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Foreign Trade Zones create economic tool for manufacturers

Posted on Mar 12, 2020 :: Global
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Posted by , Insight on Manufacturing Staff Writer

Companies importing goods to make products in the state of Wisconsin may benefit from getting established inside a Foreign Trade Zone. It’s a somewhat complicated process, but it doesn’t involve relocating — it can happen right where a business is.

“The essential purpose of a Foreign Trade Zone is to control costs on imported goods,” says Jazmine Jurkiewicz, trade development representative/Foreign Trade Zone administrator for Port Milwaukee.

It’s a federal program launched in the 1930s to encourage job growth and keep businesses competitive globally, and it is administered locally by grantees including the ports of Milwaukee and Green Bay.

FTZs can benefit companies in multiple ways, says Dean Haen, director of the Port of Green Bay. “If raw materials come in as part of a tariff and you assemble something, you can completely avoid those tariffs if the product goes back outside of the U.S.,” he says. “So it was like it was never here.”

For customers purposes, FTZs are considered as outside of U.S. territory. If a company is exporting a finished product, it technically never enters the U.S. market, so it can avoid duty fees altogether.

Other benefits can include a weekly processing fee instead of a merchandise processing fee on each entry of an imported good. “It ends up saving some of those companies quite a bit of money,” Jurkiewicz says.

Establishing within an FTZ also can provide a cash flow benefit, Haen says. “As long as raw materials are in the Foreign Trade Zone, you don’t pay your duty on those until they’re used,” he says. FTZs can benefit any company that is processing goods, including food manufacturers, such as cheese companies that import cheese and shred it later for sale.

An FTZ especially makes sense for companies that import goods for manufacturing and later export, or for those selling finished products to the U.S. market that would benefit from deferring import fees. Some companies may want to stock up on certain goods, keeping them in their zone until they’re ready to use or sell.

“There’s lots of different ways to use the program, which I think is part of the reason why it can be a little confusing to understand the program to begin with,” Jurkiewicz says.

One of the common misconceptions is that a company must relocate to a designated zone. Instead, a subzone is created around an existing manufacturing facility.

“You can keep your business right where it is,” Jurkiewicz says. The grantees have a designated number of acres that can be activated as an FTZ; in the case of Port Milwaukee, it’s 2,000 acres.

The Port of Green Bay administers FTZ No. 167, which includes locations near Austin Straubel International Airport, Wittman Regional Airport in Oshkosh and the Oshkosh Southwest Industrial Park. There are five subzones within it, with one company per subzone, Haen says. Two subzones are active, with companies Polaris and ProAmpac operating within them. The port can work with companies anywhere within the state.

Interest in the zones is limited, in part, because they can require a complicated process and a commitment from a time and financial standpoint as well as working within tight security and inventory controls. Thus, they tend to be most valuable to larger companies, Haen says. The cost to companies depends on how much product they are moving through the FTZ.

“I think once they see what their savings can be — and for some of our companies, it’s in the millions of dollars — it’s worth it for them,” Jurkiewicz says.

And interest is growing, particularly because of new tariffs on key manufacturing products such as steel and aluminum, Haen says. For example, ProAmpac, which uses aluminum in its food packets, has been working with the port for the past year to establish a zone, Haen says. “It’s made sense for them now.”

Once companies see others like Polaris and ProAmpac or those operating within the Milwaukee FTZ including Kohler, Mercury Marine, Broan NuTone and Generac, they begin to see that “it’s a goal that can be accomplished,” Jurkiewicz says.

Companies that think they might benefit can first get in touch with port contacts in their area and may choose to work with an FTZ consultant to help them through the application process, which also ensures companies won’t be disadvantaging other U.S.-based companies through receiving the benefit. “The whole point of the program is to keep our economy strong,” Jurkiewicz says.

“The program is meant to be a public utility. There’s no harm in asking questions and figuring out whether or not youre a good fit for the program,” she says.

The Milwaukee zone had 5,137 jobs and more than $2 billion in activity moving through in 2018. The two active subzones in the Green Bay area move more than $10 million of products each.

“It’s a huge contributor to our local region in our economy and toward keeping these companies competitive globally,” Jurkiewicz says. “There’s a lot of red tape involved because you’re working with the federal government, in various aspects, both through the Foreign Trade Zone Board as well as customs. The savings really do end up being worth it for these companies, in the long run.”

Get started

In the New North:

Brown County Port & Resource Recovery Department

2561 S. Broadway, Green Bay

(920) 492-4953

portofgreenbay.com/foreign-trade-zone

In southern Wisconsin:

Jazmine Jurkiewicz, trade development representative/Foreign Trade Zone administrator

(414) 286-8133

portmilwaukee.com/port