Foreign trade zone effort progresses

Diane Schwenke
Diane Schwenke
Kristi Pollard
Kristi Pollard

Phil Castle, The Business Times

The administrators of two organizations have agreed to take the next step in efforts to establish a foreign trade zone in Mesa County.

Diane Schwenke, president and chief executive officer of the Grand Junction Area Chamber of Commerce, and Kristi Pollard, executive director of the Grand Junction Economic Partnership, will oversee efforts to draft a request for proposals from consultants to explore the best way to proceed to establish and operate a zone as well as the potential costs of doing so.

The City of Grand Junction will offer assistance, and the Grand Junction Regional Airport also could be involved.

The decision followed a meeting among Schwenke, Pollard and members of the Grand Junction City Council during a workshop session.

Schwenke and Pollard told the council a foreign trade zone could not only benefit existing businesses, but also help in attracting new businesses to the area.

“I think it’s going to open a lot of doors for us,” Pollard said.

A federal program allows for the establishment of secure areas within the United States that are considered outside of U.S. Customs territory for tariff purposes. Businesses are allowed to import goods without paying a duty until those goods leave the zone and enter U.S. commerce. When imported materials and components are used to make finished products, duties can be assessed at what’s often a lower rate applied to those products. When merchandise is exported from the zone, no duties are assessed.

Schwenke said there’s interest among local businesses in establishing a zone and taking advantage of reduced tariffs and paperwork. “There’s considerable interest in our manufacturing base.”

Pollard said a foreign trade zone also could help in recruiting new businesses to the area.

One company was considering the Grand Valley for its expanding operations, but selected Salt Lake City instead because of its proximity to a zone, she said.

The majority of outdoor recreation manufacturers, a target industry for GJEP, import and export materials and products and could benefit from a trade zone, Pollard said.

Meanwhile, there’s increasing interest among companies along the Front Range of Colorado in relocating their operations to lower costs, she added.

One question, Schwenke and Pollard said, is how to best establish the boundaries of a foreign trade zone. Another question the council members asked is how much it would cost to establish and maintain a zone.

Pollard said at a minimum a foreign trade zone should encompass all of Mesa County. The City of Fruita has expressed an interest in joining in efforts to establish a zone and pledged $30,000.

Schwenke said there could be benefits to establishing a larger regional zone that also includes Delta and Montrose.

Bennett Boeschenstein, a member of the council, said he agreed because Grand Junction constitutes a regional hub. “I would try and be inclusive.”

Participating businesses within a zone usually set up areas within their facilities where imported goods can be stored separately and securely from the rest of their operations, Schwenke said.

As for the cost, Schwenke and Pollard estimated it could take $30,000 to $75,000 to establish a zone. It then could cost about $100,000 to $160,000 a year to operate a zone, with most of the money paying for the required customs officer.

The cost of operating a zone could be recouped at least in part by charging fees to participating businesses, they said.

Barbara Traylor Smith, a member of the council who’s explored foreign trade zones, said fees constitute a “sensitive” issue in that they can’t be set so high they discourage participation. Zones aren’t designed to make money, but at best break even, she said.

Several members of the council said it might make sense to cover the cost of operating the zone for a while as an investment in promoting economic and job growth. But they also asked how long it would take to make the zone self-suficient.

The council directed Schwenke and Pollard to put together a request for proposals from consultants to explore the best way to proceed to establish and operate a zone as well as the costs involved.

Grand Junction City Manager Greg Caton said city staff will be available to help with the process. “This is a priority.”

Pollard said the Grand Junction Regional Airport also could be involved because a customs officer might work out of the airport.