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HomeMy WebLinkAboutAgenda - 06-21-2011 - 5tORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: June 21, 2011 Action Agenda Item No. 5-+ SUBJECT: Potential Expansion of Foreign Trade Zone #93 DEPARTMENT: Economic Development PUBLIC HEARING: (Y /N) No ATTACHMENT(S): INFORMATION CONTACT: Triangle J Council of Governments Gary Shope, 919 - 245 -2325 6/6/2011 FTZ Correspondence PURPOSE: To receive information on plans by the Triangle J Council of Governments ( TJCOG) to apply for the expansion of Foreign Trade Zone (FTZ) #93 that could potentially benefit economic development activities in Orange County; and to authorize the BOCC Chair to submit a letter of support for TJCOG's effort regarding the expansion of FTZ #93. BACKGROUND: Foreign Trade Zones are designated areas that provide special customs procedures to US companies that engage in international trade. In these areas, products can be sorted, inspected, further manufactured and otherwise prepared for sale without payment of duty. FTZs benefit companies that are involved in international trade by offering numerous benefits including simplified import/export procedures, duty deferral and tax advantages. As detailed in the enclosed information from the TJCOG, there is interest to further expand on the existing FTZ #93 that was created in 1983. Three (3) manufacturing subzones have since been created as part of the original FTZ - one each in Durham, Wilson, and Granville counties. A recent meeting of the Economic Development Advisory Committee (EDAC) for the Research Triangle Regional Partnership has endorsed the inclusion of the thirteen (13) counties to be part of the FTZ expansion process per recommendations from TJCOG. County Economic Development staff recommends that the Board authorize the Chair to submit a letter to TJCOG in support of its effort to move ahead with the expansion of Foreign Trade Zone #93 and the inclusion of Orange County. Staff plans to attend the July 15th informational meeting regarding the FTZ expansion at the Wake County Community College -Cary Campus (as noted in the attachment) and will provide updates as the process moves forward. FINANCIAL IMPACT: There is no financial impact with submitting a letter of support for the potential expansion of FTZ #93. Potential financial impacts of the expansion itself are anticipated to be discussed during upcoming information sessions. RECOMMENDATION(S): The Manager recommends that the Board: 1. Direct staff to gather additional information on the impact of expanding FTZ #93 to include Orange County; and 2. Authorize the BOCC Chair to submit a letter of support to TJCOG stating Orange County's interest in being included within the Service Area of FTZ #93 (sample letter included in the attachment). Attachment 1 TRIANGLE J COUNCIL OF GOVERNMENTS 4307 Emperor Boulevard, Suite 110 Durham, NC 27703 Mailing Address; PO Box 12276 Research Triangle Park, NC 27709 919.549.0551 FAX: 919.549.9390 wvrn.ticoo.dst.nc.us June G, 2011 Bernadette Pelissier, Orange County Chair PO -BOX 8181 Hillsborough, NC 27278 Dear Ms. Pelissier: As a member of Triangle J Council of Governments you are likely aware that TJCOG is the Grantee of Foreign Trade. Zone - #93; general - purpose FTZ sites are currently located in Wake County and FTZ manufacturing subzones are approved in Durham, Granville and Wilson Counties. in the-past we have provided FTZ infonnation and program services to the "Greater Triangle Region" on. an as needed basis. The VS FTZ Board is now providing the .option of applying for a new management plan for the FTZ program called "Alternative Site - Management Framework" or ASF. The change will enable FTZ #93 to officially expand the service area. A fact sheet is enclosed that briefly explains the FTZ program and lists the potential advantages of the ASF over our current, traditional management framework. The enclosed FTZ brochure will provide inforniation about the program's history and advantages; the maps show our cwTent and potential service areas. The FTZ #93 Rates, Tariff & Legal Review Board (the FTZ #93 Board) has received the go -ahead from the TJCOG Board of Delegates to develop an application for the expansion of the service area. The Economic Development Advisory Committee of the Research Triangle Regional :Partnership has endorsed the inclusion of their 13 counties. in the application, and we have reached out to the COG directors of the Kerr Tar (Region K) and the Mid- Carolina (Region M) for their support. We are considering a service area comprised of fifteen contiguous counties. This letter is written to formally request a letter of support from your county for inclusion in the expanded service area of FTZ #93' there is no application fee for of TJCOG member counties. altiiottsh there will be a charge for any new "magnet sites" in the application. A sample letter is enclosed, A seminar to further explain :this opportunity is scheduled for. July 151 ", 9 AM — Noon, Wake Technical. Community College Cary Campus, 3434 Kildare Farm Rd. Each county is encouraged to send at least one elected official, preferably the chair -or vice chair, the COG delegate, your manager or assistant manager, and a key coimty economic development official. We plan to submit the draft application by the end of September. Should you have questions about this matter, please feel flee to contact me or our FTZ Administrator, Pamela Davison, 919 -558 -9394 or einail ilz%voman@Zahoo.com. Siiicetely., Zr Bower / �Efecutive Director Enclosures (4) CC (email), Frank Clifton, Orange County Manager, RTRP EDAC Members MISSION STATEMENT To serve as an intergovemmental organization for focal elected officials that works proactively on regional issues in order to sustain and improve the quality of life for our citizens. 2 3 Fact Sheet FOREIGN TRADE ZONES — ALTERNATIVE SITE FRAMEWORK FTZ #93 Grantee — Triangle J Council of Governments POB 12276; RTP, NC 27709 Contact: Pamela Davison, FTZ Administrator 919 -558 -9394, Cell 929- 610 -1917, ftzwomanC«Dyahoo.com What is a Foreign Trade Zone? Foreign -trade zones are designated sites licensed by the United States Foreign -Trade Zones (FTZ) Board at which special Customs procedures may be used for foreign goods. The activities in a zone offset Customs advantages available to overseas producers who compete with producers located in the United States. The program has existed since 1934 and continues to thrive and. change to better meet the needs of American companies to compete in the global economy. What is Foreign Trade Zone #93 Service Area? As Grantee of FTZ #93, Triangle J Council of Governments currently administers General Purpose zones in Wake County. FTZ #93 can serve an area within 60 miles or 90 rninutes - driving time from the US Customs Port of Entry for RDU. Three general- purpose zone sites are approved with two presently activated. FTZ #93 was established under the "Traditional. Zone Framework ". TJCOG member counties include: Wake, Durham, Orange, Chatham, Lee, Johnston and Moore. What is the "Alternative Site Framework ?" Alternative Site Framework (ASF) is a newly implemented program of the US FTZ Board. It offers greater flexibility to designate and manage general-purpose FTZ sites based on "user- driven" needs for an FTZ program & its benefits. What are the differences between the Traditional vs. ASF? Submission of traditional General- Purpose Expansion or Sub -Zone- application to the Foreign Trade Zone Board for action under the Traditional Zone Framework requires: • Generally a ten (10) month process, • Greater documentation requirements, and • Submission of a request for administrative minor boundary modifications involves swapping like properties from existing zone sites. Alternative Site Framework reorganization application for FTZ Board action requires: • Generally, six (6) to eight (8) months for ASF reorganization applications with no new Magnet Sites (industrial parks). Up to 6 magnet sites are possible. • Faster Processing for Usage Driven Sites once an ASF application is submitted, the Grantee can utilize the simplified and minor boundary modification actions for usage driven sites. This eliminates the need to "swap" like amounts of acreage from existing sites. ASF does not affect existing FTZ Subzones. 4 Fact Sheet, Page 2 FOREIGN TRADE ZONES — ALTERNATIVE SITE FRAMEWORK ADVANTAGES Grantee Advantages • Enhanced response to community FTZ needs • Expedited zone designation • Lower costs to users • Reduced fees to FTZ Board • Significant reduction time from application to receiving FTZ designation User Advantages • Faster return on investment (up to three times) • Expanded "service area" coverage — available to new counties • Expedited zone start-up • Lower initial investment cost • Lowers participation barriers to small and medium sized businesses National Advantages • In response to the benefits of the modified program, forty -five {45) zones in the U.S. have either applied or been