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Simplified foreign trade zone process opens benefits to more businesses

The Wichita Business Journal
October 7, 2011

Sedgwick County has received federal approval to use a new system that makes it faster and less expensive for area businesses to establish their facilities as foreign trade zones.

The more flexible system will make it easier for a region that includes Sedgwick, Butler, Harvey, McPherson, Reno, Saline and Sumner counties to use foreign trade zones as an economic development tool, local leaders say.

“Some of the companies we’re talking to that we’re trying to recruit have a real interest in having foreign-trade-zone status, so the ability to provide that is a real plus,” says Bob Myers, attorney for the city of Newton.

Simplified process
A foreign trade zone is “an island” within the United States where businesses can import goods to store, inspect or incorporate into products, says Sedgwick County Economic Development Director Sherdeill Breathett, who administers the foreign trade zone program locally. Imported goods aren’t subject to various tariffs and customs charges until they leave the zone.

Many businesses in Sedgwick County use the zones to receive imports that they then inspect, says Jack Brooks, vice president of Garvey Public Warehouse, which is designated as a foreign trade zone.

“They make sure the products are of usable quality, and if not, they don’t have to pay for them,” Brooks says. “They can ship them back and don’t incur cost. … It reduces the price of the overall end product in the United States and puts us on an even playing field, which we could use right now.”

Congress established the program in 1934 “to expedite and encourage foreign commerce.”

But according to documents from the Foreign Trade Zones Board, which administers zones across the country, the system for establishing zones has been slow and cumbersome, and hasn’t kept up with fast-changing business needs.

Breathett says that under the previous system, businesses either had to import and store goods at a magnet site — locally, the Garvey complex — or go though what could be a yearlong process of creating their own subzones. The complex process of establishing a zone could cost businesses around $70,000, largely from legal and consulting fees.

The federal board started in 2008 to move toward a new system, called an alternative site framework. Once grantees, like Sedgwick County, do their due diligence and are approved, Breathett says, they have much more flexibility to create foreign trade zones within their territory.

Sedgwick County received approval a week ago to use the new system.

Breathett says that under the simplified process, which should be up and running within a couple months, establishing a business facility as a foreign trade zone will take just 30 to 40 days and an estimated $20,000.

Generating interest
Businesses in Sedgwick County and the other counties included in the local foreign trade zone already had the ability to establish their own plants as subzones. Hawker Beechcraft Corp. Hawker Beechcraft Corp. Latest from The Business Journals Court sides with Hawker Beechcraft in wrongful termination suitAs old Beechjets turn new, door opens for Wichita supplierCessna’s Latitude announcement is highlight of upbeat NBAA show Follow this company .already has done so.

However, Breathett says, because of the time and expense involved in the previous process, it wasn’t worthwhile for most businesses. He expects renewed interest now, and he’s already received a few inquiries.

Karyn Page, president and CEO of the Kansas World Trade Center .Kansas World Trade Center Latest from The Business Journals Kansas exports expected to grow this yearData: Minority-owned businesses more likely to export productsCity funding renewed for Kansas World Trade Center Follow this company ., says the challenge for her organization, the county and economic development leaders will be to make sure businesses know the tool is available. The changed process might be an opportunity for a renewed marketing effort.

“I think it’s underutilized, especially in Sedgwick County,” she says. “A lot of people don’t know about it.”

The simplified process has captured the attention of leaders in other counties. In Newton, Myers says the city had considered establishing its own foreign trade zone from scratch at Kansas Logistics Park, which soon will be home to Tindall Corp. .Tindall Corp. Latest from The Business Journals Newton leaders revise site plan for Kansas Logistics ParkNewton educators explore wind industry’s impact on curriculumColorado’s New Millennium Wind Energy to open turbine factory in Kansas Follow this company .and New Millennium Wind Energy, among others. Now, however, businesses at the park can pursue foreign trade zone status as they need it through a quick process, he says.

The ability to offer foreign trade zone status can also be a good marketing tool for recruiting businesses, Brooks says. He says the fact that Garvey Public Warehouse is a foreign trade zone site probably accounts for about 20 percent of his business.

He says he’s not worried about losing out on that business now that companies can more easily create their own zones.

“If you’re in the fast food business, you put your Spangles right next to a Wendy’s and a Taco Tico,” he says. “One new business starts another new business. A lot of times, what imported merchandise does is that it’s always mixed with domestic products, so a guy importing foreign materials needs domestic products to support it. It’s always a win-win for us.”

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