Foreign Trade Zone an Underutilized Tool for Lehigh Valley Companies
By Colin McEvoy on December 18, 2019
The Lehigh Valley has an incentive program available that could allow companies to improve cash flow, increase global logistics efficiency, and reduce redundant or unnecessary logistics costs… and many companies don’t even know it exists.
The Lehigh Valley Economic Development Corporation (LVEDC) hosted an information session about Foreign Trades Zones (FTZ) on Dec. 18, which was attended by more than 50 people at the Foundry Room of the Wind Creek Casino in Bethlehem.
“We believe the FTZ is underutilized and we’re really grateful to all of you for coming out to learn more about it, so you can pass it on to customers and clients, as well as those of you here who are manufacturers and could benefit from it yourselves,” said LVEDC President & CEO Don Cunningham.
An FTZ is a physical location within a United States custom territory where merchandise receives the same treatment as if it were outside the commerce of the United States. Therefore, by establishing an FTZ at their facility, a business can defer, reduce or altogether eliminate their customs duties and other tariffs or taxes.
While in an FTZ, merchandise may be assembled, exhibited, cleaned, manipulated, manufactured, mixed, processed, relabeled, repackaged, repaired, salvaged, sampled, stored, tested, displayed, and destroyed. And if the merchandise never enters the U.S. commerce, then no U.S. duties or taxes are ever paid on those items.
Speaking at the event was Rebecca Williams, Director for Rockefeller Group Foreign Trade Zone Services, a division of Rockefeller Group that assists companies with the implementation and integration of FTZ operations and import/export compliance strategies.
“The FTZ program is a really important part of our business opportunity offerings that we have in the United States today given the current trade policies, and protectionist tariffs on policies on certain countries and on certain imports,” she said. “This program has almost become revitalized in its importance because of that.”
LVEDC operates as a grantee for the Lehigh Valley’s FTZ program, meaning the organization is responsible for managing the zone project and sponsoring applications from companies wishing to have an FTZ established for their business.
Several Lehigh Valley companies utilize the FTZ program, including Primark in Bethlehem; Piramal Critical Care in Hanover Township, Northampton County; BMW of North America in Lower Nazareth Township; Grundfos Pumps Manufacturing Corporation in Hanover Township, Lehigh County; and the Cooper Tire Distribution Center in Lower Macungie.
Primark, an Irish fashion retailer with a distribution center in Bethlehem, recently realized significant savings because of the FTZ, affording to Heather Anderson, the company’s Foreign Trade Zone Manager.
The company had imported goods for a clothing store that had been expected to open in October, but after the opening was pushed forward multiple months, all those goods had to be exported back to Primal’s European warehouses, Anderson said.
“The duty savings of everything we’ve exported out is going to be huge for us, because we shipped an enormous amount of stuff out,” she said. “The FTZ has been a great utilization for us.”
Piramal, a manufacturer of inhalation anesthesia products, began using the FTZ program in 2012. The company was able to defer the tariff on their imported raw materials until they were brought into their Lehigh Valley facility. Once there, Piramal used the materials to make their finished product, which they could then move into customs duty-free.
From there, they could ship the products to customers throughout the world without the added costs they would have sustained without the FTZ, allowing them to stay competitive in the global marketplace. Approval of the FTZ has saved Piramal millions of dollars over a course of years, company officials previously said.
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