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PHX CED NEWS: More than 14,000 jobs rely on Phoenix Foreign-Trade Zone including some of the largest employers

Synopsis

The Phoenix Foreign Trade Zone, FTZ75, turns 35-years-old Mar. 25. The FTZ is an economic development tool designed for companies heavily involved with imports and value-added manufacturing or distribution. Across the Valley, Phoenix has 17 federally-designated trade zones. Some of the Valley’s largest employers are in the zones, including Orbital ATK, Intel, PetSmart. Phoenix shares its zone with seven other communities in Maricopa and Pinal counties.

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Phoenix economic power tool, Foreign Trade Zones, boasts 14,000 jobs

Key quotes

“The 1930 tariffs started a trade war between the U.S. and other countries,” said Lawrence Reed, president of Foundation for Economic Education, an economics education and research foundation in Atlanta, Georgia. “Even without retaliation, the tariffs closed the door for U.S. exports and drove up import prices.”

“(Foreign Trade Zones) are a tremendous economic development tool for states and cities,” said Greg Jones, vice president of Foreign-Trade Zone Corporation, a FTZ consultancy in Mobile, Alabama. “FTZ procedures lower operating costs for businesses, primarily manufacturing, who are involved in importing materials and parts, combining them with domestic materials and parts and adding value with American labor.”

“The FTZ is an important part of our business strategy,” said Mike Pickett, senior program manager for Orbital ATK. “It allows for less interruption in the supply chain and improved operating efficiency.”

Key facts

  • Foreign Trade Zones were established in 1934 to encourage global trade and counteract the protectionist policies of the Hoover administration that led into the Great Depression • Phoenix Foreign Trade Zone, FTZ75, turns 35 on Mar. 25
  • More than 14,000 jobs are have been created or retained for FTZ companies
  • The Phoenix FTZ has sites in cities of:
    • Chandler,
    • Gilbert,
    • Glendale,
    • Scottsdale,
    • Tempe,
    • Tolleson and
    • Casa Grande.
  • Some of the larger companies inside FTZ75 include:
    • Intel
    • Orbital ATK
    • UTS Aerospace (Goodrich)
    • Medline
    • Honeywell
    • PetSmart
    • Conair

Phoenix, Arizona (March 23, 2017) Phoenix Foreign-Trade Zone turns 35-years-old Mar. 25.

Foreign-Trade Zones were enacted in 1934 to encourage global trade and reverse the protectionist policies imposed during the Herbert Hoover presidency that led directly to the Great Depression in 1930.

Economists believe that one of the most significant factors causing the depression was a trade isolationism movement in the Hoover administration, according to the Foundation for Economic Education based in Atlanta, Georgia. Tariffs imposed in 1930 were a significant reason for the stock market crash and massive unemployment in the period. The U.S. returned to a more global view of trade with a pair of laws to begin reversing the protectionist policies enacted within a week of each other, the FTZ Act and the Tariff Act of 1934.

“The 1930 tariffs started a trade war between the U.S. and other countries,” said Lawrence Reed, president of FEE, an economics education and research foundation. “Even without retaliation, the tariffs closed the door for U.S. exports and drove up import prices.”

Phoenix’s Foreign-Trade Zone, formally known as FTZ No. 75, was formed in 1982. The federally-created program allows businesses to deploy special customs procedures saving time and money when dealing with large volumes of imported and exported goods.

“(Foreign Trade Zones) are a tremendous economic development tool for states and cities,” said Greg Jones, vice president of Foreign-Trade Zone Corporation, a FTZ consultancy in Mobile, Alabama. “FTZ procedures lower operating costs for businesses, primarily manufacturing, who are involved in importing materials and parts, combining them with domestic materials and parts and adding value with American labor.”

Jones cited an application in the Federal Register from Orbital ATK.

“Orbital (ATK) is importing (rocket booster parts) that would normally have a 2.5 percent tariff,” said Jones. “Being in a FTZ, Orbital doesn’t have to pay the duty. Because of the zero duty rate that applies to aerospace products, Zone procedures allow them to eliminate many duty costs even if the product is not exported from the U.S.”

A tariff is the rate charged a company for importing certain products from other countries. The duty is the dollar cost of the tariff. Jones said that a company that does value-added work, such as Honeywell or Intel, both of which have Phoenix FTZ designations, is able to stabilize operating costs of using imported parts and materials in the final manufacturing or assembly.

A FTZ essentially carves industrial property from U.S. Customs territory, so the goods received are not subject to duties, tariffs or quotas until leaving the zone. FTZs were put into place in 1934 as a way to expand American global trade in the waning years of the Great Depression.

“The FTZ is an important part of our business strategy,” said Mike Pickett, senior program manager for Orbital ATK. “It allows for less interruption in the supply chain and improved operating efficiency.”

Orbital ATK uses many foreign vendors in building its satellites. Pickett said that the FTZ regulations allow material to clear customs quickly and predictably with a defined process. The company uses just-in-time deliveries of materials, even from foreign vendors.

“We build five satellites a month,” he said. “If imported products are slowed or blocked, it has a major impact on our operations and costs.”

In addition to Orbital ATK, Intel, PetSmart, The Gap, Honeywell, Sumco, UTC Aerospace (Goodrich) and Conair are just some of the local companies using the FTZ benefits for imports and exports. FTZs are managed in the Business Attraction division of Phoenix Community and Economic Development.

There are three types of FTZs. A magnet site is intended for multiple users and can be used for a business park or logistics campus. A usage-driven site is approved for a single user. Phoenix also offers subzones that are for single users.

Pickett said that a FTZ saves a company money.

“When properly applied, it mitigates supply issues,” he said. “Companies need to research whether it works for them. It’s important to reach out to the local government agencies, too.”

For companies interested in the benefits of a FTZ, Phoenix Community and Economic Development has a Zone Administrator, Denise Yanez, who is dedicated to overseeing the zone and assisting companies.

“The city does not approve the FTZ when an application is submitted,” she said. “That authority rests with the Foreign-Trade Zones board of the U.S. Department of Commerce. We are authorized to sponsor applications for new FTZ sites and we provide technical assistance with the application process”

The FTZ also requires activation by local U.S. Customs and Border Protection officials, who continually supervise the zone’s compliance with federal regulations and laws.

“It’s a lot of work, and attention to detail is crucial in the application process,” said Pickett. “It helps to have dedicated staff to track the process.”

FTZ 75 has 17 sites granted by the FTZ Board. The zones are not defined territories, such as used for land development zoning, but specific types of sites: magnets, subzones and usage-driven sites. Phoenix cooperates with area cities to help obtain FTZ designation for businesses. Sites within the Phoenix FTZ 75 are also inside the cities of Chandler, Gilbert, Glendale, Scottsdale, Tempe, Tolleson and Casa Grande.

The Phoenix FTZ service area includes Maricopa County and portions of Pinal County. The Phoenix FTZ also covers some areas within Yavapai County, although there are no active zones currently approved in that county. Mesa and Greater Maricopa FTZ Inc . in the West Valley also have FTZ programs within Maricopa County.

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