By the BF Staff
From the March/April 2021 Issue
Foreign-Trade Zones (FTZ) are secure areas under U.S. Customs and Border Protection (CBP) supervision that are generally considered outside CBP territory upon activation. Located in or near CBP ports of entry, they are the United States’ version of what are known internationally as free-trade zones.
Authority for establishing these facilities is granted by the Foreign-Trade Zones Board under the Foreign-Trade Zones Act of 1934, as amended (19 U.S.C. 81a-81u). The Foreign-Trade Zones Act is administered through two sets of regulations, the FTZ Regulations (15 CFR Part 400) and CBP Regulations (19 CFR Part 146).
Foreign and domestic merchandise may be moved into zones for operations, not otherwise prohibited by law, including storage, exhibition, assembly, manufacturing and processing. All zone activity is subject to public interest review. Foreign-trade zone sites are subject to the laws and regulations of the United States as well as those of the states and communities in which they are located.
Under zone procedures, the usual formal CBP entry procedures and payments of duties are not required on the foreign merchandise unless and until it enters CBP territory for domestic consumption, at which point the importer generally has the choice of paying duties at the rate of either the original foreign materials or the finished product. Domestic goods moved into the zone for export may be considered exported upon admission to the zone for purposes of excise tax rebates and drawback.
Qualified public or private corporations that may operate the facilities themselves or contract for the operation, sponsor foreign-trade zones. The operations are conducted on a public utility basis, with published rates. A typical general-purpose zone provides leasable storage/distribution space to users in general warehouse-type buildings with access to various modes of transportation. Many zone projects include an industrial park site with lots on which zone users can construct their own facilities.
Subzones are normally private plant sites authorized by the Board and sponsored by a grantee for operations that usually cannot be accommodated within an existing general-purpose zone.
There are a number of advantages to using a Foreign-Trade Zone.
CBP duty and federal excise tax, if applicable, are paid when the merchandise is transferred from the zone for consumption.
While in the zone, merchandise is not subject to U.S. duty or excise tax. Certain tangible personal property is generally exempt from state and local ad valorem taxes. Goods may be exported from the zone free of duty and excise tax.
CBP security requirements provide protection against theft. Merchandise may remain in a zone indefinitely, whether or not subject to duty.
The rate of duty and tax on the merchandise admitted to a zone may change as a result of operations conducted within the zone. Therefore, the zone user who plans to enter the merchandise for consumption to CBP territory may normally elect to pay either the duty rate applicable on the foreign material placed in the zone or the duty rate applicable on the finished article transferred from the zone, whichever is to his advantage.
Merchandise imported under bond may be admitted to a FTZ for the purpose of satisfying a legal requirement of exporting the merchandise. For instance, merchandise may be admitted into a zone to satisfy any exportation requirement of the Tariff Act of 1930, or an exportation requirement of any other Federal law (and many state laws) insofar as the agency charged with its enforcement deems it so.
There are over 230 Foreign-Trade Zones and nearly 400 subzones in the United States. A subzone is an area approved by the Foreign Trade Zone Board for use by a specific company, which can enjoy all the same benefits as foreign-trade zone companies. Subzones are located outside existing general-purpose sites within 60 miles of the port of entry.
MEETING THE PANDEMIC’S CHALLENGE AT THE PORT OF BALTIMORE
COVID-19 has not stopped the Port of Baltimore.
The Helen Delich Bentley Port of Baltimore’s state-owned, public marine terminals opened 2021 in impressive fashion, with all categories posting significant increases over 2020 lows during the COVID-19 pandemic. In addition, two categories—cars/light trucks and roll on/roll off farm and construction equipment—showed year-over-year gains of more than 20 percent in January 2021 compared to pre-pandemic numbers in January 2020.
January saw continued increases for cars/light trucks, general cargo, containers and roll on/roll off machinery compared to the COVID-19 low points in May and June. The cars and light truck category saw 44,697 units in January, an increase of 153.3 percent over a low point in May 2020 and a triple-digit percentage increase for the sixth consecutive month.
Roll on/roll off equipment, with 62,967 tons, was up in January by 27.5 percent over its low point in June 2020, while general cargo, at 879,256 tons, was up 19.8 percent compared to its June 2020 low—both of those represent the seventh consecutive month for double-digit percentage gains. The container category, with 50,674 boxes, was up 6.9 percent against its June low.
