The value of total trade and exports moving through U.S. foreign-trade zones last year hit record highs, reflecting exporter and retailers’ increased of the hubs.
The value of exports through the nation’s 177 FTZs jumped 13.7 percent year-over-year to $79.5 billion last year, while total trade through the zones rose 14.1 percent to $835.8 billion. That roughly 65 percent of the merchandise received in the FTZs was sourced from the U.S. suggests manufacturers are increasingly using the zones to produce goods for domestic and foreign markets. The share of domestically sourced merchandise brought into foreign-trade zones was 58 percent in 2012 and 57 percent in 2011.
“FTZ user companies have done more than their share to meet President Obama’s goal of doubling exports,” Daniel Griswold, president of the National Association of Foreign-Trade Zones, said in a statement. “Since 2009, exports from foreign-trade zones have almost tripled, from $28 billion to nearly $80 billion. The FTZ program shows that when U.S.-based companies are allowed to access global inputs at competitive prices, they can become export powerhouses.”
The make-up of FTZ users is also changing. Vehicle, electrical machinery and consumer product shippers are using the zones more, offsetting a decline in usage by energy refiners. Retailers are also increasingly using the zones even when they don’t introduce domestic components into the FTZs.
By operating in an FTZ, retail shippers can consolidate their Customs processing fees into a weekly payment instead of having to pay whenever a shipment is received, as required when operating outside a zone. That cuts down on retailers’ paperwork and allows them to better manage their inventory.
Retail shippers, including The Coleman Group and Kawasaki Motor Manufacturing, told JOC Inland attendees last October they are embracing FTZs in Kansas City. The increased popularity of FTZs among retail shippers is reflected in the rising proportion of merchandise received for warehouse and distribution. Last year, 32 percent of merchandise received, or $265.4 billion worth of goods, was for warehouse and distribution, while the remaining $571.3 billion was intended for production. The share of merchandise received for warehouse and distribution made up 25 percent of the total in 2012 and 17 percent in 2011, according to the Annual Report of the Foreign-Trade Zone board.
The traditional benefits of operating in an FTZ remain. Companies that manufacture, assemble and package within a zone have a choice of paying the duty on the final product or its foreign components, with the former often being cheaper. Shippers can also use FTZs as export hubs because they don’t have to pay U.S. duties on final products that are re-exported.
Contact Mark Szakonyi at email@example.com and follow him on Twitter:@szakonyi_joc.