Ports and FTZs: Gateway to Fair Trade
A variety of incentives enable U.S.-based companies to compete in a global marketplace. Current economic conditions have moved the government to increase capitalization of trade benefits created in 1934.
A “Port of Entry” is where Customs and Border Protection (CBP) officers or employees are assigned to accept entries of merchandise, clear passengers, collect duties and enforce the various provisions of CBP and related laws. These include seaports, airports and land border locations and provide the link for getting goods to consumers and transporting U.S. made products overseas for export. The U.S is the largest trading nation in the world for both exports and imports of goods and services. January exports alone totaled $142.7 billion and imports $180 billion.
Approximately 360 commercial seaports presently serve the United States, the largest being Los Angeles, Long Beach and New York/New Jersey. Ports are found along the Atlantic, Pacific, Gulf and Great Lakes coasts, as well as in Alaska, Hawaii, Puerto Rico, Guam and the U.S. Virgin Islands. Ports are gateways to domestic and international trade with more than 3,100 publicly and privately owned cargo and passenger handling facilities. Established by enactments of state government, public port agencies develop, manage and promote the flow of waterborne commerce. They act as catalysts for economic growth, and depending on the individual port facility, may accommodate anything from barges, ferries, recreational watercraft, passenger ships and ocean-going cargo. Ports also play a role in national security by supporting the mobilization, deployment and resupply of U.S. military forces.
The increasing demands placed on waterborne transportation have been addressed through billions of dollars worth of port improvements. Part of the rationale to update and modernize facilities stems from the significant benefits ports contribute to local and regional economies. More than 13 million Americans were employed through commercial port activities in 2008. Additionally, U.S. businesses related to waterborne commerce contributed more than $3 trillion to the U.S. economy and almost $213 billion in federal, state and local taxes—seaport activities alone accounted for $31.2 billion.
U.S. ports and waterways manage more than two billion tons of domestic and import/export cargo annually, some of which include commodities and finished products such as corn, lumber, steel, phosphate, plastics, film, modular homes and liquid bulk cargo like crude petroleum and petroleum products—including oil and gasoline. About two-thirds of all U.S. wheat and wheat flour, one-third of soybean and rice production and almost two-fifths of U.S. cotton production is exported via U.S. ports. Plus, automobiles and the passenger cruise industry are dependent on deep-draft seaports, which handle ocean-going vessels that move over 99 percent of U.S. overseas trade by weight and 64 percent by value. The Department of Transportation projects that the volume of cargo shipped by water through U.S. ports will increase more than 50 percent by 2020 (compared to 2001 tonnages) and the volume of international container traffic—where cargo containers are transshipped—will more than double.
Located in or near a U.S. Customs Port of Entry, Foreign Trade Zones (FTZs) facilitate international trade and increase the global competitiveness of U.S. based companies by removing certain disincentives associated with manufacturing here—thus encouraging companies to maintain and expand operations. Regardless of proximity, foreign and domestic merchandise in these areas are considered to be outside of Customs Territory. No duties or taxes are paid until merchandise is transferred from the FTZ to U.S. consumers. Instead of companies having substantial monies tied up in Customs duties on their inventory, they have use of that money for operating needs.
Once received at an FTZ, goods can be assembled, tested, sampled, relabeled, repaired, stored, salvaged, processed, destroyed, mixed, repackaged, manipulated and manufactured (with special approval) before entering U.S. commerce. Therefore, just like the duty on a product manufactured abroad and imported into the U.S. is paid at the rate of the finished product rather than that of the individual parts, materials or components, so is the duty on merchandise made in a U.S. FTZ. If a product never enters the U.S. market, no duties or taxes are paid—there is no time limit on how long merchandise can remain in a zone.
Since the Foreign Trade Zone Act of 1934, businesses have been afforded such advantages as zone-to-zone transfer—duties may be deferred until the product is removed from the final zone—and a reduction in duties on labor, overhead and profit. Businesses in a FTZ can be granted special privileges, including “direct delivery” and “weekly entry,” that can substantially reduce importation costs and increase supply-chain efficiency. FTZ companies will also see reduced fuel costs, reduced transportation surcharges and improvement of container transportation capacity.
The FTZ program has grown steadily in response to current economic conditions. Companies are doing everything possible to reduce costs and increase business. According to the National Association of Foreign Trade Zones, a not-for-profit trade association, there are currently 256 General Purpose Zones and 498 Subzones in the United States (including Puerto Rico). They handle almost $500 billion worth of merchandise annually. And, businesses are not the only winning parties.
In 2007 the FTZ program directly supported over 350,000 U.S. jobs and continues to provide employment for thousands today. And while the U.S. government incurs a reduction in Customs duty revenue by the use of FTZs, it more than makes up for it by the income tax gained from direct and indirect jobs FTZs help to create and retain. In addition, local governments benefit from sales and property taxes.
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 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 from 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 BROWNSVILLE, TX: IMPROVING AND EXPANDING
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. Opened in 1936, the Port has approximately 40,000 acres of land and more than 250 companies that make a tremendous economic impact on the community. The Port provides employment, directly and indirectly, to more than 38,000 people, locally and statewide.
The port is 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 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. For more information visit www.portofbrownsville.com.
The Port of Brownsville Industrial Park, Section 1, Phase 1 is now complete. Road, water and sewer are in and there are already two tenants located inside the park. Additional sites are available for lease off of State Highway 48. They range from one, two or three acre parcels depending on needs—with land open to lease in other areas as well.
The Port of Brownsville is in the process of clearing and opening up additional acreage for development off of R. L. Ostos Road located inside the Port’s Turning Basin area with planned railspur access. Plans for the area located off of Ostos Road include more open patio space for the storing of port cargo, such as windmill components and/or steel. There is also land available off of old SH 48 where most of the Port’s liquid bulk cargo and terminal is handled.
Information regarding land availability or pricing can be obtained by contacting Beatrice G. Rosenbaum, Director of Industrial Development at (800) 378-5395 or via email at [email protected]
PORT OF PHILADELPHIA: GROWING 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 types of 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.
PORTFIELDS INITIATIVE: NJ 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 U.S. 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 to position itself to capture as much of the expected traffic flow and corresponding new jobs as possible. It offered 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 a 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: A GLOBAL ADVANTAGE
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 (#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 Foreign-Trade Zone 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; Foreign-Trade Zone 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 Foreign-Trade Zone, 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 Foreign-Trade Zone sites to receive and store international shipments before they are tested, labeled and packaged for distribution. Therefore, the maximization of Port San Antonio’s Foreign-Trade Zone 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 Foreign-Trade Zone 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.