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Foreign-Trade Zones: Using a Federal Trade Program as a Local Economic Development Tool


By Greg Jones

By Greg Jones (©Trade & Industry Development, March 2003)

The U.S. Foreign-Trade Zones program has grown profoundly over the last three decades. In 1970 there were 8 General Purpose Zones and 3 special purpose subzones in the United States. Today there are over 250 Zone projects and over 400 special purpose subzones in the United States. This growth has been dependent upon the evolution of the FTZ program as a means by which U.S.-based companies can enhance their cost-competitiveness, and as a means by which the United States can practice both the letter and the spirit of its trade laws.

A unique strength of the FTZ program is that it involves both public sector and private sector participation. Foreign-Trade Zone Grantees serve as the public voice and the public self-administration of Zones on behalf of the firms that operate and use Zones. This public voice has resulted in the evolution and development of more user-friendly Zone procedures. These have vastly increased the utility of FTZs for U.S.-based firms, which has in turn enhanced the competitiveness of Zone users; thus attracting and retaining trade opportunities which translate into jobs and capital investment for the communities each Zone serves and into domestic economic activity for the United States.

Each active FTZ project has a Grantee, one or more Operators, and one or more users. Each Zone project has a General Purpose Zone, which may consist of one or more sites, in which any number of users may conduct operations constrained only by the physical limitations of the site or sites. A special purpose subzone is a single-firm site, usually involved in manufacturing, operating independently from the General Purpose Zone. Each subzone operates under the auspices of the Grantee. The Foreign-Trade Zones Board authorizes the establishment of subzones in instances where the activity cannot be accommodated within a General Purpose Zone and where Zone status for a particular business operation will result in a significant public benefit, such as the creation or retention of domestic economic activity. Typically, the nearest Grantee within a given State establishes each subzone. Some Zone projects have no subzones, others have several subzones. Typically, the Zone Grantee is a municipal government body, a port or airport authority, or an economic development organization.

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