A local government group says Johnston County businesses aren’t using a benefit that would save them money when importing and exporting goods.
Johnston is one of 13 Triangle counties that make up a foreign trade zone, or FTZ. FTZs permit the duty-free entry of foreign goods, but companies have to jump through a few bureaucratic hoops to qualify, including having U.S. Customs inspect and certify their sites.
The Triangle J Council of Governments administers the local FTZ, and last week, Triangle J staff members came to Clayton to tout FTZ benefits to a gathering of county and business leaders.
Staff member Renée Boyette said Johnston County has no companies that are designated FTZ sites. That might be because many businesses simply don’t now about the FTZ, which is something Triangle J aims to change, Boyette said.
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“We’re really trying to do some seminars to let businesses know that this is an option,” she said.
Another part of the problem, Boyette said, is the application process, which some companies find onerous. Because they’re bypassing Customs entry, FTZ sites face oversight from U.S. Customs.
Among other things, the federal agency has to be sure FTZ sites are secure. “You’re essentially an extension of customs,” said Cornelia Stewart, a foreign-trade consultant.
Businesses usually do a cost-benefit analysis to see if the benefits of becoming an FTZ site are worth the expense.
“Basically, it becomes a mathematical equation as to whether or not companies can afford to do it,” said Jeff Carver, a county commissioner and chairman of the Triangle J board.
But companies that import, export, manufacture or distribute from inside an FTZ can reap substantial benefits, Stewart said.
When a company imports a product – say, fine china – it pays a duty fee on each dish. Inevitably, some dishes get cracked, so they’re of no value. In an FTZ, where duty payments are delayed, a company can discard the damaged dishes and pay no duty on them.
“A lot of times, it’s a huge savings on cash flow,” Stewart said.
Some particularly savvy businesses completely sidestep duties on certain products. Revlon, which has a plant in Oxford, found a way to avoid duties on its lipsticks, Stewart said.
Cosmetics companies pay duties on imported components – things like plastic caps and containers – but not on finished goods. Revlon imports the base and cap for its lipsticks into the FTZ site in Oxford. The lipstick itself is made here.
When the product ships out of the FTZ, it is finished. Revlon pays no duties at all.
Boyette said Johnston County and its towns can ease the application process for companies by completing part of the process before businesses move in. So-called “magnet FTZ sites” can be designated in advance, leaving fewer hoops for businesses to jump through when they set up shop.
“It would be one less step,” Boyette said. “If you have a business park or something, it could be beneficial.”
Carver said he hopes to spread the word about the benefits of the FTZ. It’s a great selling point, he said, for localities trying to lure businesses.
“We’re all in the economic-development business,” Carver said. “I see this as one more tool in the toolbox.”