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Local governments support foreign trade zone application

Tuesday, June 26, 2012

Plans to create foreign trade zones in northwest Iowa continue with the support of local and county governments.

Last week the Plymouth County Board of Supervisors and the Le Mars City Council signed letters of support for an application to allow Northwest Iowa Development a grant of authority to designate foreign trade zones.

Northwest Iowa Development (NWID) is a group that markets a six-county region including Plymouth, Cherokee, Lyon, O'Brien, Osceola and Sioux counties.

The U.S. Department of Commerce Foreign Trade Zone Board will review the NWID's grant of authority application.

If the application is approved, NWID will have the authority to grant foreign trade zone (FTZ) status to businesses in the six-county region, according to consultant Bill Hooton, president and CEO of Trade Strategies, headquartered in New York.

"You have to have a grant of authority from the government to be able to bless those individual businesses," Hooton said.

Hooton was hired by NWID to put together an analysis to determine interest in creating FTZ sites in the six-county region and submitting the grant of authority application.

He described FTZs as a physical area with legal property boundaries.

"It could be as small as a room in a single building or it could be a 20,000-acre industrial park with multiple tenants," he said. "Size is not important."

No matter its size, if a piece of property is designated as a FTZ, that area is no longer in the United States as it applies to importing regulations, duties or taxes, Hooton said.

Duties are fees the U.S. government receives for goods imported into the U.S., he said.

That means manufacturers who bring foreign materials into a FTZ don't have to pay duties or taxes on them until point of sale because technically they are not in the U.S., Hooton said.

"Before foreign trade zones were created, as soon as they (materials) hit the port of arrival you ended up paying the duty and local taxes against those goods," he said.

That changed with 1934 legislation that allowed for the creation of FTZs as a way to balance the scales for U.S. companies competing in the global marketplace, Hooton said.

In addition to deferring import duty rates, FTZs have other benefits such as encouraging and lowering costs of exports, he said.

Gathering letters of support from the six counties is part of the application process, said Neal Adler, executive director of the Le Mars Business Initiative Corporation (LBIC).

Le Mars Industrial Park will be identified as a potential FTZ site in the initial application, but that doesn't mean businesses there will be required to participate, Adler said.

Currently several local companies have indicated an interest in FTZs, he said.

Companies in FTZ sites choosing that status will pay user and other fees, some of which will go to NWID as the grant of authority in the region, Adler said.

"The costs are only associated with companies that choose to function within a foreign trade zone," he explained. "Companies could be sitting right in the heart of that site and choose not to function as a foreign trade zone."

Hooton said he sees NWID's application for a grant of authority for FTZs as a proactive step for the region.

Both he and Adler pointed to benefits of having the FTZ option available for existing and prospective companies.

"It's an attractive environment for international investment," Hooton said. "One of the things most foreign companies will surely look for is whether they can get foreign trade zone status at their chosen location."

Adler said there are a number of companies throughout the six counties that could benefit from FTZ status, acknowledging that there are many that won't.

"Most of the businesses probably won't function that way," Adler said. "NWID determined if we have one company in our six counties that find benefit in that, that's what we're here for."

NWID has not asked any of the local entities throughout the six counties to pay additional dollars for the FTZ grant of authority application process, he said.

"The entire process is being funded through Northwest Iowa Development and a regional economic development grant provided by the state of Iowa," Adler said.

Hooton said he hopes to have the NWID application completed in mid-July, after which the FTZ board will review it and consider approving it, possibly in 2012.

"More realistically, sometime in the first quarter of 2013 the grant of authority will be awarded to us," he said.



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