Foreign Trade Zones in South Carolina
News from the 3rd Annual International Education Conference Sponsored by the South Carolina World Trade Center Charleston, SC, November 6 - 7, 2007
At the conference I heard a story from Donnie Barnes, Customs Manager at BMW Manufacturing Company in Greer, South Carolina, of how she had to outrun the first ship bearing BMW raw materials from abroad. She drove from Washington, DC in a blinding storm, arriving just hours before the ship at the Port of Charleston with her foreign trade zone paperwork in hand.
For those of you who have driven on the highway near Jedburg, South Carolina, you may have seen the sign, "Foreign Trade Zone 21," and wondered what it referred to. In fact, South Carolina has three Foreign Trade Zones, that is, areas not in the US Customs territory. The benefit for the users of these zones is that customs fees and duty are only paid when imports actually leave the zone and enter the Customs territory. Companies can bypass congestion at the ports, reduce, defer, or eliminate import duties, and truly help their bottom line.
BMW's Foreign Trade Subzone is the largest non-oil foreign trade zone in the US; in 2006-2007 over $5.8 billion in materials and goods traveled through the foreign trade zone. As Donnie explained it, one of the most important benefits of the foreign trade zone status is that there is no delay on deliveries. Once a shipment arrives at the Port of Charleston, it is immediately sent upstate. Also, BMW pays the duty rate on finished vehicles, 2.5%, instead of the rate on raw materials or auto parts, which can be more than eight times higher. Some might worry that this means that a company would also pay for value added; instead, a company only pays duties on the foreign content that is admitted to the US.
Federal Program Benefits SC
The US federal government initiated the program in 1931 as part of Roosevelt's New Deal to create jobs. In the example of BMW's 2.5+/- million square feet manufacturing facility, the 4,500 employees naturally pay local and state taxes and are vital to the local economy of upstate South Carolina. (And, of course, the companies in foreign trade zones still pay millions in customs duties for products that do enter the Customs territory.)
A Foreign Trade Zone is a concept distinctly different from a Free Trade Zone, which uses the same acronym and is reserved for developing countries. A Free Trade Zone is an area where trade barriers and import duties do not apply at all. In fact, there are no Free Trade Zones on US soil.
Fuji Photo Film, Inc, another South Carolina company granted their own Foreign Trade Subzone, also shared their experiences at the conference. Amazingly, George Swindell of Fuji explained, all the QuickSnap one-time-use recycled cameras for the entire globe will soon be produced at their 483 acre facility in Greenwood, South Carolina. Currently they produce 80% of the global demand for the cameras. Their facility must be an interesting thing to witness since nearly all of Fuji's 1,100 employees are working under a coat of darkness—that's the name of the game in the light-sensitive photographic paper and plate business.
Suzan Carroll-Ramsey, Foreign Trade Zone Manager for the State Ports Authority, was also at the conference; in her presentation she provided a state-wide perspective: South Carolina is 11th in annual volume in the US and 15th in employment generated by foreign trade zones.
With the recent news that Jafza International of the United Arab Emirates will build a facility in Orangeburg, SC, which could generate 10,000 jobs, we need to remember the value of our foreign trade zones. Let's keep our goods flowing efficiently and on time.
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