Backdrops
  • Decorations
  • Display booths
  • Tents and other housings or coverings

Aside from storing imported goods, the following activities, that do not change the condition of the imported goods, may also be performed while they are “in bond”:

  • Disassembling or reassembling goods that have been assembled or disassembled for packing, handling or transportation
  • Displaying
  • Inspecting
  • Marking, labeling, tagging, or ticketing
  • Packing, unpacking, packaging or repackaging (including bottling)
  • Testing and removing a small quantity of material, or a portion, a piece or individual object that represents the goods, for the sole purpose of soliciting order for goods or services

In addition, the following activities that do not materially alter the characteristics of the goods, may be carried on in a bonded facility:

  • Cleaning
  • Diluting
  • Preserving
  • Normal maintenance or servicing
  • Sorting or grading
  • Separating defective goods from prime quality goods
  • Trimming
  • Filing
  • Slitting and cutting

Yes, the primary aim of the Government of Canada’s FTZ programs is to stimulate economic growth and development in Canada. These programs have been created to advance Canadian competitiveness by helping Canadian businesses maintain and expand their domestic operations.

Similarly, the programs also aim to attract foreign businesses to create a physical presence in our country by opening distribution centres, retail shops, after sales or warranty repair centres, etc.

Furthermore, FTZ programs benefit the country as a whole due to the creation and retention of jobs, capital, infrastructure and tax base.

Global businesses, foreign investors and their site selectors often look at a potential business destination’s available FTZ programs. This is particularly the case for global businesses that already use FTZ programs and facilities in other countries. If an international business turns its

attention to North America, and wishes to either produce or simply distribute or sell directly to consumers its finished products in North America, they may look at benefits of utilizing bonded facilities in either Mexico, the United States or Canada and choose a single location to serve the entire continent.

Canada’s FTZ programs in comparison to America’s Foreign-Trade Zone program are less costly to administer and more accessible to all business sizes. They are not just designed for a multinational manufacturing facility or distribution center.

Yes, Canada’s FTZ programs are indeed better suited to cater to a small retailer’s needs than they are for multinationals. For example, in the United States and Canada, a multinational cannot store bonded imported goods in the back store of each retail outlet but only at a bonded distribution centre. In Canada, a small shop can be issued a customs-bonded warehouse license for its back store storage unit and benefit from duty and tax deferral on its imported goods until a time when the retailer needs to stock up the shelves in the retail area, or ship the goods elsewhere in Canada. The small retailer would of course not need to pay duties or taxes if he were to ship his products across the border to a U.S. destination or anywhere else outside of Canada.

In many instances, these zones are used by multinational corporations to set up factories to produce goods such as clothing, shoes, electronics and vehicles, or their parts. In some jurisdictions, corporations setting up in a zone may be given a number of regulatory and fiscal incentives and even property tax breaks.

Corporations may also receive incentives relating to the methods of customs control and filing requirements. Once again, in the United States, corporations are allowed to file one weekly customs declaration for all the goods that exit in an FTZ during that specific week. In Canada, FTZ programs simply offer the deferral of the payment of duties and taxes on imported goods while they are being stored here.

No, import duties and taxes are always payable if the imported goods remain in Canada permanently. These programs are aimed at allowing importers to “temporarily import” goods into this country in order to conduct business operations in Canada rather than offshore. This includes manufacturing, distribution and online retail for example.

A business’ decision to import goods is usually motivated by one or more of the following factors:

  • Price
  • Quality
  • Product availability

So, in some respects, a suggestion that Canadian FTZ programs cause imports, would be the same as suggesting that imports are caused by the trucks, trains, ships and planes that transport imported goods into Canada.

No. If a Canadian-owned business and a foreign-owned business have identical international trade operations, the potential benefit of Canada’s FTZ programs for each of them is identical.

The Government of Canada’s FTZ programs encourage and enable production and logistics activities to be performed here in Canada rather than take place in another country.

Free trade agreements (FTAs), including the TPP, CETA and CUSMA, result in the reduction of many Canadian import tariffs (customs duties). As a result, certain businesses that have benefited from Canada’s FTZ programs in the past may find that they no longer need the programs to place them on an even playing field with their competitors abroad. This occurs by design and is a positive reflection of Canada’s approach and strategy on international trading with partner countries.

While some businesses find that the use of FTZ programs are no longer required to improve their cash flow or recuperate import duties on goods that were subsequently re-exported, others discover that the programs offer much-needed relief from the Goods and Services Tax (GST) that remains applicable even on FTA qualified imports.

No, in North America alone, there are more than 250 Foreign Trade Zones and 500 sub-zones in the United States. Northern Mexico is home to no less than 3,000 “Maquiladora” manufacturing or export assembly plants. Additionally, outside of North America, the World Customs Organization approved the concept of “Free Zones” and they are present in over 135 countries worldwide. In most jurisdictions, they are called “Free Zones”, but in some jurisdictions they may be called:

  • Free trade zones
  • Export processing zones
  • Free ports
  • Special economic zones
  • Maquiladoras
  • Manufacturing under bond facilities
  • Customs warehouses