New London gains approval for  expansion of foreign trade zone

Published by The Day

The federal government has approved the city’s application to expand its Foreign Trade Zone to all of New London County.

The expansion is viewed by local officials as a way to stimulate economic growth by providing companies with savings on customs duties and other fees. The local Foreign Trade Zone, barely used through the past few decades, is currently reserved to 138 acres surrounding State Pier along with a magnet site in Groton.

Foreign Trade Zones are considered outside the U.S. Customs territory and allow companies importing goods to defer, or in some cases eliminate, customs duties on foreign products coming into the zone for storage, assembly, manufacturing or processing. The zones are the U.S. versions of international free trade zones.

The move could have implications for the offshore wind industry, which is expected to bring in and assemble or manufacture components of wind turbines in the region.

Mayor Michael Passero, in a statement, said the expansion “is a vital step to fully realize the economic potential of our city and region.”

“We are excited to provide our region with this valuable resource, which will assist business growth and development,” Passero said.

Both State Pier operator Gateway Terminal and Danish wind company Ørsted applauded the news.

Gateway Terminal President James Dillman said in a statement that the advent of an expanded zone will give New London County companies a competitive edge.

“We salute Mayor Passero, the New London Foreign Trade Zone Commission, and the City of New London for all its hard work, which will provide significant opportunities for future growth in the broader region, including increased cargo handling at State Pier,” Dillman said.

Justin May, spokesman for the joint venture Ørsted/Eversource, which is partnering with the state on development of State Pier, said the expansion “positions the region well for economic growth, complements the soon-to-be new capabilities of State Pier, and makes the city and region more attractive to commerce.”

“This is a very positive and smart step for the city to take,” May said.

The U.S. Department of Commerce’s Foreign Trade Zone Board approved the city’s application earlier this month. The approval allows the city to expand the zone to businesses under what is called an alternative site framework.

Tom Bombria, the city’s economic and community development coordinator and liaison to the New London Foreign Trade Zone Commission, said Pfizer is the only company currently paying an annual fee and making use of the trade zone. Pfizer has a designated site in Groton. He said there are other companies in Niantic and Norwich that have inquired about the proposed expansion.

Felix Reyes, the director of the city’s Office of Development and Planning, said in a statement that the expansion grows “the ecosystem where businesses can launch grow and prosper.” Henry Savin, the chairman of New London’s Foreign Trade Zone Commission, likewise said the approval will help to attract businesses to the region and make their operations more cost competitive compared to overseas operations.

Municipalities from the Southeastern Connecticut Council of Governments had expressed support for the expansion. SECCOG Executive Director James S. Butler said some of the benefits include expediting foreign trade, facilitation of exports, and assisting state and local economic development efforts.

• Customs duties are not paid on products and materials exported from foreign-trade zones.
• No duties or quota charges on re-exports.
• Customs duties and federal excise tax on imports can be deferred.
• Foreign goods and domestic goods held for export are exempt from state and local inventory taxes.
• FTZ status may also make a site eligible for state and local benefits unrelated to the FTZ Act.
• Zone users may elect to pay the duty rate applicable to either the original foreign material or the finished product manufactured from the foreign material, whichever is lower.
• No duties are owed on scrap/waste material.
• Retail trade is prohibited in Foreign Trade Zones.
• Zones provide the opportunity to reduce cycle time by expediting the receipt of foreign-sourced material and filing summary entries only once per week. This makes many U.S. operations more cost-competitive with overseas operations.
• Expansion of the FTZ to any business in New London County is consistent with the goals of statewide, regional, and city-endorsed strategic planning efforts.
• This expansion has been the focus of and therefore is endorsed by regional agencies such as the Southeastern Connecticut Enterprise Region (seCTer) and the Southeastern Connecticut Council of Governments (SCCOG), and others.
• The New London FTZ Commission collaborates with these regional agencies to jointly deliver a host of important services that will help create new and emerging opportunities for international trade and foreign direct investment.
• For more information on the New London Foreign Trade Zone, contact Tom Bombria, Community Liaison for Foreign Trade Zone #208, (860) 437-6346 or tbombria@newlondonct.org.

Becoming an FTZ could save you thousands in duties, merchandise processing fees (MPF), and more. More and more U.S. companies are using Foreign Trade Zones (FTZ) to better manage their global supply chain costs. Here are seven advantages that showcase FTZ as a competitive alternative to a domestic distribution center.

Specific production authority within a FTZ is required if the activity:

• Results in a change in the HTSUS number at the 6-digit level of any imported component.
• Involves the substantial transformation of a foreign article.
• Results in a change in the eligibility for entry of any foreign article.

To obtain authority to conduct production activity within a designated FTZ site, the first step is to submit a “Production Notification”.

The production notification includes a list of imported components and finished products as well as a brief summary of the activity.

The standard processing time for production notifications is 120 days and generally includes a 40-day public comment period.

If the FTZ Board determines not to authorize certain activity at the end of the notification process, the applicant may choose to use the more extensive “application” process for production authority.