November 1, 2011

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In the Zone

Untapped Potential Resides in Salt Lake’s Foreign Trade Zone

Gaylen Webb

November 1, 2011

What is the Foreign Trade Zone?

It’s an area designated by the federal government to be outside the purview of U.S. Customs—products or materials brought into the zone are not subject to Customs duties or tariffs until they leave the zone for market. Businesses engaged in international trade may receive duty-free treatment for items that are processed within the Foreign Trade Zone and then re-exported, and duty payment deferral on items until they leave the Foreign Trade Zone for sale in the U.S. market.

City leaders are mum about specific details, but new legislation taking shape in Congress could help transform Salt Lake City’s 55-acre Foreign Trade Zone from barren real estate into a magnet of activity for at least one of Utah’s economic cluster industries.

“We are this close to making an announcement,” says Tim Loftis, economic development manager for Salt Lake City, pressing together his thumb and index finger.

The Zone Reactivated

Nearly three years ago, Salt Lake City received approval from the U.S. Department of Commerce to reactivate Foreign Trade Zone No. 30. Salt Lake actually had a Foreign Trade Zone near the international airport from 1977 to 1996, but no real development occurred there and the zone’s license was allowed to expire. The site was later sold to become part of the airport’s expansion.

In 2006, the city facilitated meetings with local business leaders to determine interest in renewing the zone. Businessmen like Ron Buzzard, purchasing manager for Classic Cabinets in West Valley City, were excited about the potential money-saving benefits of bringing imported goods into the zone. Business was booming “like there was no tomorrow,” says Buzzard, and the cabinet company was importing large quantities of cabinet hardware from overseas. It made perfect sense to save money via Customs duty deferral on the imported goods.

But then the bottom dropped out of the economy and the housing market went bust, putting the kibosh on Classic Cabinet’s importing and Buzzard’s vision of saving money via the Foreign Trade Zone.

The Great Recession also nixed development within the zone. Originally, the Rockefeller Group, a New York-based Foreign Trade Zone development and management company, planned to build the first of what was hoped to be a complex of buildings in the zone. But with the recession raging, the Rockefeller Group balked at building within the zone on pure speculation, and the city has struggled to find a lead tenant big enough to make the capital investment that would get construction off the ground.

Finding an Anchor

“Finding a lead tenant has been our central focus,” says Salt Lake City Economic Development Director Bob Farrington. “We have some great prospects and have been making the case as to why they need to be in the zone.”

According to Brandi Handback, managing director of Foreign Trade Zone Services for the Rockefeller Group, one company that may be interested in making the capital investment is currently doing a feasibility analysis.

As Utah’s economy has picked up steam, other interest in the Foreign Trade Zone has heated up as well. In fact, Farrington says the Foreign Trade Zone is receiving a lot of interest from companies that need 10,000 – 20,000 square feet of space. “We just need an anchor tenant,” he adds, noting that Sahara Construction is ready to build a 100,000-square-foot building in the zone once an anchor tenant is found.

In the process of developing and promoting the Foreign Trade Zone, Salt Lake City forged strategic partnerships with key organizations such as World Trade Center Utah, the Governor’s Office of Economic Development (GOED), the Economic Development Corporation of Utah (EDCUtah), Union Pacific Rail Road, Sahara Construction and Commerce Real Estate Solutions. The partners work together to help promote the zone and educate businesses about its potential benefits.

Meanwhile, the Rockefeller Group has been conducting feasibility analyses with individual businesses to determine if operating within the zone will save them money.

An Economic Driver

Salt Lake City’s Foreign Trade Zone is a potential economic driver that could enhance the state’s rapidly growing international trade, encourage capital investment and create jobs by helping Utah businesses compete on a global scale.

“Salt Lake City’s Foreign Trade Zone provides a huge advantage for Utah and gives our organization the chance to recruit companies that will use the zone for their global business efforts,” says Jeff Edwards, president and CEO of EDCUtah. “It is yet another economic development tool that makes the state an attractive place to do business. Salt Lake City’s Foreign Trade Zone and associated sub-zones will be key resources for cost savings and serve as an international gateway to global markets, especially as manufacturing and distribution operations grow along the Wasatch Front.”

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