Compared to January 2020, the January 2021 figures in the roll on/roll off category were up 20.8 percent, while cars/light trucks were up 20.2 percent year-over-year. Containers were down 7.3 percent compared to January 2020 due to inclement weather delays that pushed some scheduled January arrivals into February.
“Starting off 2021, we are very encouraged with how our key cargos are performing,” said Maryland Department of Transportation Maryland Port Administration (MDOT MPA) Executive Director William P. Doyle. “New car purchases are up and the agriculture equipment market is improving which has helped our roll on/roll off business. The Port of Baltimore’s location near so many distribution, fulfillment and sorting centers makes it an ideal port to handle the rise in e-commerce purchasing we’ve seen during the pandemic. Though COVID-19 still impacts our industry, we have a lot of good signs showing this year.”
Even during this extremely challenging time, the Port of Baltimore continues to gain new business, as well as increased business from existing customers. The Port’s recent volume includes 17 “ad hoc” ship calls from mid-July 2020 through mid-March, totaling nearly 18,000 Twenty-foot Equivalent Unit (TEU) containers. Ad hoc ships are vessels that were diverted to Baltimore that were not on a regularly scheduled service.
In February, the first ship under the Port’s new contract with the Metsa Group of Finland and Logistec Corporation arrived. The multi-year pact is consolidating Metsa’s Mid-Atlantic volumes through Baltimore, with carriers Spliethoff Group and Royal Wagenborg servicing this business. The contract will generate hundreds of jobs and increase Metsa’s footprint at the Port, utilizing warehousing structures that have been underused or vacant for years. Metsa is bringing more than 370,000 tons of rolled paper to Maryland, used to produce materials such as corrugated cardboard boxes and other e-commerce packaging.
As part of the Port’s continuing public-private partnership (P3) with Ports America Chesapeake, construction for a second, 50-foot-deep berth at the Seagirt Marine Terminal is moving forward. The additional berth will allow the Port to handle two ultra-large ships simultaneously. Four additional Neo-Panamax cranes are scheduled to arrive this summer and will be operational later this year. The growing container business accentuates the need for the Howard Street Tunnel expansion project in Baltimore, which will accommodate double-stacked rail cars to move cargo to and from the Port. That project is benefiting from public-private investment between the federal government, Maryland, CSX and others.
The Port of Baltimore is also moving forward with growth and expansion projects. Berths at the Dundalk Marine Terminal are being reconstructed to accommodate today’s larger ro/ro machinery and heavy equipment. Construction to remake Baltimore’s Howard Street Tunnel to fit double-stacked container trains will begin this year with double-stacked train availability in 2024 which will complement the Seagirt expansion. Big things are happening in Baltimore.
54-MILE MEGAPORT IN SOUTH LOUISIANA
The Port of South Louisiana is located between New Orleans and Baton Rouge, sprawling along 54 miles of the Lower Mississippi River. As one of the largest tonnage ports in the Western Hemisphere, the Port of South Louisiana is not only the highest grain exporter in the United States (over 50 percent of the nation’s grain is exported via the Port of South Louisiana), it is also ranked third in both exports and imports.
With over 36 million short tons of crude oil imports per year, three major oil refineries and 11 petrochemical manufacturing facilities, the Port of South Louisiana has been ranked the number two energy transfer port in the nation. The Port also operates the most active Foreign Trade Zone (#124) in the country. With 15 zones, it received over $51.8 billion in merchandise and facilitated the employment of over 7,200 in 2018.
Don’t Settle For Standard: Upgrade To Albuquerque’s FTZ
When it comes to Foreign Trade Zones, basic rules of real estate apply. The value of an FTZ to your company largely hinges on location, with its benefits varying widely depending on the city in which it is located.
As home to an FTZ, Albuquerque, NM, can provide significant cost-saving benefits to U.S.-based businesses that locate here. But by definition, so do all cities that have FTZs. FTZ advantages, such as quota avoidance, improved cash flow and tax breaks, are standard no matter where the FTZ is. It’s up to the cities that house them to provide the upgrades.
Albuquerque offers the complete package, particularly for companies with fragile imports or manufacturing processes, seeking streamlined logistics. The growing mid-sized city, conveniently located in the heart of the Southwest, is low-risk and high-value, with transportation and infrastructure systems that offer proximity to large markets and supply chain advantages. Mountain views and abundant sunshine are bonuses.
