Foreign trade zones — known by their common reference as FTZs — are big business.
In 2013 U.S. Foreign-Trade Zones accounted for the export of nearly $80 billion in merchandise, employed approximately 390,000 Americans in well-paying jobs and received more than $835 billion in foreign and domestic merchandise.
Numbers for 2014, due in the fall, are expected to be equally as good.
Don’t know what a Foreign Trade Zone is exactly?
You’re not alone, even though FTZ 104 is located in our own back yard and growing.
Foreign Trade Zones are designated areas near U.S. Ports of Entry where commercial merchandise can be brought in and held without being subject to the tariffs and taxes imposed by U.S. Customs and Border Protection.
Lest you think these companies are getting away with anything, it should be pointed out that all FTZs are operated under the supervision of Customs agents.
Authorized by Congress in 1934, the Foreign-Trade Zone program was created to encourage and expedite foreign commerce.
The program allows the U.S. to achieve its trade policy goals, including export promotion, while at the same time supporting domestic job growth and economic development, according to Leigh Ryan, director of trade services and FTZ 104 for World Trade Center Savannah.
“With more than 3,000 companies taking advantage of the 250 FTZs around the country, this has become a thriving sector of the U.S. economy,” Ryan said.
Georgia has three FTZs — in Atlanta, Savannah and Brunswick.
World Trade Center Savannah has been the federal grantee — or administrator — for FTZ 104 since 2012 when the Savannah Airport Commission transferred the grant of authority of the trade zone after nearly 30 years.
The Savannah-based FTZ has just been approved by the Foreign-Trade Zones board at the U.S. Commerce Department to expand to include six new counties: Candler, Emanuel, Jenkins, Tattnall, Toombs and Treutlen.
FTZ 104 currently services Bulloch, Bryan, Chatham, Columbia, Effingham, Evans, Liberty, Long, Richmond and Screven counties, bringing to 16 the number of counties within their service area that can take advantage of the FTZ’s competitive edge in international trade.
“Foreign-Trade Zone 104 has already proven to be a valuable asset in attracting foreign direct investment projects and helping regional businesses grow,” said World Trade Center Savannah President and CEO Trip Tollison. “By adding to the zone, World Trade Center Savannah can help businesses and communities grow in these counties.”
How FTZs help
Foreign Trade Zones provide economic benefits, both to participating businesses and to the country, Ryan said.
Most of those benefits center on Customs Duty – a tariff or tax imposed on goods when they are transported across international borders.
The purpose of a Customs Duty is to protect each country’s economy and jobs by controlling the flow of goods in and out of that country.
“Within the FTZ program, U.S.-based companies can take advantage of duty deferral, duty reduction or duty elimination,” Ryan said.
Duty deferral allows for duties to be paid only when and if the merchandise leaves the FTZ and enters into U.S. commerce, she said. Duty reduction allows FTZ users to elect and pay duties on the finished product when it is ready to leave the zone rather than the individual components as they come into the zone. Duties on the finished product are often significantly lower.
Duty elimination applies to items imported into the FTZ by U.S.-based companies and then exported, helping to offset customs advantages available to foreign companies that compete with the U.S.
“For example, if a U.S.-based company uses components from the U.S., India, Europe and South America in their manufacturing process, they can bring those foreign parts into their foreign trade zone and defer the duty until the finished product is ready for market,” Ryan said. “Additionally, companies can potentially reduce their duty by electing to pay the lesser of the duties imposed, be that of the finished product or the individual components. Finally, if they sell the product oversees and it is exported, no duty is due.”
The FTZ also benefits international companies that have established a U.S. presence, making it a selling tool for recruiting such companies as Mitsubishi Hitachi to the area.
“The Foreign Trade Zone initiative for Mitsubishi Hitachi Power Systems Americas is a major component of our business model,” said Sheila A. Burtz, Production Control and Sourcing manager for Mitsubishi Hitachi’s Savannah Machinery Works.
“Due to the complexity, cost and timing of our turbine manufacturing and repair services, the benefits of duty deferral and the handling of tariff shifts to reduce the total duties has become a critical component of our successful cash flow.
“The network within the FTZ program has become invaluable with the moving of product from our sister companies and other destinations.”
FTZ 104 played a role in bringing Mitsubishi Hitachi to the Pooler megasite, Burtz added.
“When making the selection (for our new turbine manufacturing plant) we were well aware that the Pooler Mega-site offered the benefits of an established FTZ zone,” she said.
“With the assistance of Leigh Ryan and the World Trade Center organization in Savannah, Mitsubishi Hitachi Power Systems Americas has established networks within the corporate community that has allowed for training and collaboration.
Ryan’s group has also helped the company communicate and work with U.S. Customs and Border Control officials, she said.
In 2014, the company joined with the world Trade Center Savannah to co-host the FTZ’s yearly operators meeting.
While it sounds like a single entity, FTZ 104 is not a single location. It actually encompasses a designated system and operation within a number of businesses and locations around the region, including Tumi Luggage in Vidalia, Alcoa (formerly Firth Rixson) in Liberty County and the Interstate Center in Bryan County. Those are considered sub-zones, formally known as Alternative Site Framework services areas
Many of the new counties are already engaging with WTC Savannah.
Jenkins County is working to take advantage of being part of FTZ 104, said Mandy Underwood, executive director of the county’s development authority.
“We are meeting with World Trade Center Savannah staff and our existing businesses to learn more about the benefits of the foreign trade zone program and how it can help our businesses save money, which can ultimately help them expand in Jenkins County,” Underwood said.
Candler County Industrial Authority Executive Director Hannah Mullins agreed.
“Foreign-Trade Zone 104 can be a huge benefit to our existing distribution and manufacturing companies and will also be an additional incentive as we attract new investment to Candler County,” Mullins said.
“It’s another tool for us to help our community grow.”
Warehousing and distribution facilities can also participate in the FTZ program, with Port City Logistics and Schilli Distribution Services among those offering services in the Savannah area.
“This is great for companies who bring their goods into Savannah, want the benefits the FTZ provides but do not have their own warehouse facility in this area.” Ryan said.
ON THE WEB
For more information about Foreign-Trade Zone 104 and World Trade Center Savannah visit wtcsavananh.org.
FTZ FACTS AND FIGURES
• The two primary activities carried out in FTZs are manufacturing (68 percent of zone activity) and warehousing/distribution (32 percent).
• A combination of foreign and domestic components is used in most FTZ manufacturing operations.
• The majority of components (65 percent) brought into a FTZ are domestic in origin.
• FTZ activity most commonly involves domestic manufacturing operations that combine foreign parts with significant U.S. domestic components.
Source: U.S. Commerce Department