Firms save on customs duties via foreign trade zones

Foreign Trade Zones are helping Long Island businesses to cope with supply-chain disruptions by allowing them to stockpile imported goods without having to immediately pay customs duties on the materials, officials said.

FTZs permit foreign-made materials to be brought into the United States but import taxes are only owed when the materials are used. In some cases, the taxes are reduced because the imported materials have been combined with U.S.-made materials to manufacture a product that's sold domestically.

Products that only leave an FTZ to be shipped to an overseas customer pay no U.S. customs duties, the officials said last week during a webinar organized by the federal Department of Commerce's U.S. Commercial Service office in Old Westbury.

On Long Island, about dozen businesses have had their facilities designated as FTZs. There also is a decades-old FTZ near Long Island MacArthur Airport, which is run by Islip Town.

"With the current supply-chain issues, just-in-time delivery is not a good model for manufacturing," said Helen Torkos, president of Regent Tek Industries Inc., referring to the process where factories don't stockpile materials. Her company makes thermoplastic road markings in Shirley.

"We're bringing in material [from overseas] months earlier to maintain a good level of stock … and the FTZ allows for the delay in paying the duties on this material," Torkos said last week.

Still, FTZs aren't suited to every type of business, particularly those that do little importing.

Elizabeth Whiteman, a senior analyst for the Commerce Department’s U.S. Foreign-Trade Zone Board, said firms that are interested in obtaining FTZ status must first have procedures to track the movement of imported goods once they are in their possession, to separate them from domestic goods and to secure space that will serve as a zone.

“You don’t have to move into a zone,” said Whiteman, referring to Islip Town's FTZ. “We can bring the zone to you” [by designating a business’ property.] But some may not qualify.”

Thomas A. Cook, an international trade consultant, agreed, saying FTZs are worth exploring. "The benefits of a Foreign Trade Zone continue for years and years, and typically grow,” he said.

Cook, president of Blue Tiger International LLC in East Moriches, helped Regent Tek determine whether it should pursue an FTZ designation.

He found the manufacturer of white and yellow lines on roads could cut its import taxes by nearly half, from 5% and 6% to 3.1%.

Regent Tek’s FTZ has helped it to compete against rivals in states with lower costs of doing business, according to Torkos.

In 2016, the company's first year, “the upfront costs [of importing raw materials] and delays at the port chipped away at our bottom line,” she recalled. “We found activating an FTZ for our facility was a smart option.”

More information about FTZs is available at https://bit.ly/3LV03c3 and https://bit.ly/3kLqDIO.

By James T. Madore

james.madore@newsday.comJamesTMadore

James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.