What Role Do Foreign-Trade Zones Play in Georgia Ports?

April 22, 2015 | Charles Bowen

Question

What role do Foreign-Trade Zones play in importing goods to ports such as those in Savannah and Brunswick, Georgia? 

Answer

Foreign-Trade Zones encourage economic growth by leveling the playing field with international competitors, encouraging companies to maintain and expand their operations in the United States. Imports to Foreign-Trade Zones now account for more than 12% of total U.S. imports.


Foreign-Trade Zones

Foreign-Trade Zones (FTZs) are secure areas located in or near U.S. Customs ports of entry, but legally considered to be outside the Customs territory for the purpose of tariff laws and Customs entry procedures.

U.S. Customs and Border ProtectionFTZs are under the supervision of U.S. Customs and Border Protection (CBP) which is overseen by the U.S. Department of Homeland Security. There are over 260 FTZs in the country and several hundred more subzones. Qualified public or private corporations may operate the facilities themselves or contract for the operation sponsorship of the FTZs. The operations are conducted on a public utility basis with published rates. A typical general-purpose zone provides leasable storage/distribution space to users in general warehouse-type buildings with access to various modes of transportation. Many zone projects include an industrial park site with lots on which zone users can construct their own facilities. Subzones are normally private plant sites authorized by the Board and sponsored by a grantee for operations that usually cannot be accommodated within an existing general-purpose zone.

Authority for establishing these facilities is granted by the Foreign-Trade Zones Board under the Foreign-Trade Zones Act of 1934, as amended (19 U.S.C. 81a-81u). The Foreign-Trade Zones Act is administered through two sets of regulations, the FTZ Regulations (15 CFR Part 400) and CBP Regulations (19 CFR Part 146).


Purpose

It is the intent of the U.S. FTZ program to stimulate economic growth and development in the United States. In an expanding global marketplace, there is increased competition among nations for jobs, industry and capital. The FTZ program was designed to promote American competitiveness by encouraging companies to maintain and expand their operations in the United States.

The FTZ program encourages U.S.-based operations by removing certain disincentives associated with manufacturing in the United States. The duty on a product manufactured abroad and imported into the U.S. is assessed on the finished product rather than on its individual parts, materials or components. The U.S.-based manufacturer finds itself at a disadvantage compared with its foreign competitor when it must pay a higher rate on parts, materials or components imported for use in a manufacturing process. The FTZ program corrects this imbalance by treating products made in the zone (for the purpose of tariff assessment) as if it were manufactured abroad. At the same time, this country benefits because the zone manufacturer uses U.S. labor, services and inputs.


Use of Foreign-Trade Zones

Foreign and domestic merchandise may be moved into zones for operations not otherwise prohibited by law, including storage, exhibition, assembly, manufacturing and processing. All zone activity is subject to public interest review. FTZ sites are subject to the laws and regulations of the United States as well as those of the states and communities in which they are located.

Under zone procedures, the usual formal CBP entry procedures and payments of duties are not required on the foreign merchandise unless and until it enters CBP territory for domestic consumption, at which point the importer generally has the choice of paying duties at the rate of either the original foreign materials or the finished product. Domestic goods moved into the zone for export may be considered exported upon admission to the zone for purposes of excise tax rebates and drawback.


**Note: source of all information above regarding FTZs is the U.S. Customs and Border Protection website, more detailed information such as the process for establishing a FTZ, what may be placed or done in FTZs, the role of the CBP and much more can be found here.  


Local Foreign-Trade Zones

Savannah Foreign-Trade Zone

Georgia Ports Authority

Savannah Subzones

  • 104A Merck

  • 104B Wal-Mart

  • 104C Axeon Refining LLC

  • 104D Tumi, Inc.

  • 104E Firth Rixson Forgings, LLC

 

Brunswick

Brunswick Subzones

  • 144A E.I. du Pont de Nemours

  • 144B Firth Rixson Forgings LLC



Georgia Ports Authority

Operating both the Port of Savannah and Port of Brunswick, the Georgia Ports Authority (GPA) is a major economic driver in our region. The Port of Savannah is the second busiest U.S. container exporter, 13.27 million tons in 2014 and the largest single container terminal in North America. The Port of Brunswick is the number one importer of new automobiles.


Statewide Impact

  • 352,146 full-time and part-time jobs (8.3% of Georgia’s total employment)

  • $66.9 billion in sales (9.5% of Georgia’s total sales)

  • $32.4 billion in state GDP (7.8% of Georgia’s total GDP)

  • $18.5 billion in income (5.2% of Georgia’s total personal income)

  • $1.4 billion in state taxes

  • $1.1 billion in local taxes


National Impact

  • $4.5 billion in federal taxes

  • The Port of Savannah moved US$54,100,815,237 of containerized cargo during FY2011.

  • In FY2011, 8.7% of total U.S. containerized trade moved through the Port of Savannah (based on tonnage).


Forecasted Growth and Infrastructure

global economic growthThe Georgia Ports Authority increased containerized cargo in February by 14.2% over the same period last year. March saw an even greater growth rate of 27.8% for an additional 72,499 twenty-foot equivalent container units (TEUs). Strong growth is expected to continue in part due to the widening of the Panama Canal, deepening of the Savannah River and other expansion projects, and cargo diversions from the West Coast (an estimated 20-40% of diverted cargo is expected to stay with the East Coast). Savannah port traffic was forecasted to expand roughly 4-4.5% but is now handling the level of traffic it expected to handle in 2023. With all of this growth, several new commercial building construction projects are underway including logistics storage and distribution centers.


Bottom Line

The Foreign-Trade Zone program has been encouraging economic growth in the United States for over 80 years and zones have been established in all 50 states and Puerto Rico. Due to their superb geographic location, logistics and transportation infrastructure and several outside factors, the ports in our region are enjoying tremendous growth in 2014 and are projected to continue that growth in the coming decade. As the global economy continues to expand and the demand for products to be imported and exported increases along with it, Savannah and other port cities in the region are in prime position to take advantage.

 

SCHEDULE A COMPLIMENTARY  CONSULTATION

Topics: Commercial Law in Georgia