Foreign trade zone helps manage import costs

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Time is of the essence for the Springfield-Branson Regional Airport's foreign trade zone. |ret||ret||tab|

According to Foreign Trade Zone Administrator Louanna Burress, the airport property received a grant of authority to establish, operate and maintain a foreign trade zone in August 1997. But the Foreign Trade Zones Board allows only five years from the time the grant is received for the zone to be up and running. |ret||ret||tab|

That means the airport's foreign trade zone, which can help companies save duty on im-ports, must be functional by August 2002 or the grant will lapse. And that's where Burress comes in. |ret||ret||tab|

She previously ran the foreign trade zone in Wichita, Kan., but wanted to return to Springfield, so she contracted with the airport for her services. Burress said while she wants to keep the airport from losing its grant of authority, her focus, and the primary purpose of a foreign trade zone, is to help area businesses compete in the marketplace.|ret||ret||tab|

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Putting the zone to work|ret||ret||tab|

The foreign trade zones program was initiated in 1934 by Congress, and it was designed to help American businesses compete in the international economy. |ret||ret||tab|

"Essentially, what it does is it allows areas in the United States, physical areas ... to be considered outside customs territory for duty purposes," Bur-ress said. Duty on imports, she added, can vary from as little as 1.5 percent to 17 or 18 percent in extreme cases. Specifically, utilizing a foreign trade zone a-lows companies to delay paying duty on imported merchandise. |ret||ret||tab|

Imported merchandise comes to the United States and must clear a U.S. port of entry there's one of those at the Springfield-Branson Regional Airport and duty must be paid on the merchandise before it can be taken to the company's facility. |ret||ret||tab|

With a foreign trade zone, companies only have to pay duty on the merchandise they remove from the airport property and take to their business. The remainder stays in storage, duty-free within the zone. |ret||ret||tab|

Burress said in Springfield, 2,600 square feet of space initially will be activated for the foreign trade zone, but because the entire airport property is designated as a zone, more space can be allocated as needed.|ret||ret||tab|

"Say we have a firm in Springfield that's a retail firm and they import China dishes from Hong Kong. But they don't have room in the retail shop for the whole shipment. So they may order a couple of containers," Burress said. "But say he could use half of a container he's got a place at his shop to display it, store it and sell it. So he could take out the portion that he knew he could use in the next three months, or six months, or whatever period of time," Burress said. Duty would only be paid on the portion of merchandise that the owner removed from the zone. |ret||ret||tab|

Meanwhile, there is no time limit as to how long merchandise can remain in storage in the foreign trade zone, so it can sit there for as long as its owner needs. |ret||ret||tab|

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Handling damaged goods|ret||ret||tab|

Another benefit to a foreign trade zone is that it gives importing businesses some options when the merchandise they receive is damaged or isn't quite what they needed. Burress said merchandise outside a foreign trade zone can't be opened and inspected until the duty is paid. If the merchandise is damaged, the company can return it to the seller, but the duty fees won't be refunded. That can be prevented when the importing company brings its goods through a foreign trade zone. |ret||ret||tab|

"They would have these containers moved into the foreign trade zone, and they could open the containers and ... could inspect it," Burress said. If necessary, the merchandise can be rejected, and shipped back to the country from which it came. |ret||ret||tab|

"And since it never entered customs territory, (the Ameri-can company) would never pay any duty on it," she said.|ret||ret||tab|

Return shipment can be expensive, though, and in some cases the foreign company might not want its freight returned. If the freight came through a foreign trade zone, the American company can send workers into the zone to destroy the goods so they never enter U.S. Customs and become subject to duty, and the sending company doesn't have to deal with them.|ret||ret||tab|

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Necessity of imports|ret||ret||tab|

Burress said some people dislike the idea of foreign trade zones because they feel the zones encourage the use of imports. But, she said, that's not the case. |ret||ret||tab|

Burress said it's a fact of life that American businesses use imported goods, and in many cases, those imports make it possible for the company to operate. The foreign trade zones just make it easier for importing companies get the goods they need to survive. |ret||ret||tab|

"In my mind, it's all about jobs ... the imports allow American businesses to stay in the United States and create the jobs here, rather than have them close down and go to Japan or some other place," she said. |ret||ret||tab|

As of 1999, the United States had 245 general purpose foreign trade zones, which are zones like Springfield's that can be used by multiple businesses.|ret||ret||tab|

Another type of zone is a special-purpose subzone, which is used primarily by manufacturers, such as those that make automobiles. |ret||ret||tab|

A special-purpose subzone gives manufacturers savings by allowing them to pay duty on a finished product, rather than multiple duties on different foreign components. And the manufacturers stay in this country to make what they sell. |ret||ret||tab|

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Size doesn't matter|ret||ret||tab|

Burress said foreign trade zones offer the same benefits for all companies, whether they're big or small. In fact, she said, the majority of companies that use foreign trade zones are small businesses. The bottom line for all companies, she said, is the bottom line.|ret||ret||tab|

"Companies need to save every penny they can, and this is a way to do it," she said. |ret||ret||tab|

That's why she hopes local companies will take time to learn how the zone works and decide if they'll use it once it's activated. |ret||ret||tab|

"The ideal way to activate a zone is to have a business that wants it. In Wichita, after we got our grant, we activated it without a user," Burress said. But, she said, it was several months before it was used. "It's really better if you have a user when you activate. That's what I'm hoping for."|ret||ret||tab|

Dave Baker, director of imports for Bass Pro Shops Outdoor World, knows Bass Pro could benefit from a foreign trade zone. |ret||ret||tab|

Baker said even before the airport's designation was approved, he was exploring the option of bringing a foreign trade zone to Springfield with the help of outside consultants and others. |ret||ret||tab|

He said Bass Pro does not use foreign trade zones with any of its stores, but the company is interested in the possibility. A great deal of what Bass Pro offers comes from foreign companies.|ret||ret||tab|

"Everything from gifts to apparel to footwear to fishing equipment, hunting equipment, camping, just about everything that you could go to our store and see, in some cases, some part of that would probably be imported," Baker said. |ret||ret||tab|

Baker added that it's important for businesses to know how a foreign trade zone works, but he added that not all businesses in the area will be able to use the zone. But on the whole, Baker said, the zone is "going to be important to local industries here in Springfield, because it's going to help to put them on a more level playing field with some of their competition in other parts of the world." [[In-content Ad]]