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U.S. ports and foreign trade zones are poised to play a huge role in economic recovery, forming a vital interface between the nation and the world.
U.S. ports and their harbors and the industries located within them help form a vital economic interface between the U.S. and the world. According to Martin Associates, a Lancaster, PA based business consulting service that specializes in port-sector economic impact studies, port activity in 2007 contributed more than $3.15 trillion to the GDP, while 13.3 million Americans worked in port-related jobs that generated nearly $650 billion in annual personal income and $212.4 billion in federal, state and local taxes.
U.S. ports also provide sites for ocean-dependent industries like petroleum refining, commercial fisheries and recreational boating, and for national defense installations. U.S. ports also play a crucial role in providing a higher standard of living for the nation and its trading partners. According to Martin Associates, port sector jobs pay above-average wages. In 2006 the number of jobs from business activities at U.S. ports stood at 1,444,650, and the earnings and consumption dollars from those jobs came to $107.1 billion. Overall, port-sector workers earned, on average, about $50,000 a year, which is $13,000 more per year than the National Average Wage Index, as computed by the Social Security Administration.
The U.S. Foreign Trade Zone (FTZ) program has been a critical tool in helping U.S. ports remain a strong economic force in the global community. The program was created in 1934 with a goal of helping businesses in the U.S. stay competitive with foreign manufacturers and suppliers.
The FTZ program has grown steadily in response to current business conditions. Today there are over 250 FTZ projects (with nearly 400 Subzones) in the U.S. According to the National Association of Foreign-Trade Zones, a not-for-profit trade association representing 361 public and private organizations, in 2007, the FTZ program directly supported 350,000 U.S. jobs, was responsible for exports of over $31 billion and total shipments of more than $502 billion, of which about 60 percent was domestic status merchandise, suitable for export or being combined with imported products in the U.S.
So exactly how can FTZs benefit your company? FTZs are considered to be outside the “Customs territory” for the purpose of entering goods into U.S. commerce. This means that if the final product emerging from an FTZ is exported, no U.S. customs duties or excise taxes are levied. If the product is imported into the U.S., Customs duties and excise taxes are due only at the time of transfer from the FTZ.
When operating in an FTZ, there are numerous benefits for companies, including retention and creation of jobs, improved supply-chain efficiency, increased profit margins, and the ability to reduce costs through deferrals, reduced expenses, and savings.
For example, if a company manufactures or assembles within an FTZ it is not required to pay duty on the “value added” to the product and duty is not paid at all until the product is removed for consumption. Any export product is removed from the FTZ without duty liability. Companies that need to import capital equipment when setting up a zone do not pay duty on that equipment until the factory is in production.
Companies will also see reduced entry charges and a reduced Merchandise Processing Fee (MPF). Some states, including Texas, waive inventory tax on merchandise located in an FTZ to encourage job retention and creation.
In an FTZ, you can be granted special privileges, including “direct delivery” and “weekly entry,” that will substantially reduce your cost of importation and increase supply-chain efficiency. Companies locating in a FTZ will also see reduced fuel costs and transportation surcharges and improved container transportation capacity.
Recent changes in the program to support automated filing of admission reporting has made the program easier to use than ever, and with more than 250 FTZ projects throughout the country, businesses may be able to avoid the time and cost associated with obtaining a federal designation.
There has never been a better time than now for companies to locate their business in a FTZ at U.S. ports. Faced with one of the worst global recessions in years, U.S. ports are playing a huge role in economic recovery.
The recent plunge in the value of the U.S. dollar has made the U.S. a much more attractive exporter to many markets. According to a recent report from the consulting firms Tioga Group and IHS Global Insight, while containerized imports are flat to down, exports are growing. In addition, federal economic stimulus programs will begin to slowly have an effect on the ports.
The challenge ahead for U.S. ports is to be able to adapt to the needs of 21st century business and industry. This means that U.S. ports must focus on being prepared and improving its logistics infrastructure.
According to a statement from the American Association of Port Authorities, “With the volume of containerized trade projected to increase an average 6–8% a year, capacity pressures placed on ports are huge. The biggest challenges for ports are terminal expansion (including environmental issues) and security (both for terminal facilities and cargo).”
A recent Purchasing survey of supply chain professionals found that most (nearly 80%) cited equipment and physical infrastructure issues as the main challenge the ports face today. And right now, the slowdown in the U.S. economy is helping U.S. ports play catch-up and implement improvement plans.
