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Inward Investment Guides
Doing Business at the Border
The logistics and distribution benefits of border locations are continuing to increase - and foreign-trade zones are adding to the equation.
Jennifer LeClaire  (Aug/Sep 07)
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Looking for FTZs
Of course, it's not all about being located on the nation's border. There is a movement among economic developers to highlight FTZs, which were created stateside to offer special custom procedures to U.S. companies that export and import goods. Duty-free treatment is part of the package. Though FTZs are not always located along the borders, these locations are becoming hot spots because they offer the ability to clear merchandise without waiting for approvals.

"Foreign-Trade Zones are popular in locations that are some distance from our nation's borders because they provide opportunities for companies to streamline their international logistics," says Greg Jones, a senior consultant for the Foreign-Trade Zone Corporation, an FTZ consulting firm in Mobile, Alabama. FTZ direct delivery procedures allow foreign merchandise to be transported in-bond directly to zone user's facility without clearing Customs at the first port of unlading, and without the necessity of the in-bond carrier reporting to the local Customs office prior to the delivery of the merchandise to the zone site.

"Direct delivery procedures often save one to two days in delivery of foreign merchandise to the zone user," he says. "This shortens the zone user's international pipeline, thereby eliminating inventory within that pipeline." What's more, he adds, FTZ weekly entry procedures allow the zone user to serve the domestic market without paperwork delays. And since the formal Customs entry takes place when merchandise leaves the zone for domestic commerce, zone users often use weekly entry procedures to streamline shipments and Customs paperwork.

"Under weekly entry procedures, the zone user files one Customs entry per week, rather than filing one Customs Entry per shipment," he says. "This allows the zone user to serve the domestic market without paperwork delays. Pursuant to the provisions of the Trade Development Act of 2000, weekly entry procedures have been made available to all kinds of FTZ operations, including both manufacturing and distribution operations."


Cross-Border Challenges

Perhaps the largest challenge facing cross-border shippers is transportation security. With immigration issues and border security strongly in the American consciousness, the increasing number of regulations may continue to escalate. The security is causing a bottleneck, but experts say it's not as bad as it once was, despite the enhanced measures. That assumption may be evidenced by the volume of trade.

Trade using surface transportation between the United States and its NAFTA partners Canada and Mexico was valued at $65 billion in April, 5.3 percent higher than in April 2006, according to the Bureau of Transportation Statistics of the U.S. Department of Transportation. Michigan led all states in surface trade with Canada in April with $6.7 billion, followed by Illinois and New York, which each registered about $2.9 billion. Texas' surface trade with Mexico in April totaled $6.9 billion, followed by California ($3.8 billion) and Michigan ($2.5 billion).

What's behind the gains? Initiatives such as the Free and Secure Trade, or FAST, program are paying off by offering expedited clearance processes to carriers and importers who have enrolled in the U.S. Customs Trade Partnership Against Terrorism or Canada's Partners in Protection. "The border crossing delays are substantially shorter than they were even a year ago," says Phillips. "The perceptions are far worse than the realities."

On the Mexico side, a one-year pilot program that began in February will grant 100 Mexico-domiciled trucking companies unrestricted access to U.S. roads. It's a cross-border program that represents a major shift in U.S. transportation policy. The new truck pilot program also grants U.S. trucking companies unrestricted access to Mexican roads. NAFTA provisions to open the border to trucks in 1995 were delayed by Congressional action and litigation. A U.S. Supreme Court reversal of a lower court decision in 2004 gave the go-ahead to opening the border.

Over the long haul, if the program became permanent it could make a significant impact on the bottlenecks, given that the U.S. Census Bureau estimates that in 2006, 75 percent of the $198 billion worth of goods imported into the U.S. from Mexico were transported by commercial truck. But the streamlining may not happen overnight. "The borders are still perceived by many to be a bottleneck," Sullivan concludes. "I don't predict a rapid solution to that, especially as manufacturers ramp up production and put more pressure on the borders."

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