Foreign-Trade Zones: A Quiet Source of Economic Stimulus

Foreign-Trade Zones allow producers in the United States to bring in foreign materials for processing into the United States at zero or reduced tariff duties. These zones, which include facilities such as the Virginia Port Authority and Nissan’s two manufacturing facilities in Tennessee, help offset customs advantages available to overseas producers who compete with domestic industry.

In a recent article in The Tennessean, Daniel Griswold, the President of the National Association of Foreign-Trade Zones, argued that Foreign-Trade Zones are a key contributor to the recovery in the automotive industry. They are also helpful to any industry that faces the problem of “inverted tariffs,” where the tariffs on parts needed to manufacture and assemble a final product are significantly higher than the tariffs charged to import an already-finished product. This creates an unintended incentive for manufacturers to locate production offshore, rather than in the U.S.

Griswold noted, “In 2010, a total of 2,400 companies and 320,000 American workers used the FTZ program to manufacture, process and distribute a wide range of products, including clothing, electronics, refined petroleum, pharmaceuticals – and motor vehicles.”

In terms of the auto industry, the FTZ program puts U.S. auto plants on an equal footing with foreign producers. If a finished automobile enters U.S. commerce, the tariff is 2.5%, but if the finished product is exported for sale abroad, no tariff is due. This acts as a stimulus to U.S. auto exports.

And these results aren’t limited to the auto industry. In the blog Griswold spearheads on www.NAFTZ.org, he notes how Tootsie Roll Industries’ participation in the FTZ program helps ensure that U.S. workers will continue to produce its sweet treats, because of the access they receive to sugar at world market prices.

 In 2011, Samsung announced a $3.6 billion investment in its Samsung Austin Semiconductor (SAS) plant. SAS will increase the capacity of its 12-inch semiconductor fabrication facility in the city, creating up to 500 permanent jobs. One of the reasons cited for the investment? Foreign-Trade Zones.

Adding a Foreign-Trade Zone is a great way for a city/state to increase its manufacturing presence. NIC Americas, Inc. was the first tenant of the Foreign Trade Zone in Hilo, Hawaii. NIC Americas manufactures a device that uses electrical arcing to destroy used needles from health care facilities. The company was Hilo’s first significant new manufacturing facility in recent times.

A recent proposal by The Port of Miami would expand the number of Foreign-Trade Zones in Miami-Dade County. The plan will benefit the port since, as a license holder, the port can charge businesses thousands of dollars to establish duty-free subzones at individual company facilities.

PIERS offers a number of solutions that benefit Foreign Trade Zones and their tenants.  For more information about the solution that’s right for you register for a free demo or visit our booth at the NAFTZ’s Annual Conference September 9-12.

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2 Responses to “Foreign-Trade Zones: A Quiet Source of Economic Stimulus”

  1. NJ Targets Foreign Investment « PIERS Says:

    [...] Jersey may be small in size but it currently boasts five Foreign Trade Zones within the state with pharmaceutical firms, food distributors, auto-makers, and oil companies [...]

  2. Data-In-Motion: 2012 Year in Blogging « PIERS Says:

    [...] Foreign-Trade Zones: A Quiet Source of Economic Stimulus (June 19, 2012) [...]

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