The U. S. Foreign Trade Zone Program, or FTZ as it is known, has been around for three-quarters of a century. But it has only been in the last year and a half the business-expanding enterprise has been available in mid-Michigan. FTZ 275 is now in operation at Lansing’s Capital Region International Airport. “We did research that discovered a lot of cargo that moves through the state of Michigan is shipped internationally out of Chicago,” says Bob Selig, executive director of the Capital Region Airport Authority. Additional research found freight could be shipped out of mid-Michigan if there were the facilities and the international services here to support that type of shipment. “The authority then changed the strategic plan to focus on international passenger and cargo services,” says Selig. “We then went after establishing the facility as an international airport.” It was officially established as a U. S. Port of Entry in 2008.
International commerce is a more than $2 trillion industry. Statistics indicate the export of goods and services from this country in 2008 grew by 12.5 percent, while imports increased by 8.6 percent. Duty-free treatment is given to products brought into the United States, processed in an FTZ, then exported back into the marketplace beyond U. S. borders. The savings can translate into cost savings in the tens of thousands of dollars. Customs duties and tariffs are only paid when products leave the FTZ area and enter the U.S. domestic market. “It’s a nice way for many companies to manage their cash flow much better, especially for high ticket items or large quantity products,” says Dr. Tomas Hult, director of Michigan State University’s International Business Center. Hult added many different types of products and component parts would also benefit from being placed in an FTZ. The draw for companies to do business internationally through FTZs is obvious. But not all companies are able to make the leap. That’s where analysis comes into play. “If a company has never exported before, we need to do market research to determine if the product is wanted and whether they can expand in foreign markets,” says Brent Case, director of FTZ 275 and International Trade Development. Companies without a product or service to import, however, would not make a good FTZ fit. “I work with a panel of FTZ consultants to analyze whether a company would be a good candidate for the trade zone,” says Case. “We look at past transactions and what the company is planning for the future.”
Those who make the cut must then determine whether a General Purpose Zone (GPZ) or Subzone would better fit their needs. GPZs are storage or shipment facilities located at a bonded warehouse at the airport or somewhere else off site within an eight-county area—they are managed by a third party FTZ operator who assists multiple companies utilizing the FTZ program. “It would benefit companies that are not at a level where it makes sense for them to make their own facility an FTZ,” stresses Case. Subzones are at the company’s own facility. Those are usually where manufacturing or complex and heavy assembly occurs.
Although with much to offer Lansing-area businesses or those anywhere in the state of Michigan, some companies have been slow to catch on to the concept. “They have a certain way of doing things and change is sometimes hard for them,” says Tim Daman, president and CEO of the Lansing Regional Chamber of Commerce. He adds trying to achieve growing awareness of Lansing’s airport as an international hub has been a challenge.
“They’re used to going through Chicago and customs there and not really considering Lansing as a place where businesses can clear freight.” Daman says an aggressive marketing campaign is under way not only to drive that point home, but also to stress the benefits of shipping local. “The airport is centrally located in the state with the infrastructure available on Interstates 69 and 96 and US 127, and we’re just a half hour from I-94 to either Detroit or Chicago.” Shipping out of Lansing also expedites the process. “Where in Chicago a shipment can be held in a warehouse for several days waiting for inspection, we can get the job done in a matter of hours,” Selig adds. Utilizing FTZ No. 275 would also translate into revenue and jobs for the Lansing area and the state as a whole.
MSU’s International Business Center has 10 staff and 30 graduate and undergraduate students. “The kids are pretty sophisticated,” brags Hult. “They’re able to dig up research and figure out what it means before providing answers to companies.” A research team, which usually consists of two staff members working with four students, provides its services pro bono. Of the 30 companies they have worked with so far, most are within driving range. “We don’t exclude anyone,” he stresses. “We’ll work with any Michigan business, but our focus is on the Lansing area.”
FTZ No. 275, which received its designation in August, 2009, also can help businesses in cutting the application time. What used to take nine to 12 months to get approval, now can be completed in just 30 to 75 days. Case says the reduction in red tape came after a meeting with commission members in eight counties. Prior to the change, each company had to undergo a public hearing before getting community approval.
“Companies are thinking near term,” says Case. “If they have to invest a lot of effort and then wait nine months to a year to see if they can take advantage of it, it doesn’t become a priority for them any longer.” The counties currently on board are Ingham, Eaton, Clinton, Shiawassee, Isabella, Gratiot, Jackson and Livingston. “They each provided a letter of support for the project and for getting rid of the public hearing requirement of the application process,” he says. In each of those areas, companies now already have the support of the community before the process even begins.
It may be a while before businesses actually begin taking advantage of all FTZ No.275 has to offer. General Motors has three inactive Subzones under FTZ No. 275 and the airport is about to launch its first General Purpose Zone. But other than those, no other companies as yet have signed up to use the FTZ. Selig says it is just a matter of time. “Although companies have yet to sign on the dotted line, we are talking with several interested businesses and getting a sense of the number of international shipments moving through the port of entry and just how businesses can take advantage of the FTZ.”
The men are hesitant to make predictions on just how much use of the FTZ can increase sales, but Hult is willing to take a guess. “I think they could increase their business by 40 percent in the next three years.”
He admits, though, that may not be the norm. “It’s pretty lofty, but it is doable.”
Capital Region Airport Authority
Bob Selig, Executive Director
4100 Capital City Blvd.
Michigan State University’s Eli Broad College of Business
International Business Center
Dr. Tomas Hult, Director
7 Eppley Center
Lansing Regional Chamber of Commerce
Director FTZ No. 275 and International Trade Development
Tim Daman, President
500 E. Michigan Ave., Ste. 200