For example, the Port of Tacoma in Washington’s FAST program (Freight Action Strategy for the Everett-Seattle-Tacoma Corridor) is a multi-year effort to ensure that transportation infrastructure remains viable for freight mobility throughout our state. So far, total funding for FAST is above $260 million and the most recent project was an overpass that will allow the realignment of rail tracks to triple rail capacity while trucks will no longer have to wait for trains to pass.
Whether your business is distribution, manufacturing or a mixture of both, the following U.S. ports are implementing 21st century initiatives and offering unique business opportunities, such as those included in the Foreign Trade Zone program, which will help your company remain competitive in the global economy.
Portfields Initiative: N.J. Hub for Job Growth
The New York-New Jersey metropolitan area is one of the largest most affluent consumer markets in the world. One important reason for this is its strong maritime, rail, aviation and highway transportation network. Strategically located at the heart of the mid-Atlantic corridor, the region offers efficient access to more than 105 million consumers in a single day. It’s maritime and transportation facilities rank among the largest and most productive in the nation. The New York-New Jersey seaport is the third largest in the country and the largest on the American east and gulf seaboards. Additionally, these maritime ports are seamlessly integrated with the metro area’s three-airports which handle nearly 25 percent of all US international air cargo.
New Jersey ports and its logistics sector are responsible for more than 500,000 jobs. And each year, more than 600 million tons of freight with an estimated value of over $800 billion moves into, through, and out of the state. From 2006 to 2008 cargo volume increased by 15 percent at the Port of New York and New Jersey, and in spite of the current recession, this level is expected to double in the next 20 years. It was this growth forecast combined with a desire to effectively meet projected demand that prompted the New York-New Jersey port complex position itself to capture as much of the expected traffic flow and corresponding new jobs as possible by offering new, attractive, and highly functional warehousing and distribution facilities in highly efficient logistic centers designed to speed goods rapidly along the supply chain.
In 2005, New Jersey’s Portfields Initiative was launched as joint project of the Port Authority of New York & New Jersey (PANYNJ), the New Jersey Economic Development Authority (EDA), and Public Service Gas & Electric (PSE&G), which spearheaded a public-private coalition of developers, logistics companies and communities to promote and market this effort. The goal of this initiative was to transform underutilized Brownfield sites into productive warehousing and distribution centers that would retain and attract logistics operations and create new jobs. There are currently 21 Portfields sites which have been identified as strategic centers most able to capitalize on emerging market opportunities and logistics trends for ocean and air freight-related warehousing and distribution operations. Each Portfields site is situated in New Jersey’s Port District, thus the name.
Portfields plans call for over 10 million square feet of new and improved warehouse and distribution space throughout the Port District. These projects involve private sector developers and, in some cases, have private/public sector partnerships of developers and public agencies, which sponsor various projects. “New and improved Portfields warehousing and distribution facilities have already created jobs, expanded community tax bases and improved roads in a number of key locations. The initiative is on the way to assuring the viability of New Jersey’s ports in the future,” commented Tim Comerford, PSE&G’s Area Development Manager, who has been actively involved with this project from the start.
Functionally, the Portfields Initiative identifies and helps advance Brownfield and other underutilized sites to “shovel ready” status––each able to accommodate at least 350,000 square feet of competitive, ocean or airfreight cargo distribution building space. Located in the Port District, these sites all have a minimum of 25 acres and offer easy access to major highways and port facilities. The Port Authority and EDA provide financial, technical and other support to developers who build on Portfields sites. Financing and technical support are available for planning, pre-development, site investigation and clean up, infrastructure costs, buildings and equipment and the reduction of energy costs.
Port San Antonio: Leader in Global Trade
Given its status as an international logistics platform, Port San Antonio understands the importance of duty-free inbound commodities and their impact on U.S. based corporations engaging in global trade. As a result, Port San Antonio’s entire 1,900-acre site is covered by a General Purpose Foreign-Trade Zone (FTZ) (#80-10) designation, which affords its customers the option of activation at any of the Port’s sites or existing buildings.
Port San Antonio offers a total of 371 acres of FTZ logistics sites on the grounds of its East Kelly Railport property. These Railport sites currently consist of the following classifications: air industrial sites; air logistics sites; aviation/airport operations sites; FTZ industrial sites; rail-accessed sites; aeronautical-use sites; town center sites; and rail line sites. In addition, a build-to-suit option is available to customers through the Port’s Real Estate Division.
Due to Port San Antonio’s designation as a FTZ, a number of financial advantages can be reaped by customers who employ the property’s logistics facilities. Duty payments can be deferred, resulting in an immediate cash flow improvement for shippers. Since minor assembly of merchandise is allowable on-site, duties may be paid either on components or finished products. Lower inventory costs are also available to Port San Antonio customers, as reduced duty rates on imported goods can be achieved during the time they are warehoused within the Foreign-Trade Zone. Additionally, goods may be stored in one of Port San Antonio’s vast warehouse facilities for unlimited periods of time, improving the customer’s overall logistics processes.
