The Evolution of Foreign Trade Zones

Dear Diligence Readers,

International trade has always been subject to change, indicative of its growth. Looking back at the world and society over the past 200+ years, there are many correlations to international trade that have mapped out America's evolution. The Foreign Trade Zone (FTZ) industry is no different and will be celebrating its 100th anniversary next decade.

Throughout the years, the FTZ industry has experienced numerous milestones that have led to its growth and expansion, such as:

• Inception in 1934
• Growth and expansion in the 1950s and 60s
• Evolution in 1980, which opened up possibilities to all facets of the industry
• "Weekly entry" in 2000, which gave us a spotlight that has never dimmed since
• Maturity in 2007-8 with the implementation of the Alternative Site Framework (ASF) to provide a more comprehensive outlook for its sustainability.

However, the uphill climb we continue to bear is education and awareness.

While organizations like the National Association of Foreign Trade Zones (NAFTZ) have played a crucial role in advancing the cause of FTZs, the real engine of change has been the grassroots effort of local champions. Across the country, Customs Brokers, Manufacturers, Exporters, Distributors, and others have been building up the infrastructure and education needed to drive the growth of FTZs. While the NAFTZ provides a national perspective and public-private partnership, it is these local efforts that provide the foundation for sustainable growth in the FTZ industry.

Pockets around the country are evidence of this in sectors such as Customs Brokers, Manufacturers, Exporters, and Distributors just to name a few. The FTZ Program at the turn of the century was lacking this infrastructure. The narrative was "To learn about FTZs, hire a consultant." While this is good for consultants, it is not good for the sustainability of an industry that is more vital today than ever before. The FTZ Program is no longer just an advantage to help businesses grow and expand, but an arbiter for safe passage while navigating the import and export obstacles that affect businesses across all industries.

To further promote education and awareness, organizations such as the NAFTZ, NCBFAA / LACBFFA, Foreign Trade Association (FTA), Women in International Trade (WIT), District Export Council (DEC), and International Compliance Professionals Association (ICPA) are recognized regionally and nationally for continuing to educate and provide awareness to the FTZ Program. Grantees over the years have invested in the marketing and education of the FTZ Program as well, which is now seen as an essential cornerstone for the international trade business community. Government agencies such as the FDA, EPA, TTB, FCC, Commercial Service, SBA, SBDC, and cities, counties, and states have expanded their strategic economic development philosophies to be inclusive of FTZs.

Most importantly, community colleges and universities are developing curriculum in their International Business Departments through text, guest lectures, and even field trips to learn more about FTZs and other trade programs. This is the grassroots effort of our industry to inspire young people to pursue careers in the FTZ industry, whether that's government positions, attorneys, customs brokers, consultants, or Zone Administrators.

My colleagues around the country that join me in this endeavor deserve gratitude.

Concluding, I emphatically encourage customers, employees, vendors, colleagues, and every facet of the supply chain industry to continue to learn, stay relevant, and echo the narrative of the FTZ Program. Through trade associations, government agencies, educational institutes, and passionate champions of the industry, the FTZ Program will climb to greater heights than ever before.

Best regards,

David Harlow, CEO of ITC Diligence International, Inc.

Dock Worker Strike Shuts Down LA and Long Beach Ports: How FTZ Solutions Can Keep Your Supply Chain Moving

The recent dock worker walkout that shut down the Ports of Los Angeles and Long Beach has raised concerns about the state of the supply chain and the potential impact on businesses that rely on the ports for imports and exports. The work stoppage was initiated by the International Longshore and Warehouse Union (ILWU) amid ongoing labor talks with the Pacific Maritime Association (PMA), which represents ocean carriers and terminal operators.

Although the contract negotiations are ongoing, the ILWU has lost some of its leverage due to a slump in West Coast container volumes. Some import and export companies have been routing their shipments away from the vulnerable West Coast ports in anticipation of potential union unrest, with some volumes already dropping sharply.

Here are some key takeaways from the situation:

• The Ports of Los Angeles and Long Beach have been closed due to a manpower shortage caused by a dock worker walkout.
• The work stoppage is a concerted action taken by the ILWU in relation to labor talks that have been ongoing since May 2022.
• Fearful of a repeat of the dock closures that rocked supply chains in 2015, many companies have already begun routing their shipments away from the vulnerable West Coast ports.
• Although negotiations for a new coastwise contract continue, the shutdown is already crimping regional trade.
• The ILWU has lost some of its bargaining power due to a slump in West Coast container volumes, further solidifying the PMA's negotiating position.
• The situation threatens to accelerate the diversion of discretionary cargo to Atlantic and Gulf Coast ports, which could erode the market share of the Ports of Los Angeles and Long Beach and impact the Southern California and state economy.

How FTZ Solutions Can Help:

Foreign Trade Zones (FTZs) are secure areas that are considered to be outside of U.S. Customs territory. Goods can be brought into an FTZ without being subject to customs duties or taxes, which can help improve cash flow and reduce the cost of doing business. Additionally, companies can benefit from reduced processing times and streamlined customs procedures when operating in an FTZ.

ITC Diligence International Inc. is well-positioned to help clients take advantage of the benefits of FTZs. With years of experience and knowledge of international trade, customs, and supply chain management, ITC Diligence International Inc. can provide clients with comprehensive support and guidance when it comes to operating in an FTZ.

Here are some ways in which FTZ solutions can help businesses affected by the port strike:

• FTZs offer a secure alternative to the vulnerable West Coast ports, enabling businesses to bring goods into the U.S. without being subject to customs duties or taxes until the goods are removed from the FTZ and enter U.S. Customs territory.
• By operating in an FTZ, businesses can benefit from reduced processing times and streamlined customs procedures, which can help mitigate the impact of any potential port disruptions.
• ITC Diligence International Inc. can provide clients with comprehensive support and guidance when it comes to operating in an FTZ, including assistance with the application process, ongoing compliance, and reporting requirements.
• ITC Diligence International Inc. can also help clients identify and evaluate the best FTZ sites and partners based on their specific needs and goals.

The looming port strike in Los Angeles and Long Beach is a serious concern for importers and exporters, as it threatens to disrupt supply chains and cause delays and increased costs. However, by utilizing the benefits of Foreign Trade Zones, companies can mitigate some of the risks associated with port strikes and ensure a smoother flow of goods through the supply chain. ITC Diligence International Inc. is committed to helping its clients navigate these complex challenges and providing comprehensive solutions to help them succeed in the global marketplace. By working together, importers, exporters, and service providers can overcome these challenges and continue to grow their businesses.

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