Santa Clarita Offers Foreign Trade Zone Benefits
The topic of foreign trade is something you’d expect to be discussed in port cities, but maybe not in Santa Clarita. According to the California Chamber of Commerce website, California exports to 226 foreign markets and international commerce accounts for approximately one-quarter of our state’s economy.
So, while foreign trade may not be a large focus for local businesses right now in Santa Clarita, as more of our local companies expand into global markets, you can bet conversations about programs like the Foreign Trade Zone, which can save import-export businesses money, will become more commonplace.
What is a Foreign Trade Zone?
A Foreign Trade Zone is a secure, access-restricted, Customs & Border Protection privileged area in or near a U.S. port of entry where merchandise (both foreign and domestic) may be admitted, stored, exhibited, manipulated, temporarily removed, manufactured, or destroyed duty free.
The Foreign Trade Zone program was developed in the 1930s by the U.S. government to facilitate international trade and increase the global competitiveness of U.S.-based companies. Duties, certain user fees, and taxes are only assessed on products that are transferred out of the Foreign Trade Zone and entered into the U.S. for consumption.
What are the benefits of a Foreign Trade Zone?
According to ITC – Diligence, Inc. President David Harlow LCB, CCS, who consults with businesses in Santa Clarita and throughout the city of Palmdale’s zone area, the primary benefits of a Foreign Trade Zone include:
Duty deferral – Duties are only paid when imported merchandise is entered into the U.S. Customs territory.
Duty elimination – There are no duties paid on merchandise that is exported from a Foreign Trade Zone, transferred to another zone, or destroyed.
Weekly entry – Customs allow for a weekly entry processing, which benefits importers because the merchandise processing fees are capped at $485 on a weekly basis, versus per shipment basis.
Harbor maintenance fee deferral – A harbor maintenance fee is paid quarterly and in a single payment.
Enhanced security – By using a Foreign Trade Zone, the “internal controls” requirements of section 404 of the Sarbanes-Oxley Act are met.
Expedited logistics – By relocating Customs House Brokerage services to your facility, you can expedite the delivery to your facility without customs clearance. Potential savings is up to two days.
Ease of paperwork – Through automation of the Foreign Trade Zone, the paperwork submitted for receiving and the weekly entry program is greatly diminished and approvals expedited.
Manipulation – All manipulations are authorized and can be completed without physical Customs supervision, which means duties are paid on the finished production only, after it has been: cleaned, repaired, fixed, improved in value, amended, exhibited, etc.
How did Santa Clarita become a Foreign Trade Zone?
The Foreign Trade Zone actually exists in the city of Palmdale, but can have magnet sites into the northern most cities in the Antelope Valley and to the northern most part of the San Fernando Valley. Therefore, businesses in Santa Clarita can take advantage of the Foreign Trade Zone benefits on a site-specific basis as part of the city of Palmdale’s designation.
How do I know if I can benefit from the Foreign Trade Zone?
The city of Palmdale has a contractual agreement with ITC – Diligence, Inc. to provide complimentary evaluation and consultation services to companies in the geographic area, which includes Santa Clarita. Therefore, local business and land owners can learn more about the program, indentify potential savings, and even evaluate costs with a cost-benefit analysis free of charge. If you are in the import-export business and haven’t looked at this program, there’s no better time. And remember, consideration of the program doesn’t cost a dime. Fees are only incurred when an application is submitted.
If after a thorough evaluation it is determined the Foreign Trade Zone program can benefit the business or property, the company owner can then decide to contract with ITC – Diligence, Inc. to prepare and submit an application to the federal government. The typical application begins at approximately $10,000 and if approved, the government then designates the specific site as being in the Foreign Trade Zone where benefits and savings are available.
What does this mean locally?
The Foreign Trade Zone program is another reason doing business in Santa Clarita makes sense for so many companies.
Ken Wiseman, CEO and managing partner at AMS Fulfillment – which provides third party warehouse and fulfillment services for more than 40 national and international retail brands – is currently working to secure this designation for his company. Wiseman says the Foreign Trade Zone is just another cost-savings program available in Santa Clarita that makes doing business here work for his company.
Interest in the Foreign Trade Zone for AMS Fulfillment actually came about as a result of a client request.
“We are extremely customer-service oriented at AMS Fulfillment, so when our client asked about the designation, we worked with ITC – Diligence, Inc. to see if it made sense,” Wiseman said.
Wiseman and his business partner Jay Catlin were originally attracted to Santa Clarita more than a decade ago because of the high quality of life, safe and secure community, and because Santa Clarita boasted one of the best labor forces in the state.
“We didn’t move to Santa Clarita because of this designation, but realize the program will be a benefit to our business and clients,” said Wiseman. “The savings realized as a result of the Foreign Trade Zone allows companies to invest in bigger facilities and more staff. It’s about jobs creation.”
About the Author
Assistant City Manager for the city of Santa Clarita
Ken Striplin is assistant city manager of Santa Clarita.
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