If we're going to keep businesses in New York, they need ways to save money, and that's the chief reason the Genesee County Legislature should get behind creating a Foreign Trade Zone (FTZ) in the county, according to Charles Giunta, port director for U.S. Customs in Rochester.
Giunta (pictured above) was brought to the Ways and Means Committee meeting Wednesday afternoon by staff of the Genesee County Economic Development Center.
"I’m a different kind of port director," Giunta said. "I go out four or five times a month and make presentations to companies on foreign trade zones. Why? Because foreign trade zones mean we're going to keep the business here. They're not going to go overseas. If I can save these companies money, then it’s a no-brainer."
A foreign trade zone allows a business to import products and materials duty-free that will be used to manufacture items. It's as if the FTZ is outside the United States. There is only a duty if the item is "imported" (sold) into the U.S.
For example -- as used in the meeting -- if you built motorcycles and bought some of the parts overseas, you would pay duty, say $20 each, on the handlebars, headlamp, starter and seat. But the duty on a completed motorcycle is only $10. So the company saves money on buying all the parts and pays duty on only the finished product when it becomes a consumed item in the United States.
GCEDC is putting together an application for an FTZ and needs the support of the legislature. A resolution will be presented to the Ways and Means Committee at its next meeting. The GCEDC is also gathering data and support material to sway the FTZ board in Washington, D.C., that there is a need and desire for an FTZ in Genesee County.
If a general FTZ is granted to Genesee County, companies that want to take advantage of the FTZ would need to apply for a subzone. A subzone must be fenced off or otherwise segregated from non-FTZ factory operations.
There is a $5,000 annual fee companies must pay.
The fee would be paid, in this case, to GCEDC, and Mark Masse, senior VP of operations, said the fee would be reinvested in GCEDC's parks and programs.
The idea of applying for an FTZ came up when a local manufacturer made a request for an FTZ. The Genesee County-based company has a plant in Georgia and an FTZ locally would save the company more than $15,000 a month.
"So there is an urgency because every month that goes by, we’re missing out and they’re out that money," said Chris Suozzi, vice president of business development for GCEDC.
Roberta Jordans, with the law firm Harris-Beach, said that with the importance President Barack Obama is putting on increasing American exports, the FTZ board in Washington is trying to expedite applications. The normal 18-month process has been shorted, she said.
Legislators pumped Giunta and Jordans with questions.
Edward DeJaneiro wanted to know that if FTZs aren't technically part of the United States, what happens if a crime is committed.
It turns out, if a person steals from within an FTZ, it's a federal crime.
Inventory control is one of the most closely watched aspects of an FTZ by U.S. Customs, Giunta. While small thefts are usually handled internally, and require notification to customs, Giunta said, big thefts will trigger a customs investigation.
After the meeting, Jordans said that companies within a FTZ must still comply with all state and federal environmental regulations, for example, as well as local zoning ordinances.
Mary Pat Hancock wondered if a FTZ would create local companies that stop buying locally grown crops.
Giunta said there just isn't as much money to be saved on importing food to make it financially worthwhile for a food processor to be part of an FTZ. The duty even on sugar has come down substantially, said Giunta, and many food items have almost no duty.
Jay Grasso wanted to know why, with it being such a seemingly great thing, there aren't more counties setting up free trade zones (the program is 76 years old).
Giunta said there simply aren't many officials with U.S. Customs out marketing the program. A lot of companies don't understand it or think it's too difficult of a process.
Masse (pictured below) said it hasn't necessarily been easy so far to convince local manufacturers to apply for subzones. Many times, businesses haven't sent decision makers to attend FTZ presentations, so something may be lost in translation when it gets back to the decision makers.
"Once somebody gets in and becomes successful, then it will become easier to sell to everybody else," Masse said.
Suozzi said the FTZ will help support other GCEDC projects, such at the STAMP project in Alabama.
"This is a tool to retain business here and it's a tool to attract business," Suozzi said. "This is a huge opportunity."