Economic Development Tools
Foreign-Trade Zone 132
The Oregon International Port of Coos Bay is the grantee for Foreign-Trade Zone No. 132. Foreign Trade Zones (FTZ) are intended to expedite and encourage foreign commerce, stimulating economic development in the United States. There are only two designated FTZs in the State of Oregon; No. 132 in Coos County and No. 45 in Portland.
What is a Foreign-Trade Zone?
Foreign-Trade Zones are designated areas within the geographic boundary of the United States that have been approved by the U.S. Customs and Border Protection (CBP) as being outside U.S. territory for purposes of duty collection – FTZ sites and facilities remain within the jurisdiction of local, state and federal governments or agencies. FTZs can include labor-intensive manufacturing centers that involve the import of raw materials or components and subsequently the export/entry of finished merchandise or products. Customs duty is determined when the merchandise leaves the zone. Foreign Trade Zones are essentially business islands within the United States. An FTZ is a designated area where merchandise, both domestic and foreign, receives the same treatment it would if were outside the commerce of the United States. Importers, distributors, manufacturers, and other entities can utilize an FTZ to defer, eliminate, or reduce duties on imported goods.
Typical activities that are permitted within the zone include but are not limited to:
- Manufacturing/production (Manufacturing/Production Authority requires advance approval from the FTZ Board)
- Destruction of goods
Foreign-Trade Zones were created in the United States in 1934 as a result of the Foreign-Trade Zones Act, with the hopes of stimulating the economy following the Great Depression. Our ever-changing global economy has changed how goods are produced. Often, parts or components are manufactured in one country, then assembled in another, and then sold in a third. The FTZ program helps to keep industries in the United States competitive in the global market place and retain jobs.
Benefits of Foreign Trade Zone No. 132
For businesses models that include the import of various goods and components, Foreign-Trade Zones offer a number of potential benefits. Potential uses for the zone include:
- The duty on components imported into the U.S. that are used in production/manufacturing activity may be assessed at the finished product duty rate rather than on its individual parts, materials or components. This is known as inverted tariff benefit.
- Goods that have an established quota for entry may be placed in an FTZ until the quota opens or is removed. Such goods (with exception) may also be manipulated or manufactured into a product that is not subject to the established quota.
- FTZs require physical security measures, and are subject to certain access and inventory requirements, which lends to the improvements in the security of supply chains.
- When calculating the dutiable value of foreign goods removed from the FTZ, FTZ users are able to exclude Zone costs related to processing, fabrication, general expenses, and profit. As a result, duties are not owed on labor, overhead, or profit attributed to the production activities. Additionally, no duties are assessed on merchandise sold from an FTZ to either the U.S. Military or NASA.
- Utilizing an FTZ can have impacts on import expenses and a business’s cash flow resulting from duty deferral, reduction, or total elimination. Goods that are within a zone only incur an import duty once they are withdrawn and enter the U.S. market. Import goods that are not destined for an FTZ are charged a duty on each component of a device, as opposed to goods within a zone which can be packaged into a single unit. Additionally
- Goods can stay within a zone indefinitely
- If goods within the FTZ are shipped outside the U.S., there is no duty
- If materials enter an FTZ and become scrap, there are no duties charged.
- Certain types of personal property within an FTZ are generally exempt from state and local ad valorem taxes.
- Companies within an FTZ can transfer goods from one FTZ to another FTZ. Because the goods are transported in-bond, the duty can be deferred until they are removed from the final zone to enter the U.S. Market.
- If products are going to be assembled, packaged, or tested within the FTZ, the business operating within the zone can receive the components in bulk and purchase lower cost packing materials can be purchased locally.
- If manufacturing/production activities take place within the FTZ that result in a finished product with a lower duty rate than the duty rate of the various components used in its production, the finished product can enter the U.S. at the duty rate that applies to the finished product when it leaves the zone.
Requirements for Businesses Operating Within an FTZ
To operate within an FTZ, businesses must comply with certain requirements. Businesses must keep an accurate inventory control system that can determine what merchandise is in the zone, as well as the quantity. They system must also track what is done with the merchandise. This includes shipping and receiving, but also how the merchandise was manipulated (i.e. was it simply retagged, or were there manufacturing or production activities?). The system must also track how manipulations made to merchandise impact its tariff classification. The inventory control system must track what was done with the merchandise no matter what activities are undertaken in the FTZ.