Port San Antonio customers often utilize the property’s FTZ sites to receive and store international shipments before they are tested, labeled and packaged for distribution. Therefore, the maximization of Port San Antonio’s FTZ status is especially beneficial to customers with the following specific operational requirements: assembly; warehousing; testing; repair; manufacturing; repackaging; salvage; and labeling. With ample office, flex, and warehouse space currently available within close proximity to Port San Antonio’s air and rail services, prospective customers will be able to effectively streamline their importing and exporting activities.
International shipments must be inspected as they arrive in the U.S. To meet this federal provision, the Port opened a U.S. Customs and Border Protection Federal Inspection Services (FIS) facility at its on-site airfield in February 2009. The facility is utilized to conduct administrative and cargo processing functions for customers of Port San Antonio. An agricultural laboratory and several storage areas are also available for the accommodation of bonded goods. Prior to the opening of the FIS facility, all incoming commodities were processed either in Laredo, TX or at the San Antonio Municipal Airport before arriving at Port San Antonio.
Given its ideal geographic location, Port San Antonio’s compelling advantage is its accessibility. The Port is located at the center of the North-South IH-35 NAFTA Corridor that connects Mexico, the U.S. and Canada. Furthermore, the adjacent IH-10 intersects the city from East to West and extends from California to Florida. As congestion slows cargo in other venues, Kelly Field (SKF) is only now emerging and, as a result, remains uncongested. This allows for the efficient transport and inspection of commodities en route to various destinations. With a myriad of opportunities for customers looking to maximize their shipping capabilities, Port San Antonio’s status as a FTZ will continue to satisfy the stringent demands of the logistics industry in the years ahead. By partnering with the Port, shippers are opening themselves to greater opportunities in the international trade and commerce sector.
Port of Brownsville, TX: Full Steam Ahead
Opened in 1936 and located at the southernmost tip of Texas, the Port of Brownsville is at the westernmost terminus of a 17-mile channel that flows into the Gulf of Mexico. The Port has over 250 companies that make a tremendous economic impact on the community. The Port provides employment, directly and indirectly, to over 38,000 people, locally and statewide.
In 2008, the Center for Transportation Research at the University of Texas at Austin in cooperation with the Texas Department of Transportation and the Federal Highway Administration released a report that quantified the national, regional and local economic importance of Texas ports. According to the report, the Port of Brownsville helped to create 10,578 jobs in Brownsville and the surrounding area. The statewide impact of these jobs produced an additional 27,851 related jobs for an overall impact of jobs created to 38,429. The impact of state and local taxes was in excess of $44 million and the overall economic value of the port was $2,779.5 billion.
In the face of one of the most challenging economic times, the port has seen its share of economic downturns; however, it has also been extremely resilient. Its FTZ designation has placed it among the nation’s leaders in commerce shipped in bond through the U.S. from one foreign country to another and is ranked third in the U.S. for handling foreign waterborne in-transits for 2007. This rank puts them ahead of Long Beach, Los Angeles and Houston.
The port of Brownsville has established itself as a center of intermodal transportation and industrial development with diverse companies and services. It is continuously looking ahead for new opportunities that lead it to economic success.
In 2008, for the first time in history, the port exceeded 6 million metric tons of cargo in any one given year. 2008 also saw the beginning of the quantifiable container movement at the port through the inception of its short-sea shipping initiative. This type of shipping is known as “short-sea shipping,” which utilizes inland and coastal waterways along Americas Marine Highway. This is important since the amount of cargo that can be carried on a ship or barge is many times what can be hauled by a truck.
One such company is SeaBridge Freight Inc. In December 2008, this thriving container business launched its marine highway transportation service at the port, linking the growing Texas-Mexico market to the Southeastern United States though Port Manatee in Tampa Bay, Fla. To date, over 1,000 containers have been handled at the port.
The port is also restructuring and creating new business opportunities by improving its facilities. Several projects include a roads improvement project, channel deepening and widening, and the seeking of a permanent overweight corridor extension. Another exciting initiative the port is undertaking is to establish itself as an attractive location for the cruise ship trade. This effort includes a regional collaboration to conduct a feasibility study to look at the challenges and opportunities for attracting a cruise line to the area. The cruise ship trade is an expanding industry that would be beneficial to the port by helping increase business in the area.
The port is identifying projects suitable for federal stimulus funding and has amassed a cash fund that will enable it to leverage 20% local dollars to 80% federal dollars in new infrastructure, such as new bulk cargo and liquid cargo docks.
