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“The purpose is to enable
small business to better compete in the global market,” said Michael
Gay, business development coordinator for the City of Madison. “It’s a
way for local businesses to get involved in foreign trade without
getting taxed to the nth degree.”
Normally, businesses must
pay duties on any raw materials that come into the country, even if they
end up sitting in storage, but the zone allows the payments to be
deferred until final products are assembled and put into the U.S.
economy for consumption.
Aside from improving cash
flow, this could save businesses money since the final tax might end up
being lower than the cumulative amount of duties on separate, raw
materials.
A company could also avoid
the duties entirely by importing foreign parts, manufacturing products
within the zone and then re-exporting them for sale.
The county decided to begin investigating the creation of foreign trade
zones about two years ago because it seemed like something that could
bring new companies, and possibly jobs, to the area, said County
Executive Kathleen Falk.
“This is one of those steps that we can take and we hope will make a
difference for some of our companies,” Falk said. “We just want to do
whatever we can to be helpful.”
After research and surveys
costing about $261,000, Dane County Regional Airport officials submitted
an application to the federal Foreign Trade Zone Board in November.
The proposed South Central
Foreign Trade Zone would be overseen by the airport and include five
sites within Dane and Columbia County in Arlington, DeForest, the town
of Windsor and Madison.
County airport property
constitutes the fifth site.
“Conceptually we become the
port of entry right here,” said Paul Tessmer, president of Capitol
Warehousing Corp., which would serve as part of the 47-acre foreign
trade zone site in DeForest.
Tessmer already has about
five businesses that do international trading through his warehouse.
“The benefit to the
importer is the cash flow because he doesn’t have to write that check
for months or potentially years later,” he said.
A south-central Wisconsin
trade zone also would benefit the area in general because the duty
savings could attract future businesses to develop here.
“This zone will place the Dane County area on the map in terms of
international logistics trade and we are going to market this as a
location that’s an alternative to Chicago,” where many foreign imports
currently must be screened, Tessmer said.
Once the zone is established, sub zones can be created to allow existing
businesses to take advantage of the duty deferrals.
Each participating
business, however, would have to pay a fee to be determined on a
case-by-case basis.
The federal government has
up to 10 months to review the airport application, although many times
it makes decisions earlier than that, according to officials involved
with the project.
Wisconsin now is home to
two foreign trade zones, one in Milwaukee and one in Green Bay.
Although statutes allowing
the zones have been around since 1934, there were only eight until about
30 years ago.
Today, there are 240
general-purpose zones and over 450 sub zones throughout the country.
“It’s just the changing
economy in the last 10 years alone,” Gay said. “The amount of businesses
that do international commerce has grown exponentially.” |
