Foreign Trade Zones Offer Benefits

May 11, 2007
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Car manufacturers, oil refineries, computer manufacturers, textile distributors, drug manufacturers, and even small companies use foreign trade zones to their advantage. Activity in some foreign trade zones tends to peak and valley, while other zones see activity year round.

Firms can use foreign trade zones to maintain the cost competitiveness of their U.S.-based operations compared with their foreign-based competitors, according to Greater Detroit Foreign Trade Zone Inc. Zone status provides firms the opportunity to reduce certain operating costs associated with a U.S. location — costs that are avoided when operating from a foreign site.

A foreign trade zone is a designated site within the United States that is in or near a U.S. Customs port of entry, where foreign and domestic merchandise can be introduced for a variety of reasons. Any foreign or domestic material or merchandise can be brought into a trade zone without being subject to U.S. Customs duties, according to the Van Andel Global Trade Center. Within the zone, the merchandise can be stored, labeled, manufactured, sold, processed, displayed, tested, broken up, repackaged, assembled, distributed, sorted, graded, cleaned or otherwise manipulated without being subject to U.S. Customs law.

Duties are deferred until the merchandise leaves the zone and enters U.S. territory for domestic consumption. If the merchandise is exported to a foreign country, no customs duty is levied. Michigan has six active foreign trade zones.

There are two kinds of foreign trade zones. A general purpose zone is one or more central locations in which multiple users conduct multiple activities. A subzone is specific to the manufacturing process, said Sonja Johnson, VAGTC interim executive director.

“I think once companies really understand what a foreign trade zone is, they realize it’s a great tool they can utilize. It’s just a matter of getting them up that learning curve,” she said. 

There is a piece of property set aside at GeraldR.FordInternationalAirport for a foreign trade zone, but the zone has never been activated.

Columbian Logistics Network is the general purpose operator of the Kent, Ottawa, Muskegon FTZ No. 189. The zone is located at two Columbian Logistics facilities: Columbian Distribution Services at

900 Hall St. SW
in Grand Rapids and Columbian Interstate Services at
2900 Dixie St.
in Grandville. Theresa Zarnosky, Columbian warehouse manager, said the volume of activity in the zone has not been very high this year.

Foreign Trade Zone No. 43 is operated by the BC/CAL/KAL Inland Port Authority of South Central Michigan Development Corp. Managing Director Jan Burland said there is a general purpose zone in the Customs Cargo Center warehouse, a 50,000-square foot, multi-tenant facility in Battle Creek. This zone also has four active subzones. Perrigo Co., Pfizer, Abbott and Mead Johnson all have permanent subzone facilities. Arthur Shannon, vice president of investor relations at Perrigo, said the company’s subzone facility in Allegan manufactures products and is active year round.

Ford, GM, DaimlerChrysler, Mazda and other companies have facilities in subzones of FTZ No. 70 in Detroit.

“There are dutiable imports coming in, and Southwest Michigan manufacturers are taking advantage of that with the subzone designation,” Burland said. “We see continuing growth, and definitely interest, but often when we do a cross benefits analysis, we find that the benefits of the zone might not be quite what we anticipated.”     

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