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State Will Create A Large Free Trade Zone In Eastern NC

By Jenny Callison, posted Apr 4, 2014
Goods for import or export through the Port of Wilmington can potentially have greater protection from customs duties through a new agreement announced Monday by an official with the N.C. Department of Transportation.

At Monday’s Go Global Road Show co-sponsored by the NCDOC, the N.C. World Trade Council and the Wilmington-based Foreign Trade Promotion Council, Lori Fuller, NCDOT’s deputy general counsel for logistics, announced that a 24-county area of the state, including Brunswick, New Hanover and Pender counties, will become a free trade zone (FTZ) through an Alternative Site Framework (ASF) arrangement.

“A free trade zone defers duty taxes and ad valorum taxes until the product leaves the zone,” explained Rep. Rick Catlin (R-New Hanover), a supporter of free trade zones as a way to boost international sales and save companies significant expense.

In an interview Friday, Fuller explained that NCDOT is the grantee of FTZ 214, and will administer the zone under the U.S. FTZ board rules.

“Within our service area for the 24 counties, we at DOT as the grantee would apply for sites to be designated as a FTZ site,” she explained. “A company wishing to become a site would apply through us and we will advocate for that through the U.S. FTZ Board.”

Put simply, any company designated as an FTZ site within the new zone can manufacture, assemble, handle or reconfigure goods at its existing site and receive the benefits of a free trade zone. Fuller said goods can move around from FTZ site to FTZ site within the zone and receive full protection from duties as long as they travel by approved means.

As an example, Fuller said, a North Carolina tractor manufacturer could import European engines into the new FTZ, install the engines in its tractors, and export the tractors without ever paying customs duties on the engines – as long as they never left the zone. Free trade zones work on the same principle as duty-free stores at international airports, she said.

Fuller said there is a second type of site that can be established in FTZ 214.
“Anyone who does both warehouse and distribution can apply to be a magnet site. That is where foreign companies can import merchandise into the warehouse in North Carolina that is a designated magnet site without paying custom taxes until merchandise is shipped to the ultimate customer in the U.S.,” she said.  “The magnet site management, however, must keep detailed inventory on this merchandise and report on it monthly.”

Catlin pointed out that, if goods arrive damaged or if a shipment from abroad contains more product than necessary, there is no duty on those unusable goods if they land and remain in an FTZ. Goods moving in and out of an FTZ are insured as well, he added. 

Typically, FTZs are organized around seaports and airports, said John Hayes, executive director of the Foreign Trade Promotion Council and chairman of the Cape Fear chapter, N.C. World Trade Council. Wilmington has had an FTZ at its port for about 30 years, but has been little used, he said. Efforts by Catlin and others to create an FTZ at Wilmington International Airport have not been successful thus far.

Monday’s announcement that the entire 24-county region would essentially become a free trade zone came as very welcome news to Catlin and Hayes.

“This will encourage people in North Carolina to manufacture, encourage people to ship here,” Catlin said, pointing out how the creation of a free trade zone in Greenville, S.C. had lured BMW production facilities there.

“BMW has completely changed that town. It’s like going to Germany, with its outdoor cafes and concert halls,” he said.

Catlin said he and Hayes are in talks with NC secretary of transportation Tony Tata and his staff, making them aware of the benefits of having the FTZ-ATF, and with federal Department of Commerce officials to urge them to expedite the review process for the new zone.

Catlin said that it could take from a year to 18 months to establish the zone. Meanwhile, he and Hayes want to help area businesses learn how they can use the designation to their advantage.

“This is definitely a big deal for Wilmington; it's a great tool and people have got to know about it,” Catlin said, adding that he and Hayes will be promoting the zone and providing information and training for businesses.

“We want North Carolina to be open for business to the world,” Fuller said.
 
 

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