A foreign trade zone license gives a company cash-flow advantages by delaying the paying of duty on imported goods until they are shipped to buyers.
By: Michael Arges
EAST WINDSOR Expanded use of foreign trade zones in the township could be an important "marketing tool" to attract new businesses, according to a discussion at Tuesday’s Township Council meeting.
However, some council members expressed concern that participation in the plan might lead to too much traffic in the municipality.
The proposal before the council is for Mercer County’s master foreign trade zone license, which applies to lands in Ewing Township around the Trenton Airport, to be extended by other municipalities in Mercer County. Municipalities could designate in advance certain areas to be foreign trade subzones areas in which companies could have the tax protection and convenience of a foreign trade zone if they choose to locate there.
For companies locating in such designated areas, the application process would be much quicker and simpler than before, Mayor Janice Mironov noted in a Wednesday interview.
"If a company were to locate in that area, they would automatically be entitled to the benefits of the FTZ," she said.
Not only would this simplify the process for companies seeking foreign trade zone benefits, but it also would allow local towns to use those benefits as a marketing tool to attract new factories or warehouses, the mayor noted.
Normally, a company would make an application to the U.S. Department of Commerce to be designated as a foreign trade zone though the company would have to be in an area where there is a master license to which the application would be attached. An example of this usual, much longer process is illustrated by the example of the Conair Corp. in East Windsor, the only operating foreign trade zone in Mercer County. The process took about a year and there was a lot of paperwork, Mayor Mironov noted.
A foreign trade zone license gives a company cash-flow advantages by delaying the paying of duty on imported goods until they are shipped to buyers. If raw materials come into a foreign trade zone and the finished product is shipped outside of the customs territory of the United States, then there are no duties charged at all.
A major concern about the idea expressed by council members was that it might tend to attract businesses moving a large amount of goods in and out, thus placing additional burdens on the township’s transportation system.
"I have some concern about making the town too attractive to trucking and rail," Deputy Mayor Perry Shapiro said.
Councilwoman Marsha Weinstein agreed.
"That’s a concern of mine: that we not overpopulate the town with warehouses," Ms. Weinstein said.
Mayor Mironov downplayed such concerns, noting that the township will still maintain important controls over development.
"This is a marketing tool; it has no effect on a town’s zoning and planning regulations," she said. "Certainly you want to use it in areas where you think it would be a useful tool and fit into the overall plan of the town. Just as an example, I would not wish to designate Route 571 as an FTZ." That is an area to which township officials would like to attract high-tech and research and development facilities.
Mayor Mironov said she would favor the Milford Road corridor, where Conair is located, as the best place to designate as a foreign trade subzone, though she would be open to other ideas. As an example of the potential benefits, the mayor pointed to Conair, a company attracted to the area by the possibility of a foreign trade zone that has made a positive contribution to township life.
"Most people would concede that Conair has been an excellent neighbor in our community: a good civic neighbor, a good, clean company. They employ lots of local people," she said. "They are an example of a company that benefits extensively from an FTZ designation."
The East Windsor site is the worldwide operations headquarters for Conair, which makes a variety of products including personal care products such as hair dryers, curling irons, electric toothbrushes, shampoos and conditioners. The company owns Cuisenart, a kitchen appliance company, and makes telephones under the Southwest Bell trademark. The East Windsor site is also the distribution hub for all Conair products shipped east of the Mississippi River.
About 90 percent of Conair’s products are made overseas, in the Orient, Costa Rica and other countries around the world and the company normally would have to pay duty on this merchandise as soon as it hits the pier. Because of its foreign trade zone license, the company does not pay the duty to the government until the merchandise is shipped to customers.
Conair soon will begin an expansion to its building on Milford Road; the addition will automatically be covered by the company’s foreign trade zone license, said Conair Vice President John Mayorek.
"The license that we have for the foreign trade zone expands with the footprint of the building," he said.
Expanded use of foreign trade zones might well contribute to an expanded Conair presence in the township, Mr. Mayorek suggested.
"We’re looking to purchase other lands in the area so that we could build other facilities," he said.
If the company does establish other facilities in the area, it would wish for those areas also to be foreign trade zones.