Port of Freeport, TX is Ready for 21st Century Business
Since its establishment over 100 years ago, Port Freeport in Freeport, Texas, has become one of the fastest growing ports on the Gulf Coast, and it is currently ranked as the 16th largest port in the U.S. in terms of foreign tonnage.
Located just three miles from deep water, Port Freeport is one of the most accessible ports on the Gulf Coast. Its central Texas location offers efficient transportation via highway, railroad or intercoastal waterway, and its 400-foot-wide, 45-foot-deep channel ensures a fast, safe turnaround.
The port’s land and operations currently include 186 acres of developed land, with 7,723 acres of available for development, 14 operating berths, a climate-controlled facility, a 45-foot deep Freeport Harbor Channel and a 70-foot-deep berthing area. Future expansion includes building a 1,300-acre multi-modal facility, two multi-purpose 1,200-foot berths on 50 feet of water and two dockside 120,000 square-foot transit sheds. There is direct access to the Gulf Intracoastal Waterway, Brazos River Diversion Channel, State Highways 36 and 288 and rail service provided by the Union Pacific Railroad.
Created in 1988, FTZ No. 149 exists within the boundaries of Port Freeport. This provides manufacturer-shippers with duty-deferral, in-transit storage and assembly of products for import and no duty assessment on products re-exported. Available real estate and warehouse space, combined with an energetic and skilled local labor force make FTZ No. 149 an excellent choice for manufacturers exporting to other countries or serving U.S. markets. The port recently won approval to add another 1,633 acres to the FTZ.
In addition to its status as a FTZ, port initiatives for the past 20 years have helped it to meet the demands of 21st century business and industry. Located just 50 miles from Houston, a huge commercial zone, the port recently constructed and divided Texas Highway 288 from Freeport into Houston to form a direct and quick route into the energy capital of Houston and the second largest manufacturing zone in Texas.
In the fall of 2009, the port opened its Velasco Terminal, a project that encompasses the newest containerized cargo facility on the Texas Gulf Coast, as well as a berthing for ships carrying project cargo and other goods. It is nearly 100 acres and is expected to support almost 800,000 TEU’s a year.
One example of a company taking advantage of its location at Port Freeport is Vulcan Materials Company, which transports aggregate construction materials. Demand for the stabilizing rock material has been so great that Vulcan brought 392,000 tons of cargo into the port from Mexico in the 2008 fiscal year; up 45 percent form its fiscal 2007 volume through the port, according to general manager Clay Upchurch of the Texas Coastal Region of Birmingham, Ala.-based Vulcan.
Port of Philadelphia: A Good Combination for the Future
The Port of Philadelphia is situated in the heart of the northeastern corridor. The facilities of the Philadelphia Regional Port Authority (PRPA) handle a wide variety of import and export cargoes, including containers, fruit, steel, cocoa beans, frozen meat, paper, and over-dimension/project cargoes.
The Port of Philadelphia is the number one perishables port in the U.S. But Philadelphia really offers much more: the ports of the Delaware River rank number three in the U.S. for steel imports, and are among the nation’s key entry points for forest products and cocoa. Philadelphia has grown over 20 percent in container throughput for three years in a row. In addition, Greater Philadelphia is the fourth largest retail market in the U.S. and has the sixth largest gross metropolitan product. In addition to its state-of-the-art marine terminals, the Port of Philadelphia has the supporting infrastructure necessary for quick and efficient cargo transport. This infrastructure includes adequate channel depths, rail linkages, major highways, hundreds of trucking services, and a network of private warehouses.
The agency is currently working with the U.S. Army Corps of Engineers to deepen the main channel of the Delaware River, the port’s artery of commerce, from 40 to 45 feet. This will allow the Port of Philadelphia to welcome a wider array of vessels, which get larger every year.
PRPA is also in the preliminary stages of establishing a new multi-purpose terminal, SouthPort, which will significantly increase the Port’s cargo capacity. Southport is an ambitious plan to create a 150-acre container terminal near the southern tip of the Philadelphia Naval Shipyard. With international trade expected to more than double over the next 10 years, Philadelphia has the space to increase its share of global cargoes.
PRPA’s Foreign Trade Zone (FTZ) program, which covers Southeastern Pennsylvania, is a model for the nation. The Philadelphia Region also offers a General Purpose Zone, which normally has indoor and outdoor storage space used by a number of companies. This site is in close proximity to local marine terminals and airports. PRPA can also help individual companies locate in its Sub-Zones. Savings on duty and other costs can be significant if imports are modified within the zone.