Trade zone designation considered

Kelly Sloan
Kelly Sloan

Kelly Sloan, The Business Times

Establishing a Foreign Trade Zone in Grand Junction could help existing businesses that import goods and materials as well attract new manufacturers and jobs.

There are costs involved, though, in setting up such a zone.

Officials with the City of Grand Junction are considering the benefits and costs as part of broader efforts to promote economic development.

Foreign Trade Zones, or FTZs, are specially designated areas within the United States considered to be outside of U.S. Customs territory for tariff purposes. First established in 1934, FTZs allow domestic companies, usually manufacturers, to import materials without paying a duty until they leave the FTZ. If the material is used as an input to a finished product manufactured within the FTZ and the final product is shipped within the U.S., duty is paid on the lower of either the imported component part or finished product. If the finished product is exported and the imported material has never left the FTZ, no duty is owed.

FTZs allow manufacturers to defer duty on imported components and then gives them the choice of paying duty on the component or the finished product when it leaves the FTZ bound for a location within the U.S. Experts say the duty on the final product is often lower than the duty on the raw input materials. The duty is exempt on final products shipped from the FTZ outside the U.S. or if the imported material is scrapped.

The benefits to FTZs for local governments and economies include increased exports, the attraction of foreign investment, job creation and a decreased incentive for manufacturers to locate facilities in other countries.

Across the United States, 177 active FTZs serve a total of 289 operations. According to the 2013 annual report to the Foreign Trade Zones Board, that year saw $835 billion worth of shipments into FTZs.The report also stated 65 percent of shipments out of FTZs were domestic.

The information was included in a presentation by Elizabeth Tice-Janda, revenue supervisor for the City of Grand Junction, at an event hosted by the Grand Junction Area Chamber of Commerce.

The closest FTZs to the Grand Valley are located in Denver and Salt Lake City.

Barbara Traylor-Smith, a member of the Grand Junction City Council, said establishing an FTZ in Grand Junction could benefit existing businesses as well as attract new businesses.

“I think it gives us an opportunity to be in the running for attracting businesses that would otherwise never consider us,” Traylor-Smith said. “The two things we need to look at are who can it help now, and secondly, who will now give us a look.”

FTZs must be approved by the U.S. Commerce and Treasurer departments and are activated by the Customs and Border Protection Agency. The application process is lengthy and expensive, city officials said, and there are additional costs associated with having customs agents on site for enforcement.

City officials say the next step is to answer those and other questions related to the benefits and costs of the program. The city council authorized a contract with a third party consultant to conduct a cost benefit analysis.

For more information about FTZs, contact Diane Schwenke at the Grand Junction Area Chamber of Commerce or Elizabeth Tice-Janda at the City of Grand Junction.