Life in the Fast Lane

Life in the Fast Lane

Indiana Receives Major Trade Designation
By Nick Dmitrovich, with details from the Ports of Indiana

A few weeks ago, the state of Indiana received an important approval from the U.S. Foreign-Trade Zone Board that seemed to gain little media traction after the announcements were made – despite the fact that the new regulation could make an important impact on our economy.

Officials from the Ports of Indiana and the state capital announced that Indiana has become the second state in the country to establish an accelerated application process for Foreign-Trade Zones (FTZ) in all counties. This is referred to as the Alternative Site Framework (ASF), which helps to streamline the application process for business involving FTZs.

There are 41 states that have been approved for the ASF designation in at least one county, and only three states have more than 80 percent of their counties approved. Indiana now has 100 percent.

So, what the heck does this mean for Indiana?

Basically, it means we now have a way to cut through some red tape and create new business opportunities much faster than other states. That’s right, we’ve gotten a foreign-trade turbo boost!

As explained by the Ports, the ASF designation was created by the U.S. Foreign-Trade Zones Board to reduce the time and paperwork required to establish an FTZ, in some cases reducing the application process from one year down to 30 days. FTZs are designed to reduce, eliminate or delay duties on certain international goods in order to increase competiveness of American companies and protect U.S. jobs.

“Having every county approved for the streamlined FTZ application process is a unique asset for Indiana,” said Rich Cooper, CEO for the Ports of Indiana. “Indiana’s FTZ administrators were committed to pursuing the ASF designations in order to provide a faster pathway for businesses to obtain FTZs and to eliminate some of the obstacles companies face when exploring FTZ benefits. In an expanding global economy with increased competition among nations for jobs, industry and capital, FTZs help promote American competitiveness by encouraging companies to maintain and expand their operations in the United States.”

Designated by the U.S. Department of Commerce Foreign-Trade Zones Board, a Foreign-Trade Zone allows foreign and domestic merchandise to be admitted to the U.S. for operations such as storage, exhibition, assembly, manufacture and processing, without being subject to formal customs entry procedures, the payment of customs duties or the payment of federal excise taxes until the finished goods leave the zone and enter the U.S. for domestic consumption.

The Ports of Indiana is the statewide administrator for all Foreign-Trade Zones. In 2011, the Ports of Indiana became the first foreign-trade zone grantee in the country to receive ASF approval on multiple zones. Indiana has six FTZs, which include:

  • Port of Indiana-Burns Harbor, FTZ 152
  • Port of Indiana-Jeffersonville, FTZ 170
  • Port of Indiana-Mount Vernon, FTZ 177
  • City of Fort Wayne, FTZ 182
  • Indianapolis Airport Authority, FTZ 72
  • Joseph County Airport Authority, FTZ 125

Randolph County recently received its designation under Fort Wayne’s FTZ 182. “The community of Randolph County is pleased with this important approval for membership in the Foreign-Trade Zone 182 district,” said Bruce W. Hosier, executive director of the Randolph Economic Development Corporation. “Given the circumstances of the global business presence in our communities, this asset will put in place another important piece of the puzzle, helping build our economic development capacity and securing a better path forward for those we have the privilege of serving.”

Many states are not able to receive ASF designation because of geographical challenges and the vast distances between international ports of entry. Indiana’s central location allows it to connect with multiple ports of entry in and around the state. The City of Fort Wayne made a special application to service Randolph County because its territory is at the limit of the ASF boundary.

“We’re looking forward to our region working with Randolph County and offering the advantages of being located within the Foreign-Trade Zone,” said Fort Wayne Mayor Tom Henry. “This innovative approach will help boost economic development efforts and allow more businesses to maximize opportunities to promote growth for international business.”

Ahead of the Curve

The key takeaway from all this is that Indiana is ahead of the curve, and will be remaining there. While other states might need more than a year to establish new trade with a foreign entity, we’ll be able to do it in just over a month. This designation should enable Hoosier companies to “strike while the iron’s hot,” when new opportunities arise, rather than wading through a lengthy sea of regulations.

Announcements like this serve as a testament to Indiana logistics – it’s almost as if our state is built to keep commerce flowing throughout our distribution networks. It’s difficult to pinpoint how big of an impact this decision will make further down the road, but it appears that geographic and infrastructure hurdles are going to keep other states from reaching this level anytime soon. Perhaps this new “fast track” designation will stand as one of those lesser-known moments in economic history that may not stand out in popular consciousness, but nevertheless produces important results.

 


What’s the Biggest Benefit of Foreign Trade Zones? Cost Savings.

Here are some examples of cost savings that companies can experience in foreign-trade zones:

Cash Flow – The postponement of Customs duty payments on imported merchandise in an FTZ can result in significant savings for companies and numerous other cash flow benefits.

Inverted Duty – For companies that perform manufacturing or processing, imported parts often have higher Customs duty rates than finished products. For example, a company may import materials with a 6% Customs duty but, in some cases, the process of manufacturing transforms these parts into a completely different finished product with a 0% Customs duty rate.

Waste – FTZ status can enable companies to avoid paying Customs duties on imported merchandise that becomes scrap, waste or obsolete during receiving, manufacturing, processing, storing or shipping.

Exports – Merchandise can be transferred in bond to between zones and subzones without a Customs entry, which could create considerable savings.

Source: Ports of Indiana