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The Honolulu Advertiser
Posted on: Sunday, April 1, 2007

Foreign trade zones can offer savings

Advertiser Staff and News Services

Judy Giese, a packer at Anderson Packaging Inc. in Rockford, Ill., puts finishing touches on packaging for bottles of pharmaceuticals.


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What is a foreign trade zone?

This is an area within the United States, or near a U.S. Customs port of entry, where foreign and domestic merchandise is considered to be outside the country or at least outside U.S. Customs territory.

What activities are permitted in a foreign trade zone?

Products may be assembled, tested, sampled, relabeled, manufactured (special approval needed by the foreign trade zone board), stored, salvaged, processed, repackaged, destroyed, mixed or manipulated.

What benefits are available to companies that operate in a zone?

Deferral, reduction and possible elimination of duties; tighter inventory control that may eliminate year-end inventory loss adjustments; potential direct-delivery benefit reduces long hold times at crowded ports of entry.

Source: National Association of Foreign Trade Zones

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As far as U.S. Customs is concerned, Anderson Packaging is in a foreign country.

Pharmaceutical manufacturers can import drugs into Anderson's Rockford, Ill., facility and have the products packaged and ready to ship before the Food and Drug Administration even approves them. Once the FDA gives the green light, the products are out the door.

"It helps it get into the consumer's hand sooner," said Chad Spotz, warehouse manager for Anderson. "Every day that they don't have their product in the market after it's had FDA approval, they lose X amount of money. Sometimes that can range to a million dollars a day."

Anderson is part of Rockford's foreign trade zone, a federally approved area where goods are considered outside U.S. Customs territory. Businesses delay or even reduce their import duties by bringing items into a zone; having them manufactured, processed or packaged there; and shipping them out.

"We want to give (U.S. companies) the same benefits as a foreign operation while investing in the United States," said Tommy Berry, president of PointTrade Services and an expert on foreign trade zones. "We call it leveling the playing field, that a U.S. operation can at least compete with a fully foreign operation."

It's about jobs, he said.

Since the foreign trade zone program was established more than 70 years ago, he said, it's helped companies keep work in the United States that would otherwise go abroad.

Companies can import parts or products into a zone, use U.S. labor to manufacture or process the items, and export the finished goods without paying import duties or going through certain Customs procedures. If the products are shipped domestically, only then are duties paid. That gives companies at least a cash-flow savings.

While only one of Anderson Packaging's customers uses the zone now, Spotz said several others may join in.

Zone users can be anywhere within 60 miles or 90 minutes of a U.S. Customs port of entry.

Roger Hopkins, executive director of the I-39 Logistics Corridor Association and of the DeKalb County, Ill., Economic Development Corp., said he's marketed the zone to businesses in his area but hasn't gotten very far.

"I can't seem to get them to take much notice of it," he said.

But he supports efforts to get the word out and says that as more companies with international operations come to Rockford, the zone will become much more active.

Airport officials agree and see it as another way their facility can be an engine for area economic development. "They're growing it, and they're ready to put fertilizer on it," Berry said.

In Honolulu, Foreign Trade Zone No. 9, headquartered at Pier 2, is one of the largest and most diversified zone programs in the United States. The trade zone's seven locations around the state processed $8.7 billion in cargo last fiscal year, up from $6.7 billion the previous fiscal year. The facility, which was launched 40 years ago, helps more than 300 Hawai'i companies trim their operating costs by utilizing the zone's tariff- and duty-free environment.

The Rockford (Ill.) Register Star and Advertiser staff contributed to this report.