We describe the project for the construction of a terahertz (THz) beamline to be called TeraFERMI at the seeded FERMI free electron laser (FEL) facility in Trieste, Italy. We discuss topics as the underlying scientific case, the choice of the source, the expected performance, and THz beam propagation. Through electron beam dynamics simulations we show that the installation of the THz source in the beam dump section provides a new approach for compressing the electron bunch length without affecting FEL operation. Thanks to this further compression of the FEL electron bunch, the TeraFERMI facility is expected to provide THz pulses with energies up to the mJ range during normal FEL operation.