Getting into the zone: Trade program benefits touted

Daniel Griswold
Daniel Griswold

Phil Castle, The Business Times

Foreign trade zones help businesses  take advantage of what’s literally a world of opportunities, according to the president of a national trade association of entities and businesses involved in the federal program.

The benefits from deferring, reducing and even eliminating custom duties apply to a foreign trade zone proposed for Grand Junction, said Dan Griswold, president of the National Association of Foreign-Trade Zones. “This is the right strategy for the City of Grand Junction and Western Colorado.”

Griswold outlined the foreign trade zone program and its potential benefits for local businesses during a presentation at a manufacturing summit hosted by the Colorado Advanced Manufacturing Alliance West Chapter in Grand Junction.

A program enacted in 1934 to encourage foreign trade allows for the establishment of foreign trade zones —  secure areas set up within the United States, yet considered outside U.S. Customs territory for tariff purposes, Griswold said.

Businesses in the zones are allowed to import goods without paying a duty until those goods leave the zones and enter U.S. commerce. When materials and components are used to make finished products, duties can be assessed at what’s often a lower rate applied to those products, in effect as if they were made abroad. When merchandise is exported from the zones, no duties are assessed, he said.

The program decreases the costs and in turn increases the competitiveness of businesses that import and export goods, particularly manufacturers and distributors that use foreign materials, components and merchandise, he said. The program also can help to speed the delivery of imported goods, improving supply chain efficiencies.

The program has helped U.S. companies bring back operations from overseas locations as well as encouraged multinational firms to establish facilities in the U.S., he added.

A total of more than 3,000 companies in nearly 260 foreign trade zones use the program, Griswold said.

As of 2013, the latest year for which figures are available, manufacturing operations in the zones received about $571 billion in merchandise that year, while warehousing and distribution operations received about $264 billion in merchandise.

Businesses in foreign trade zones exported a total of $79.5 billion in merchandise in 2013, a 182 percent increase in four years that was three-times faster than overall growth in U.S. exports, he said. Those businesses employed a total of about 390,000 people.

So far, two zones have been established in Colorado — an active zone in Denver that includes 16 companies and an inactive zone in Colorado Springs, Griswold.

Officials with the City of Grand Junction are considering the benefits and costs of establishing a foreign trade zone as part of broader efforts to promote economic development. The Grand Junction City Council authorized a contract with a third party consultant to conduct a cost-benefit analysis.

Given the growth of exports in the United States and Colorado and the fact
95 percent of all customers in the world are outside the U.S., Griswold commended local officials for considering a zone. “Global perspective is crucial to economic development.”

A variety of public and private entities can serve as a grantee in establishing a foreign trade zone, Griswold said, including city governments, chambers of commerce and economic development organizations. While some grantees charge fees to recoup costs, others don’t as a way to promote development, he said.

One possibility in establishing a foreign trade zone in Western Colorado, Griswold said, would be to set up a multi-county service area with so-called magnet sites for participating businesses within the zone. Such sites are usually areas set up at businesses where imported goods can be stored separately and securely from the rest of the operation.

Even if no businesses want to participate right away in a foreign trade zone in Western Colorado, a zone could help in attracting new businesses to the area that do want to participate, he said.

Businesses involved in manufacturing and exporting tend to pay higher wages, he added. “Those are just the kind of companies we want to develop in Grand Junction.”

More information about foreign trade zones is available from the National Association of Foreign- Trade Zones Web site located at www.naftz.org.