Below are some FAQs that show why FTZ No. 110 in Albuquerque should be considered No. 1 for your company.
Q: Where is Albuquerque’s FTZ, and why is it advantageous?
A: Albuquerque’s FTZ is at the Albuquerque International Sunport, ideal since access, connectivity and flight patterns are critical components in manufacturing and trade. By air, Albuquerque has direct flights to over 20 cities across the U.S. The city is also part of an extensive railroad network. Albuquerque sits on the Burlington Northern Santa Fe Transcontinental Line that connects the Port of Los Angeles with the Inland Port of Chicago. It is also equidistant on the BNSF line between the ports of Los Angeles and Houston, providing access to both hemispheres. A second BNSF line originating in Albuquerque gives direct access to Central Mexico. Albuquerque has two of the nation’s three major east/west freight corridors—interstates 25 and 40—bisecting the city. Interstate 40 connects the East Coast to the West Coast, and Interstate 25 connects Mexico to the Montana-Wyoming border.
Ultimately, Albuquerque’s location and multimodal transportation save time, optimizing a company’s speed to market, and presents an opportunity for companies seeking to be logistic innovators and leaders in last-mile distribution solutions.
Q: Where must my company be located, or have a presence, to make use of Albuquerque’s FTZ?
A: FTZ #110 operates under the Alternative Site Framework (ASF), allowing for companies to utilize it out of their own facilities so long as they are located somewhere within Bernalillo and Valencia counties or in the cities of Rio Rancho, Moriarty, Bernalillo or Santa Fe. An ASF helps zones use quicker and less complex procedures to obtain FTZ designation for eligible facilities. Once approved, a subzone or usage-driven site can be designated anywhere in the service area in as quickly as 30 days.
Q: While an FTZ will be economically advantageous for my company due to improved cash flow, freedom from duties on raw materials, elimination of customs clearance delays, greater inventory control and the like, how expensive is it to conduct business in Albuquerque?
A: When combined with other incentives, New Mexico offers the lowest effective tax rate in the Western United States for manufacturing operations. For example, New Mexico’s Single Sales Factor income tax election allows manufacturers to base their state income tax on sales made within the state, potentially reducing the tax to zero. Further, according to labor market analytics, Albuquerque has strikingly low manufacturing labor costs when compared with many major U.S. cities.
Q: Will any savings be offset by the cost of living and potential business interruptions caused by natural disasters?
A: Albuquerque is both extremely affordable and low-risk. The cost of living is 5 percent lower than the national average, when analyzing home prices, medical costs, utilities and groceries. Also, the city does not have hurricanes, severe tornadoes or major earthquakes.
Q: If I locate my company in Albuquerque, I may need to hire new employees. Will I find qualified labor there?
A: The Albuquerque metro area has a population of 924,000 and is home to more than 60,000 college students. Northern New Mexico also leads the country for the percentage of workers with a college degree. Few other cities can compete with Albuquerque’s concentration of niche expertise and engineering savvy due to our academic institutions and the presence of renowned R&D laboratories: Sandia National Laboratories, Los Alamos National Laboratory and the Air Force Research Laboratory.
Q: My company would prefer to locate in a city that provides a healthy, balanced quality of life for its employees. How does Albuquerque stack up?
A: Albuquerque bills itself as “Your Home for Life” because of its abundant sunshine; outdoor recreation; mountain scenery; minimal traffic; clean air; low population density; relaxed, affordable living; cultural diversity; and collaborative, welcoming attitude.
Add Foreign Trade Zone No. 110 to that mix, and there’s no reason to consider another location. For more information, visit abqftz.com.
Along both banks of the river, more than 50 piers and docks owned and operated by an impressive group of industry that includes ADM, Dow, Cargill, Valero, Bunge, Marathon, Shell and Nucor Steel reside within the district. Its headquarters are currently located in LaPlace, Louisiana. Overall, the navigational depth of the Mississippi River is 45 feet (13.7 meters). The region continues to attract billions of dollars of investment (currently at $23.262 billion) by companies within, but not limited to, the petrochemical, fertilizer and logistics industries. The Port contributes $1.8 billion in income, $14.4 billion in revenue and $72.5 million in state and local taxes, and handles over $83 billion in trade annually that supports over 30 thousand direct jobs (six out of 10 jobs) in the River Region.