accepted as ASF zones to date (including the FTZs in upstate South Carolina, Northern Virginia and three in Georgia). • The ASF program is simpler through clearer regulatory provisions, flexibility in meeting the speed of business today, and more predictability for zone administrators and users. • Coupled with the President's recent National Export Initiative (NEI), there should be increased interest in the FTZ program as it mutually supports the trade goals by maximizing the potential for U.S. exporters and manufacturers. For all of these reasons, more than 250 communities throughout the United States support and rely on the benefits that the FTZ program offers public as well as private entities. Tentative plans & schedule for the ASF application from FTZ #93 • Presentation-to RTRP EDAC and other related organizations - June. • Letters to counties in RTRP (Regions J, K and M) to obtain commitments to support the ASF application to expand the service area for FTZ #93 — June. • FTZ and ASF Seminar at Wake Tech, Cary Campus — July 15, 9 AM - Noon • Application fee will be $1000.00 per county if not a TJCOG member. Preparation of the application for the Alternative Site - Management Framework & Submission of the draft application to US FTZ Board, September 2011. 6/6/2011 A Foreign Trade Zone (FTZ) is a very secure area in or near a port of entry that is considered outside of US "commerce" but is under US Customs supervision. Site IA. WORLD TRADE PARK The FTZ program was created in 1934 to provide special customs procedures i=iZ #93 HEADQUARTERS to US companies engaged in international trade. The goal is to offset customs (85 acres). near Raleigh - Durham advantages available to overseas producers competing with domestic industry. Airport. Raleigh, NC Domestic and foreign. merchandise may be admitted to an FTZ without a formal Customs entry. Goods in the Zone may be sorted -, manipulated, used in manufacturing, inspected, combined with other domestic or foreign materials, displayed for sale, and re- exported without payment of duty. Subzones may be created if specific criteria are met. FTZ Subzones approved under FTZ #93- include: Merck Sharpe and Dohrne Corp. locations in Wilson & Durham Counties and Revlon Consumer Products located in Granville County. Other Subzones in NC serve diverse industries. Even small to medium -sized companies may take advantage of FTZ benefits and cost�savings that include a provision for weekly entries with US Customs & Border Protection. Duty and other fee savings as well as zone- to-zone transfers are some of the many reasons to consider using the FTZ program. On November 4, 1983, �¢ Triangle J Council of 1 { o r i g n t-ra d Governments was approved as grantee of Foreign Trade . Zone #93. FTZ #93 is a full- service, multi - site Zone serving the Greater Triangle Region. The Zone operator, Longistics International, furnishes secure, customs- bonded space for products and is able to expand its FTZ operations to other, approved locations including a company's own plant site. FTZ #93 has facilities for storing, assembling, manufacturing and displaying merchandise. Land is available for new industry location. The US FTZ Board and Triangle J Council of Governments' Rates, Tariff, & Legal Review Board require that zone activities result in significant public benefit and a net positive economic impact. FTZ #93 stimulates trade in the Greater Triangle Region by creating new jobs in companies engaged in international commerce and encouraging job creation in spin -off industries. Contact: Duane Long, Chairman: Longistics Longistics International P 0 Box 110007 Research Triangle Park. NC 27709 Phone: 919.872.7626 Toll-Free: 800.289.0082 Web: http: / /www.longistics.com Email: duane@longistics.conn Site 2. DUDSON CHINA, USA (6 acres). in North Raleigh. NC This site is at full- capacity. Site 3. HOLLY SPRINGS BUSINESS PARK (240 acres). Holly Springs, NC Contact: Irena Krstanovic Phone: 919.557.3923 Web: http: / /www.holiyspringsnc.org Email: irena .krstanovic @hollyspringsnc.us 5 A.OF THE FOREIGN TRADE ZONE PROGRAM DEITY DEFERRAL Customs duties are paid only when imported merchandise is shipped -into US Customs territory. Merchandise may be held in inventory in the FTZ without Customs, duty, indetrnite9v. ' EXPQRTS Customs duties are not paid on merchandise exported from the FTZ to a foreign country. DEFECTS DAMAGE, QRSOLESCENCE WASTE SCRAP Customs duties are-significantly reduced or eliminated on merchandise subject to defect, damage, obsolescence, waste and scrap in the FTZ. In addition, merchandise consumed in processing in the FTZ is generally not subject to Customs duties. NONDUTIABILITYOF LABOR OVERHEAD AND PROFIT Customs duties are not owed on labor, overhead and profit attributed to production operations in the FTZ. INVERTED CUSTOMS DUTY SAVINGS FTZ users may elect to pay the duty rate applicable to component materials or merchandise produced from component materials - whichever is the lower rate. INTERNATIONAL - RETURNS Merchandise exported and subsequently returned to the FTZ is not subject to Customs duties upon return. It can be repaired and re- exported without duty. EXHIBITION Merchandise -may be held for exhibition- without Customs duty payments. Many companies use FTZ's as display areas for merchandise and machinery. US QUOTAS Most merchandise may be held in the FTZ, even if it's subject to US quotas. When the quota opens, the product may be immediately shipped into the US Customs territory. SIMPLIFIED IMPORTJE_XPORT PROCEDURES Delays in Customs clearances and duty drawback procedures are eliminated. Delivery times are reduced. by direct shipments and the ability to do "weekly- entries" into US commerce via Customs and Border Protection. QUALITY CONTROL The FTZ may be used for quality control inspections to ensure that only products that meet specifications are imported. Substandard goods can be destroyed before duty is paid. Sources: National Association of Foreign -Trade Zones http: / /www.naftz.org/ Miller& Company P.C. http.11www.millerco.com Si CURITY & G RGO INSURANCE Some FTZ users have negotiated up to 40% reduction in cargo insurance rates because imported merchandise is shipped directly to the FTZ, thus avoiding potential pilferage at deep -water ports and major international airports. The FTZ Operator is subject to Customs supervision and security procedures, saving the FTZ users expenses for security and insurance. INVENTORY CONTROL FTZ operations require careful accounting on receipt, processing and shipment of merchandise. Firms find that the increased accountability cuts down on problems with inaccurate receiving and shipping as well as waste and scrap. However, the specific identification of merchandise is unnecessary in the FTZ, thereby saving on accounting systems. SPARE PARTS Unneeded spare parts may either be returned to the foreign vendor or destroyed, duty free. TAX ADVANTAGES By federal statute, tangible personal property imported from outside the US or produced in the US and held in a zone for export is not subject to state and local ad valorem taxes. NC currently has no inventory tax but most states exempt all FTZ merchandise from this tax. ZONE- T0-ZONE TRANSFER An increasing number of firms are transferring merchandise from one zone to another. If the transfer is in -bond, customs duty is not owed until the product is finally shipped into the US. TRANSFER OF TITLE Title to merchandise may be transferred in the FTZ, as long as there is no "retail" sale. The global supplier can own it until it is shipped just -in -time to local manufacturers. +CHANGING CIRCUMSTANCES As US -laws and especially US Customs laws change, location in an FTZ allows operators and users greater flexibility in addressing these changing circumstances. OTHER SAVING Broker and merchandise processing fees may be reduced by using the "weekly entry provision" of the FTZ program. Certain duty deferral and reduction benefits also apply on equipment admitted to the FTZ for assembly and testing prior to use in production (e.g. racking systems, conveyors, etc.) 0 PROPOSED FOREIGN TRADE ZONE #93 E .13 Sample Letter of - Support of ASF Please put on County Letterhead Date (Please provide by August 26, 2011) Kirby Bowers, Executive Director Triangle J Council of Governments Post Office Box 12276 Research Triangle Park, NC 27709 Dear Mr. Bowers: The purpose of this letter is to document the support of this county for inclusion within the Service Area of Foreign Trade Zone (FTZ) #93. We understand that this means that the grantee, Triangle J Council of Governments, will be able to apply to the US Foreign - Trade Zones -Board for authority to serve sites located within this county based on the trade related needs of businesses. We also note that the zone will be made available on a uniform basis to companies in a manner consistent with the legal requirements that each FTZ be operated as a public utility. Sincerely, Signed Chairman, County Board of Commissioners 6/7/2011 10:3TAM