Owen Tucker-Smith
Appearances
WSJ What’s News
Companies Turn to Foreign-Trade Zones to Shelter From U.S. Tariffs
So they go from the ports to these warehouses, and these warehouses, according to U.S. Customs, are technically not even part of America. They're considered sort of foreign soil for customs purposes in that they haven't gone through the customs process, so there aren't any tariffs assessed.
WSJ What’s News
Companies Turn to Foreign-Trade Zones to Shelter From U.S. Tariffs
However, under Trump's latest executive order, they're basically locking in the tariff rate that was in place when the goods entered. This was a big source of confusion for a lot of companies who were exploring FTZs for the first time.
WSJ What’s News
Companies Turn to Foreign-Trade Zones to Shelter From U.S. Tariffs
I came across plenty of businesses who were under the impression that they could essentially take the goods, put them in the warehouse, wait for the tariff rate to drop, and then remove at the lower tariff rate. But that's not actually how it works. As of now, the policy is that
WSJ What’s News
Companies Turn to Foreign-Trade Zones to Shelter From U.S. Tariffs
If your goods entered the forward trade zone when the tariff rate was, for example, 145 percent, even if the tariff rate drops when you take it out, you still have to pay that really high tariff rate from before.
WSJ What’s News
Companies Turn to Foreign-Trade Zones to Shelter From U.S. Tariffs
A lot of it is a cash flow thing. So usually when you import goods, you have to pay the tariffs immediately. But if you import goods into a foreign trade zone, you get to essentially wait and defer until you actually have the security and the peace of mind to know that you're going to be able to sell your goods.
WSJ What’s News
Companies Turn to Foreign-Trade Zones to Shelter From U.S. Tariffs
And for smaller businesses, for whom some of these tariff payments are really, really high, it helps from a cash flow perspective. Traditionally, the companies that have made this program such a huge thing over the last century have been major businesses that have used them for manufacturing. So think businesses like Apple or Intel or TSMC.
WSJ What’s News
Companies Turn to Foreign-Trade Zones to Shelter From U.S. Tariffs
But during this year's FTZ craze, the businesses that we're seeing run there are actually much smaller businesses. Their thinking is, yes, we know that we're going to have to pay these tariffs eventually, but we get to pay the tariffs on our own terms.
WSJ What’s News
Companies Turn to Foreign-Trade Zones to Shelter From U.S. Tariffs
Arizona has special incentive for FTZ development. And that's brought many, many jobs to the program in this state specifically over the last 10 or 20 years. And now that everyone's talking about it, there's some states that might be looking to Arizona as sort of an example. And we're seeing a lot of talk from the Trump administration about wanting to create more jobs.
WSJ What’s News
Companies Turn to Foreign-Trade Zones to Shelter From U.S. Tariffs
domestic American manufacturing jobs. And this program essentially allows companies to create those jobs, but maybe in a scenario where your entire supply chain can't be in the U.S.