EXPLORING THE POSSIBILITIES: FOREIGN

TRADE ZONESJoe Kiely, Town of Limon

• What is an FTZ?• What Are the Benefits a

Company Locating in Colorado?

• What are the Local Benefits?

• A Look at Colorado’s International Trade

• Do FTZs exist in Colorado?• An Invitation to Be

Included in the Service Area

Topics

The Foreign-Trade Zone Program was created by the U.S. government to facilitate international trade and increase the global competitiveness of U.S.-based companies. The program, which has existed since the 1930s, continues to thrive and change to better meet the needs of American companies in the global economy.

What Is a Foreign Trade Zone?

An FTZ is an area within the United States, in or near a U.S. Customs port of entry, where foreign and domestic merchandise is considered to be outside the country, or at least, outside of U.S. Customs territory.

Customs duties and excise taxes are due only at the time of transfer from the FTZ for U.S. consumption. If the merchandise never enters the U.S. commerce, then no duties or taxes are paid on those items.

• FTZs are designated sites licensed by the FTZ Board (Commerce Secretary is Chairperson) at which special CBP procedures may be used.

• A site which has been granted

zone status may not be used for zone activity until the site or a section thereof has been separately approved for FTZ activation by local CBP officials.

Duty Deferral • Goods imported into the U.S. are

subject to duty paid through the U.S. Customs and Border Protection (CBP).

• FTZs affect the timing of the duty payment. If a product or good is moved into the U.S. outside an FTZ, duty is due upon arrival in the U.S. If the same product or good is moved into an FTZ, the duty is deferred as long as the product or good remains in the FTZ.

• The good can be moved from one FTZ to another FTZ and the duty is still deferred.

Company Benefits

Federal income taxes are unchanged.

All other federal regulations apply.

Inverted Duty for Manufactured Products

• When components of a final product come together in a final product, instead of duty being paid at the rate due on each component, the duty is paid only upon the final product and at a lower rate.

Avoid Personal Property Tax

• Products or goods stored in an FTZ are not subject to inventory tax, i.e. personal property taxes.

• Local government may require payment in Lieu of Taxes

Marketing

• The business may benefit from having a presence in the U.S.

Increased Real Property Taxes

• While the goods stored in an FTZ are exempt from personal property taxes, facilities within an FTZ are subject to real property taxes.

.

Local Benefits

Increased Jobs

• FTZs have a multiplier effect on local employment. Job creation follows a wide range of FTZ activities—assembly, manufacturing and distribution.

Marketing

• An FTZ provides another reason to do business within and with this area.

U.S. Subsidiaries of Global Companies Play a Vital Role in

Colorado’s Economy

U.S. subsidiaries own over $28 billion in gross property, plant and equipment.

U.S. subsidiaries own $2.5 billion in commercial property in Colorado.

U.S. subsidiaries announced 14 “Greenfield” projects in Colorado in 2010, creating an estimated 2,587 new jobs.

Colorado Trade

Foreign Destination

Total M$ in 2002

Total M$ in 2011

% Change 2002-2011

Total M$ in 2040

% Change 2011-2040

Canada $1,552 $6,572 323% $16,249 147%Mexico $436 $1,086 149% $4,096 277%Rest of Americas $128 $197 54% $577 192%Europe $1,004 $1,691 68% $6,169 265%Africa $14 $56 301% $164 195%SW & Central Asia $84 $277 228% $903 226%Eastern Asia $1,649 $2,404 46% $8,593 257%SE Asia & Oceania $442 $941 113% $2,801 198%Total $5,309 $13,223 149% $39,552 199%

Import Flows - Value - All Commodities

Foreign Destination

Total KTons in 2002

Total KTons in 2011

% Change 2002-2011

Total KTons in 2040

% Change 2011-2040

Canada 2,407 6,471 169% 11,858 83%Mexico 100 158 57% 587 271%Rest of Americas 166 321 93% 815 154%Europe 386 293 -24% 869 196%Africa 25 200 704% 441 121%SW & Central Asia 75 326 337% 826 153%Eastern Asia 457 643 41% 2,211 244%SE Asia & Oceania 163 289 77% 770 167%Total 3,778 8,702 130% 18,377 111%

Import Flows - Weight - All Commodities

Today, the bulk of U.S. FTZ activity occurs in subzones. Subzones, which carry all zone benefits, consist of a site or sites that are designed for a specific company or use for either warehousing or manufacturing. They account for 85% of all merchandise received in zones and 74% of all zone exports.

… U.S. Foreign Trade Zones: Background and Issues for Congress

Colorado Springs FTZ #112

• Colorado Springs Foreign Trade Zone, Inc.

• No Activity.

Colorado FTZs

Denver FTZ No. 123

• City and County of Denver• 2012 Currently 1 Companies• 100% Oil/Petroleum

• Vestas… application for Subzones• Pillow Kingdom … application for

Subzone

Marketing

• An FTZ provides another reason to do business within and with this area.

U.S. Subsidiaries of Global Companies Play a Vital Role in

Colorado’s Economy

U.S. subsidiaries own over $28 billion in gross property, plant and equipment.

U.S. subsidiaries own $2.5 billion in commercial property in Colorado.

U.S. subsidiaries announced 14 “Greenfield” projects in Colorado in 2010, creating an estimated 2,587 new jobs.

Proposed Service Area

Why be included in Service Area?

• Allows quicker response to potential clients

• Inclusion in Service Area makes getting a sub-zone a shorter process

• Strengthens the Regional Economy!

Would You Provide a Letter of Support for Our

Application to the FTZ Board?

QUESTIONS?