The inventory control process must utilize the appropriate import documentation. The admission document, also called the 214 is completed when filing to receive goods. The form includes compliance documentation, in which the operator determines if they received the type and amount of goods they were anticipating receiving. The physical movement of merchandise requires an accounting of the amount, value, and tariff classification of merchandise.
Inventory methodology is also important. Companies can either select cycle count or annual inventory processes. Companies must provide Customs with a guarantee that merchandise is being counted and accounted for.
How does a Company Access FTZ Benefits?
The fee to activate an FTZ within an existing FTZ boundary is $1,500, and can be done through the grantee of the zone (Oregon International Port of Coos Bay). Companies that could benefit from the zone, but fall outside the existing boundaries can seek to have the grantee file for a minor boundary modification or other application to have a new boundary or site/subzone established or expanded. The cost to have this application completed and filed is $5,000. There are annual fees associated with maintaining the activation. Oregon International Port of Coos Bay staff are knowledgeable about the program, and can help facilitate between companies and the U.S. Customs and Border Protection and the Foreign-Trade Zone Board to determine steps to utilize the program.
Additional costs associated with the program include the implementation of the above described inventory measures, as well as securing the site where FTZ activities will take place.
Duty rates are set annually and released through publication from the U.S. International Trade Commission (USITC) and are collected by the U.S. Customs and Border Protection. The first step to determining if FTZ designation would provide a cost benefit to your company is evaluating associated duties on goods being imported, and how the FTZ designation could impact cash flow and expenditures.
A simple calculator for determining FTZ savings can be found at: http://ftz.rockefellergroup.com/foreign-trade-zones/rockefeller-calculator2/
About Foreign Trade Zone No. 132
#1 -- 284 acres on the eastern shore of the central section of the North Spit Peninsula, Coos County, Oregon; accessed by TransPacific Parkway. This property is owned and operated by the Port and the Bureau of Land Management and is known as the North Bay Marine Industrial Park. Intended use is marine and heavy industrial development.
#2 -- 520-acre parcel located on the northeast section of the North Spit Peninsula; also accessed by TransPacific Parkway. This property is owned by Roseburg Forest Products Co. and Weyerhaeuser. Existing buildings on the Roseburg property could be utilized for general-purpose warehousing. A portion of this site has railroad service.
#3 -- 531 acres in five parcels located at four marine terminals and at Southwest Oregon Regional Airport.
Parcel 1 - Ocean Terminals in the City of North Bend, at Channel Mile 11.0, with rail and highway access.
Parcel 2 - Export Services in the City of North Bend, at Channel Mile 11.5, with rail and highway access.
Parcel 3 - Central Dock in the City of Coos Bay, at Channel Mile 13.3, with rail and highway access.
Parcel 4 - Coos Bay Docks near the City of Coos Bay, at Channel Mile 15.1, with rail and highway access.
Parcel 5 - Southwest Oregon Regional Airport; regular passenger and cargo flights, with adjacent business park.
Foreign-Trade Zone No. 132 is one of two zones in Oregon. The other one is Zone No. 45 and subzones, granted to the Port of Portland. For general information on Foreign-Trade Zones, visit www.naftz.org
Enterprise Zones are an economic development tool created by the State of Oregon to encourage business growth and development. In short, enterprise zones exempt businesses from local property taxes on new investments for a specified amount of time. The length of time varies among the different types of zone programs, but the most commonly utilized is between 3-5 years.
Enterprise zones are sponsored by city, port, county, or tribal governments. The local enterprise zone in the Coos Bay/North Bend area is the Bay Area Enterprise Zone. The Port of Coos Bay is one of the four sponsoring entities for this zone, along with the Cities of Coos Bay and North Bend, and Coos County. In exchange for locating or expanding into any enterprise zone, businesses (which generally does not include retail or professional offices) receive total exemption from property taxes that would normally have been assessed on the new plant or equipment.
Businesses making an inordinately large investment (there are several types of criteria that must be met, including the total dollar amount invested, average wage paid to employees, and the total number of employees) can be eligible for a Long-term rural Enterprise Zone designation. The long-term program extends property tax abatement to as many as 15 years on the new improvements and investments.
The Boundary of the Bay Area Enterprise Zone, shown in yellow shading below: