BLOUNTVILLE — A relatively unknown economic development assistance program that helps importers save money is changing its business model to become even more business-friendly.
Tri-Cities Regional Airport’s Foreign-Trade Zone (FTZ) operation hopes to be an impact player in a rebounding economy, but its main challenge has always been the same — educating businesses about how it can help with imports.
Mark Canty, TCRA’s trade development specialist and point man overseeing the FTZ initiative, works with import businesses using FTZ sites across Northeast Tennessee and Southwest Virginia.
He’s always on the road pitching an FTZ’s benefits to business operators, but many of them have no clue how an FTZ works.
“Five minutes into discussing it, if their ears don’t light up, it’s easy to tune out,” Canty said of those discussions. “Awareness is 100 percent the toughest issue.”
Inside our region, imported merchandise lands at TCRA and is processed at U.S. Customs and Border Protection Port No. 2027 at the airport’s Air Cargo facility.
From there, the merchandise had been shipped to FTZ sites located in area industrial parks or subzones within an FTZ user’s property.
An FTZ is a designated location in the United States where companies can use special procedures to help encourage U.S. economic activity — in competition with foreign alternatives — by allowing delayed or reduced duty payments on foreign merchandise.
“Let’s just assume that a company imports components to make a finished product,” Canty said of how an FTZ works. “Those components normally carry duty rates ranging from 4 percent to 10 percent. Because the company is an FTZ user, the components come into their facility duty-free and remain duty-free as long as they remain in zone territory. A finished product is assembled from those components and that finished product is shipped to a buyer overseas.”
Earlier this year, TCRA’s FTZ operation was approved by the federal government to transition from a “Traditional Site Framework” to an “Alternate Site Framework.”
The Traditional Site Framework was dependent on pre-designated FTZ locations, namely the area’s industrial parks. The Alternate Site Framework, said Canty, is simply a program to manage individual FTZ locations and will be less time-consuming.
In other words, the FTZ initiative can be taken business-to-business.
“Now we’re able to take the foreign-trade zone to the businesses. ... In exchange, we are giving up the industrial parks, and we have created an FTZ service area within the greater Tri-Cities region and any business in that service area is now eligible for FTZ access and could have the designation within 60 days,” Canty said.
The FTZ service area includes nine counties in Northeast Tennessee and seven in Southwest Virginia.
“Just last week, I met with a group of manufacturers in Morristown at the chamber of commerce,” Canty said. “There’s great interest there in foreign-trade zones. They have such a large industrial base and now we’re able to take the FTZ designation to those individual businesses. ... They can store products duty-free. You are able to manufacture and manipulate a product inside the zone. ... You can ship finished products back outside the country and never pay duties at all.”
Canty is hesitant to name individual companies taking advantage of FTZ access.
“Importing is kind of a fluid process for businesses,” he said. “One thing I try to stay away from is quantifying the value of an FTZ based simply on the amount of merchandise entered into a zone.”
One major selling point used by regional industry recruiters is the FTZ service area being situated near the intersection of Interstate 26 and Interstate 81.
Richard Venable, CEO of NETWORKS — Sullivan Partnership, said having the FTZ service area is a critical economic development tool.
“We’ve got (employers) from France, we’ve got people from Germany, we’ve got people from Japan in (Sullivan County),” Venable said. “All these people import. Manufacturing can use an FTZ. It’s extremely important in global business. Anybody who brings any product into the U.S. should look at the foreign-trade zone and see how it will benefit them. It’s a matter of import duties and export duties. They can save money and it makes us competitive. Even if companies don’t use it, when we get an RFP (request for proposal), they’ll say ‘Do you have a foreign-trade zone?’ ... In the future, it will be more and more important.”
For more about TCRA’s FTZ initiative, call (423) 367-2385.