Opinions Op-Ed Jan Frantz of Battle Creek Unlimited: Foreign-Trade Zones and U.S. jobs
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By Jan Frantz,
Director of Corporate Projects
Battle Creek Unlimited Inc.
Several months ago, an alarmist blogger posted inflammatory information on the Internet about Foreign-Trade Zones. The rabble-rousing details blogged bore little consequence for the board of directors of the Battle Creek — Calhoun County — Kalamazoo County Inland Port Development Corporation (BC CAL KAL) which administers Foreign-Trade Zone 43 at the U.S. Customs and Border Protection Port of Battle Creek.
We already knew folks existed with biased views teetering at the edges of our planet. Board and staff recognized that the word “foreign” inflames legions during times of fiscal hardship. We were not taken by surprise that the Foreign-Trade Zone (FTZ) program remained sorely misunderstood.
The time has come to put FTZs in perspective. The BC CAL KAL board of directors represents a multitude of business, academic, manufacturing, public and service sector interests from both Calhoun and Kalamazoo counties. All set aside competitive and parochial issues in support of economic development throughout West Michigan — and know the benefits always cross jurisdictional lines. Following the broad-minded example of its board, FTZ 43 now administers sites in Zeeland, Sturgis, Allegan, Jackson, Kalamazoo and Battle Creek.
Enacted by Congress in 1934, the Foreign-Trade Zones Act since its inception held to the purpose of “expediting and encouraging foreign commerce.” Harkening to a time when onerous U.S. Customs duties encouraged the flight of US manufacturers to offshore locations, the purpose has never been more central to economic vitality.
Last fiscal year total exports from FTZ 43 exceeded $44.6 million — not an insignificant contribution to our nation’s trade balance. Thousands of West Michiganders are employed by firms operating within FTZs.
FTZ procedures simply allow for the delay, reduction, or elimination of U.S. Customs duty on imports. Certain raw materials and components are available only from foreign sources. FTZ procedures bring the advantages of manufacturing at the source of those materials right back here to the good old USA. Foreign inventory admitted into a FTZ is not liable for the payment of duty until it is removed from the FTZ and enters the U.S. for consumption. If goods are exported from a FTZ, no U.S. Customs duty obligation exists at all.
Waste and scrap may also become duty-free in a FTZ. For example, if products are tooled from imported metals with high duty rates, the waste and scrap will usually be assessed at a lower rate. Exported waste and scrap from a FTZ facility is duty-free. If your waste and scrap percentage is high, FTZs represent substantial savings.
Sometimes an importer may choose a lower duty rate. This benefit is known as “inverted tariff,” and refers to the topsy-turvy but common set of circumstances in which finishing a product offshore results in a lower duty rate on the imported item. A foreign-based production facility takes the advantage. Foreign-Trade Zones promote jobs in the U.S. by treating a U.S. production facility, for Customs purposes, as if it were not in the U.S. The U.S. manufacturer may import a high-duty material, add value by U.S. workers transforming it into a finished product, and elect a lower duty rate – as if it had been produced offshore. This levels the playing field for the U.S. factory.
Factories, warehouses and third-party logistics hubs operate as FTZs. Foreign-Trade Zone projects must always serve the public good, and not violate federal, state, or local laws. Au contraire to the blogger — wily foreigners and their singing schoolchildren don’t live in FTZs, stealing jobs from Americans.
Foreign-Trade Zones contribute cash flow benefits and direct financial gain. They are proven tools for economic vigor.
