Industry News

The Economic Development Council for Central Illinois added Galesburg into Foreign Trade Zone 114 in October 2009.   The approval means that businesses located in Galesburg will be exempt from having to pay customs duties or other tariff taxes on internationally imported merchandise.

Komar Distribution Services congratulates the hard work of those involved in the application and approval process.  Local business owners and future business activity will benefit from this action and the work of GREDA.

The city of Galesburg’s approval is actually an extension of Peoria Illinois FTZ 114.  According to the Economic Development Council for Central Illinois:

“FTZ 114 is a multi-modal zone — rail, air, river, road — serving the West Central, Central and East Central Illinois Region, providing over 2 million square feet of warehousing and distribution space available for General Purpose Zones usage and four Sub-zone sites.”

The extension of FTZ 114 is targeting Logistics Park in Galesburg and is expected to help attract warehouse and distribution firms.

Illinois FTZ Warehousing

The first public discussion of a Foreign Trade Zone here was near Christmas 2006. At that time, Greg Mangieri, president of Galesburg Regional Economic Development Association, said it would take six months to a year to receive approval. In February 2007, the Galesburg City Council approved $25,000 to hire the EDC of Central Illinois to handle the application.

GREDA officials learned along the way that the process takes longer than initially expected, but GREDA spokeswoman Michelle Smith said Tuesday that once the economic development group realized that, things moved faster than anticipated.

“It usually takes longer, actually,” Smith said. “They originally told us it (approval) would be in the spring.”

EDC Chief Operating Officer Vickie Clark said the designation lowers costs for businesses, increases competitiveness in global markets and strengthens employment and capital investment opportunities for the whole region.

According to the Department of Commerce and Economic Opportunity, Foreign Trade Zones are created to “help level the playing field between U.S. operations and international competitors by helping attract foreign investment in the U.S. and encouraging national companies to expand domestic operations by realizing significant savings.”

“This is a great business incentive tool for Galesburg,” she said. “The Foreign Trade Zone designation will help them grow and attract businesses involved in international trade and it creates a huge financial incentive that sets them apart from many other towns.”

In a prepared release, Mangieri said Tuesday: “The FTZ status will enhance opportunities for warehousing and distribution. We are thrilled that with the FTZ status our region will get serious consideration relative to economic development and growth.”

KDS Warehousing Services in FTZ

If you have goods and merchandise in the Peoria or Galesburg FTZ and are looking for a competent Supply Chain Management partner that can offer distribution warehouse, inventory warehousing and cross docking services, give KDS a call.

Jay Harris, CEO
Komar Distribution Services
jharris@komar-ny.com
O: 212 725 1500 xt 107

Tony Pechenik, Senior Vice President
Komar Distribution Services
tpechenik@komar-ny.com
O: 212 725 1500 xt 326
M: 917 584 9027

Ron Weissbrod, Vice President
Komar Distribution Services
rweissbrod@komar-ny.com
M: 917-836-6810

What are the types of Foreign Trade Zones?

There are two types of foreign trade zones: General Purpose Zones and Subzones. General purpose zones are usually located in an industrial park, on raw land or in port complexes whose facilities are available for use by the general public.

Subzones are sites sponsored by a general purpose zone grantee on behalf of an individual firm or firms. Subzones are single-purpose sites for operations that cannot be feasibly moved to, or accommodated in, a general purpose zone; e.g., oil refineries, automobile manufacturers.

What may be placed in an FTZ?

Any foreign or domestic merchandise not prohibited by law, whether dutiable or not, may be admitted to a foreign trade zone.

Conditionally admissible merchandise is merchandise subject to permits or licenses, or that must be reconditioned to bring it into compliance with the laws administered by various Federal agencies before entering the United States. Because zones are considered outside the Customs territory, requirements that would otherwise apply to imported merchandise are suspended as long as the merchandise remains in the FTZ.

An example of conditionally admissible merchandise is a substance subject to the Toxic Substances Control Act (15 USC 2601 et seq.) which has not received approval by the Environmental Protection Agency for use in the United States. However, merchandise that is illegal, i.e. Heroin, may not be imported under any circumstances.

Some Federal agencies regulate storage and handling in the United States of certain types of merchandise, such as explosives. Depending on the nature of the requirements and the particular characteristics of the zone facility, such merchandise may be excluded. Most agencies that license importers or issue importation permits may block admission of merchandise that is not licensed or permitted into a zone.

The Foreign Trade Zone Board may exclude from a zone any merchandise that in its judgment is detrimental to the public interest, health, or safety. The Board ensures that foreign trade zones are not used to violate other trade laws of the United States.

Merchandise subject to quota restrictions may be admitted into a zone until a quota on entry is removed or may be manufactured or manipulated in a zone into a product that is not subject to quota. The FTZ Board can restrict or prohibit activity on public interest grounds.

What may be done in an FTZ?

Foreign and domestic merchandise permitted in a zone may be stored, sold, exhibited, broken-up, repacked, assembled, distributed, sorted, graded, cleaned, mixed with foreign or domestic merchandise, otherwise manipulated, destroyed, or manufactured. On the other hand, machinery and equipment that is imported for use within a zone is not exempt from the payment of duty. Such equipment and supplies may include, but are not limited to: office furniture, machines, and equipment; construction machinery and materials; manufacturing machinery and equipment, tooling, and supplies; packaging machinery and equipment; food to be eaten in the zone and water and fuel that do not become part of a zone product.

What may not be done in an FTZ?

In specific cases, the Foreign Trade Zones Board may prohibit or restrict any activity in a zone in order to protect the public interest, health, or safety. All manufacturing is reviewed in terms of government policy and its net economic effect.

Many products subject to an internal revenue tax may not be manufactured in a zone. These products include alcoholic beverages, products containing alcoholic beverages (except domestic denatured distilled spirits), perfumes containing alcohol, tobacco products, firearms and sugar. In addition, the manufacture of clocks and watch movements is not permitted in a zone.

Retail trade is prohibited in zones, unless conducted under a permit issued by the zone grantee and approved by the Foreign Trade Zones Board. Retail trade is then allowed only for the sale of domestic goods, or goods brought from the Customs territory following a regular Customs entry on which any applicable duties and/or taxes have been paid.

How is merchandise admitted into a zone?

Merchandise does not achieve zone status until a permit is given by the port director for its admission (except in the case of domestic status merchandise for which no permit is required), and the zone operator signs for receipt of the merchandise into the zone.

If you would like help with FTZ vocabulary, click here.