Its family-friendly neighborhoods, broad educational system, well-stocked libraries, dependable medical services and diverse outdoor activities are some of the indicators of the River Region’s high quality of life. Laced by swamps, bayous and lakes, and bisected by the Mississippi River, the River Region is a natural setting for water sports of all kinds, from fishing and swimming to water skiing, sailing and boating. Also, several festivals are held within the River Region throughout the year, which include the St. Charles Parish Catfish Festival held in June, the St. John the Baptist Parish Andouille Festival held in October and the St. James Parish Festival of the Bonfires held on Christmas Eve.
Industries from all over the globe have taken notice of the Port of South Louisiana’s competitive advantages. As a matter of fact, the region has attracted billions of dollars of investment—$22.287 billion to be exact—by companies in the petrochemical, fertilizer and logistics industries. Projects like these are vital to sustaining and promoting further economic prosperity for the Port of South Louisiana, the River Region and its labor force.
SAVANNAH: AN IDEAL GATEWAY FOR TRADE
Several factors make the Port of Savannah an ideal gateway for container trade.
The size of the facility, along with on-terminal rail and the port’s proximity to Interstates 95 and 16, lend themselves to the free flow of cargo beyond the port’s gates.
At 1,345 acres, 34 ship-to-shore cranes and 172 rubber-tired gantry cranes, the Port of Savannah’s Garden City Terminal is the largest single-operator container terminal in the Western Hemisphere.
The Port of Savannah features 37 global container ship services and immediate access to I-16 and I-95,
providing faster-to-market service to domestic and international destinations. In terms of cargo volume, the Port of Savannah is the third busiest gateway for containerized trade in the U.S., behind only L.A.-Long Beach and NY/NJ.
The Port of Savannah is also closest and fastest by rail to the major population centers of Atlanta, Memphis, Nashville, Charlotte, Huntsville and Birmingham. On-terminal service from Class I railroads CSX and Norfolk Southern means more choices on schedule and routing.
Savannah’s location as the most westerly major port on the U.S. East Coast, centrally located within the Southeast, means the Georgia Ports Authority provides unmatched speed to market, with shorter overland routes to major inland destinations.
GPA’s owner-operated container terminals offer greater flexibility, and the power to tailor its services to customer needs.
Steady infrastructure investment readies GPA terminals with the capacity for future demand, allowing Georgia Ports to absorb influxes of cargo when they occur. Outfitting Garden City Terminal with cranes capable of serving the largest vessels calling the U.S. East Coast, additional container stacking space and greater on-terminal rail capacity proved to be vital assets in handling the influx of container cargo since August.
Another timely addition was the expansion of container services at the Port of Savannah’s Ocean Terminal, bringing annual capacity there to 210,000 TEUs.
To strengthen its market position, Georgia Ports has started construction on a project to straighten a bend in Berth 1 at Garden City Terminal. This project will allow the Port of Savannah to serve four 15,000+ TEU vessels, plus three other ships, simultaneously.
To improve rail capacity, GPA will commission nine new working tracks by the end of 2021, for a total of 18, at its Mason Mega Rail Terminal. Upon completion, the largest on-terminal rail yard in the nation will have the capacity to build and receive six 10,000-foot trains simultaneously.
Through the Savannah Harbor Expansion Project, the U.S. Army Corps of Engineers will deepen the river channel to 47 feet at low tide, allowing vessels in the 15,000+ TEU range to transit the river with heavier loads and fewer tidal restrictions for increased efficiency in vessel operations. The project is expected to be complete by the end of 2021.
Efficient port services and a strategic location central to the U.S. Southeast make Georgia Ports an important factor in the location of industries involved in international trade.
Private warehouse and distribution center development is key to facilitating the flow of cargo beyond GPA’s terminal gates, out to stores and customers. Savannah has an industrial market of nearly 80 million square feet, with almost 9 million square feet under construction. Beyond that, there is enough land permitted for private development for another 130 million square feet of industrial space within 30 miles of the port.
Statewide, Georgia’s ports support 496,719 full- and part-time jobs across the state, according to a study released by the Selig Center for Economic Growth at the University of Georgia’s Terry College of Business.
The latest figure is based on FY 2019 impacts, and represents an increase of 57,500 jobs (up 13 percent) compared to FY2017. Georgia ports now account for 10 percent of total state employment. Personal income derived from port-supported jobs totaled $29 billion statewide in FY2019.
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