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FTZs and U.S. Trade Policy

“Foreign-Trade Zones: A Home Run for Trade and Jobs” National Association of Foreign-Trade Zones Capitol Hill Forum 121 Cannon HOB June 7, 2012. FTZs and U.S. Trade Policy. U.S. trade policy important for U.S. growth FTZ program important tool of U.S. trade policy

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FTZs and U.S. Trade Policy

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  1. “Foreign-Trade Zones: A Home Run for Trade and Jobs”National Association of Foreign-Trade ZonesCapitol Hill Forum121 Cannon HOBJune 7, 2012

  2. FTZs and U.S. Trade Policy • U.S. trade policy important for U.S. growth • FTZ program important tool of U.S. trade policy • White House Statement of Feb. 17, 2012: • “A Simplified Process for Foreign-Trade Zones” • FTZs “help encourage manufacturing and investment in the US, in industries including automotive machinery and equipment and pharmaceuticals.” • New regs will contribute to NEI

  3. FTZ Program Poised for Growth • Streamlined procedures and growing trade volumes • Three-quarters of world’s spending power outside the United States • U.S. economy more globalized than ever through trade and foreign investment • U.S. exports in 2011 at record high 18.8% of GDP

  4. America’s Growing Globalization

  5. Promoting Exports, and Imports • National Export Initiative • Exports fuel economies of scale, R&D, creation of jobs that pay 15-18% above average • FTZ exports doubled 2003-2008, up 23% in 2010

  6. Promoting Exports, and Imports • Export success depends on imports • More than half of U.S. imports are raw materials, component parts, and capital machinery used by business to create final products • Important industries cannot compete globally without foreign-sourced inputs

  7. A Brief History of FTZ Program • FTZ program offers U.S. producers equal access to global resources • Foreign-Trade Zones Act of 1934 intended to “expedite and encourage foreign commerce.” • Program expanded in 1950 to include manufacturing • After 1980, only foreign inputs dutiable • Further expansion for oil refining, production equipment, small manufacturers, automation, ASF

  8. New FTZ Board Regulations • Preamble to 2012 FTZ Board Regulations: • “Zones have as their public policy objective the creation and maintenance of employment through the encouragement of operations in the United States which, for customs reasons, might otherwise have been carried on abroad.” • New regulations will: • Streamline applications • Clarify Grantee liabilities • Make program more user-friendly for SMEs, including manufacturers

  9. How an FTZ Operates • Secure areas near Port of Entry • Foreign goods admitted to zone considered outside U.S. customs territory. Customs collects duties only when goods enter U.S. commerce • All U.S. laws apply re: labor, health, safety • General Purpose Zones: warehouse district, industrial park; subzones; ASF • In FTZ, merchandise may be: exhibited, cleaned, relabeled, repackaged, repaired, stored, tested, assembled, manufactured, destroyed FTZ no. 20, Chesapeake, VA

  10. FTZs Reduce Costs/Move Trade • Duty Reduction (inverted tariff relief) for manufacturing zones only • Duty Elimination on Exports & Scrap • Duty Deferral on Inventory • State and Local Ad ValoremTax Exemption on inventory tax (federal law) • Administrative savings and expedited flow due to flexible Customs procedures, consolidated weeklyy entryreporting, reduced brokerage and government fees

  11. FTZs and Border Security • Secure facilities, vetted personnel • Trusted relationships between Customs and importers • Oversight of “Participating Government Agencies,” such as FDA, EPA, USDA, APHIS “For us, FTZs are as secure as it can get.” -- CBP Officer Norman Bebon, El Paso Port of Entry

  12. Key Facts of U.S. FTZ Program • 250 zones, 350 subzones in all 50 states and P.R. • In 2010, more than half a $ trillion of merchandise admitted to FTZs, 58% sourced domestically • $35 billion exported, up 23% from year before, faster than overall export growth

  13. Key Facts of U.S. FTZ Program • 2,400 companies operate in FTZs. • 320,000 U.S. residents employed in FTZ or subzone • Major industries that use zones: petro-chemical, automotive, electronics, pharmaceutical, clothing footwear, cosmetics, machinery

  14. Exhibit A: Global Auto Sector • International automotive sector one of most active users of FTZ program • Active Subzones: BMW in SC, Honda in OH, Hyundai and Mercedes-Benz in AL, Nissan in TN, Subaru in IN, Toyota in KY and W.VA. • In 2010, combined $45b in merchandise received, $11b exported, 45,000 workers directly employed • Most export-intensive sector: 10% of zone admissions, almost a third of exports

  15. Questions & AnswersDaniel Griswold, PresidentNational Association of Foreign-Trade Zones1001 Connecticut Ave. NW Suite 350Washington, DC 20036202-331-1950dgriswold@naftz.orgwww.naftz.org

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