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Frequently Asked Questions...
Why do firms use foreign-trade zones?
To maintain the cost competitiveness of their U.S.based operations vis-a-vis their foreign-based competitors. For a firm, zone status provides an opportunity to reduce certain operating costs associated with a U.S. location that are avoided when operating from a foreign site. Why do communities organize trade zones? A local trade zone contributes to an area's commercial attractiveness as a place to do business. By using local business initiative and existing facilities, organizing a zone can be a relatively inexpensive feature of an area's overall economic development efforts. A well organized lone will provide immediate service to the area's current business base as well as aiding in the attraction of new business to the area.
How does the zones program fit within the economic development efforts of the various states?
The trade zone program is a true federal program; the underlying authority to approve the creation of a zone resides with the Federal Government. Composing the general character of individual zones is a responsibility delegated to the states, which they fulfill by enactment of enabling legislation. The initiation and use of individual zone protects usually results from some combination of state and local community interest generated by both the private and public sectors. The Foreign-Trade Zone Boards' staff advises zone organizers to integrate their zone project within their state's or local area's overall economic development strategy rather than segmenting their zone as an individual development effort. Overall, zones tend to be incorporated in their areas' efforts to maintain their attractiveness as a business location and/or as an element in state and local development efforts.
Is zone status more beneficial for a foreign-owned U.S.-based firm (or operation) than a "traditional" U.S. firm?
No. The benefit of zone use is determined by the firm's operations, not its ownership; if a U.S. and a foreign owned firm have identical trade operations, the potential benefit of zone status for each of them will be identical. To the extent to which tones treat ownership differently, the difference is that zones encourage U.S. firms to stay in or return to the United States and encourages foreign firms to come to the United States. Currently, over 90% of FTZ users are U.S. based firms.
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