It’s undeniable: a foreign trade zone designation comes wrapped in red tape.
But for those who embrace and navigate the unavoidable government scrutiny, the option can yield serious benefits.
Ask UniCarriers Americas, a locally based forklift manufacturer. The Marengo company avoids duties on imported parts through its FTZ, which spans 390,000-square-foot and 70,000-square-foot facilities.
“Given our current manufacturing footprint and what we do, we can avoid well over $1.5 million a year,” said Traci Grever, manager of logistics and trade compliance for UniCarriers.
That money goes toward other areas of the business and has helped the company expand in recent years – adding space and employees.
A foreign trade zone is an area where goods can be imported, then stored and processed without being subject to the import duty.
Grever is quick to point out, though, that “FTZ” stands for foreign trade zone – not free. Regulation and fees from several federal government agencies – such as the U.S. Department of Commerce and the U.S. Customs and Border Protection – can add up.
UniCarriers employs a full-time employee to sort through the paperwork and file reports, which are required daily, to U.S. Customs. That employee sometimes requires help. And then there’s filing and technology costs.
“It’s usually pay, pay, pay,” said Bill Lada, president of McHenry-based World Trade Center Illinois. “And if you pay and follow the rules, you’re going to have no problems.”
Lada is pushing for more area businesses to take advantage of the option. He sees foreign trade zones as one way to combat low overseas production costs and keep manufacturing jobs in the U.S.
“We’re not going to get a cheaper labor force here in the U.S.,” Lada said. “We make good product. We innovate better than anybody in the world. But we have to somehow level the playing field on the parts.”
But, Lada added, manufacturers aren’t the only businesses that can benefit from an FTZ. He sees other businesses, such as a bakery importing specialty items from overseas, potentially fit for the distinction.
Although she’s up front about the significant efforts needed to fully comply, McHenry County Economic Development Corp. President Pam Cumpata is similarly enthusiastic about what a FTZ can mean for the local economy.
“Anything that strengthens the companies that are here, makes them viable into the future, and provides opportunities for employment for our residents is a positive,” Cumpata said. “Taking advantage of the foreign trade zone is a great way to accomplish those items.”
For UniCarriers, the rewards have been significant. Saving on duties has allowed money to go elsewhere. And the company is in the process of qualifying a recently purchased building – an additional 121,000-square-feet – for foreign trade zone status.
For businesses mulling a FTZ, Grever recommended going through a thorough analysis before any decisions are made.
“You have to figure out the benefits, whether the savings are going to outweigh the costs – what is your foreign trade zone return on investment,” she said. “It all depends on your business structure.”