Free zones can help businesses compete globally, reducing costs through inventory management and deferral of federal customs duties and excise taxes.
Speakers at an Oct. 21 webinar by the Connecticut District Export Council and the U.S. Commercial Service Connecticut office said free zones encourage business and value addition at U.S. facilities that compete with foreign alternatives.
“A free zone is simply a location in one of 50 states, DC or Puerto Rico, where special customs procedures can be used,” said Liz Whiteman of the International Trade Administration.
“These customs procedures allow you to import imported goods before they officially enter customs.”
Whiteman said that while the FTZ program was originally developed to encourage international trade, its importance has evolved “to encourage activity to happen here in the United States when it might be happening elsewhere.”
“This is one more tool that we can use to reduce the costs of a US operation to encourage activity to happen here and stay here,” she said.
Whiteman explained how changing customs procedures benefits businesses.
“If you store imported goods in the free zone and re-export them, you never filed a declaration and never paid duties,” she said. “So there are obvious savings there for re-exported goods. “
In addition, customs duties and excise taxes are deferred as long as the imported goods remain in the free zone.
Whiteman used an example of how importing auto parts through a free zone saves money.
If a car radio is imported into a free zone with a 5% duty, she said, and a steering wheel is imported into a free zone with a 4% duty, but the car is being assembled has a 2.5% duty, the company pays a 2.5% duty. duty for all parts.
Whiteman said the free zone application process is generally very straightforward and is often completed in less than 30 days at no cost.
U.S. Customs and Border Patrol Officer Stephen Long told webinar attendees that the agency’s role is to gather basic information about applicants to ensure they are a good fit. , and to “lay the groundwork and ground rules for how you are going to operate your free zone,” primarily zone security.
“A really good zone procedures manual is like an education tool,” Long explained.
“He has definitions, he has processes for how you bring things into the zone… you have to make sure they stay specific.”
Free Zones in Connecticut
Martha Klimas, administrator of FTZ 76 in Bridgeport, said that while the area was initially conceived as an economic engine for the city, its focus has broadened “to provide an advantage for businesses so that they can compete on a global market”.
Dan Carstens, who operated in an FTZ and now administers FTZ 71 at Windsor Locks, said an FTZ benefits any business that needs to store goods indefinitely.
Anne Betowitz, director of economic development at the New Haven Chamber of Commerce and FTZ 162 beneficiary, noted the growing popularity of the program.
The operator of the Port of New Haven has reported a sharp increase in activity over the past 10 months and is now considering expanding access.
“It just gives us more opportunities to market them,” Betowitz said. “It will just be extra space to meet the capacity.”
Iliyana Hristev, senior director of trade and customs for Wilton-based semiconductor company ASML, highlighted the unique advantages of free zones.
“After four years of experience in the foreign trade area… one of the best advantages is drop shipping,” she said. “It saved us many times.”
For more information on getting involved in a free zone, contact Elizabeth Whiteman of the ITA or Diane Finver or Melissa Grosso of the Middletown Export Assistance Center of the US Department of Commerce.