News Article | 4/2/2004

Southaven Bids For Foreign Trade Zone Designation

Memphis Business Journal04/02/04


Amos MakiSouthaven is making a bid to establish a Foreign Trade Zone at DeSoto Trade Center. An application is pending before the Foreign Trade Zones Board at the U.S. Department of Commerce. If approved, it could bring international trade related jobs, millions of dollars in capital investment and make Southaven a major player in the business of international trade.”It’s going to be good for us,” says Southaven Mayor Greg Davis. The proposed zone consists of a 219-acre site at the DeSoto Trade Center, tucked between Interstate 55 and Highway 51.Northern Mississippi FTZ, Inc., a non-profit incorporated by Dallas-based development firm Hillwood, submitted the application.The site is about six minutes from Memphis International Airport and has immediate access to I-55 and Highway 51.The application, filed formally March 16, lists Mayfield/New York, LTD., Hillwood Fund DTC 1 LP, Mississippi Purchase Corp. and Hal Crenshaw as owners of the property. Northern Mississippi FTZ would operate the site. It takes about nine months for an application to be approved, but officials close to the deal say the closing is just a formality.”It is just a matter of finishing the process and making sure our paperwork is filled out properly,” Davis says.Davis, along with other representatives from local government and business, made a three-day lobbying trip to Washington, D.C., in late March to push for FTZ status.Backers of the project say the goal is to attract corporations that will benefit from the logistical opportunities Memphis provides while enjoying the reduced operating costs derived from being located in Mississippi.Memphis International is the world’s busiest air cargo port and the Port of Memphis is the fourth-largest inland port in the nation. Mississippi offers incentives like no sales tax on purchases of raw materials, processing chemicals or packaging materials.”I think it will put us on a more even playing field as far as getting international business to locate here,” Davis says. “I think we already have the location and tax structure and this FTZ will make us more competitive.”Six buildings totaling more than 3.8 million square feet are planned for the site. One 846,066-square-foot facility has been constructed and Emerson Electric Co. occupies 290,000 square feet of it. St. Louis-based Emerson Motor Co. plans to make use of the zone status. It is a division of Emerson Electric Co. with sales in fiscal 2003 at $14 billion.Officials from Emerson and Hillwood declined to comment for this story. FTZs allow companies to save money by not paying duties for products or components shipped into the zone. This way, businesses can assemble the components in the zones duty-free and then ship them out. Merchandise, both foreign and domestic, admitted into a FTZ is perceived as being in the stream of international commerce and is therefore not subject to customs’ duties, government excise taxes or import quotas.It’s only when the final product is transferred from an FTZ and formally entered into U.S. commerce that duties and taxes are due. And, if the final product is exported from the U.S., no duties or taxes are levied.”U.S. communities often have to compete globally for investment in local manufacturing and commerce,” says Dennis Puccinelli, executive secretary for the FTZ Board, the agency that awards FTZ status. “In some instances, locations overseas may offer more favorable customs environments for businesses. Therefore, U.S. foreign trade zones help level the playing field in terms of the business costs associated with importation and customs clearance.”FTZs also assist state and local officials to develop their economies by attracting foreign commerce,” Puccinelli says. “And by helping U.S. companies improve their international competitiveness, FTZs can help retain local business and encourage the development of additional jobs.” In Memphis, the FTZ operated by Centrepot, Inc., has been a success.”It’s helped us from the standpoint of gaining customers,” says Bill Fisher, executive vice president of Centrepot, a third-party logistics company that also operates the Memphis FTZ. “But the ripple effect is that it has helped us create jobs, which helps the economy of Memphis and the Memphis area.” Centrepot has expanded its facility to four times its original size at opening and employs 21 people locally.But Fisher says companies of all sizes can benefit from the FTZ.”We literally have a couple of customers who put one pallet of freight in here,” Fisher says.As an FTZ operator, Centrepot’s services include cost/benefit analysis to determine foreign trade zone savings potential, assistance in structuring applications and proposal submissions, customs service-approved inventory tracking and record-keeping, management of customs compliance, technical advice on regulatory issues and preparation and maintenance of all customs documentation.There are two kinds of FTZs. The general purpose zone, the type slated for Southaven, is a facility used for a number of activities such as storage, distribution or manufacturing. The Memphis zone, a 295,000-square-foot general purpose facility, is located at 5000 E. Raines.The second type of zone, called a special purpose subzone, is confined to one type of activity, usually manufacturing, and is for operation by individual firms. In Memphis, Brother International and Sharp Electronics Corp. have special-purpose subzone status. But there’s more. Another application, this one before the Bureau of Customs and Border Protection, would, if granted, extend the Memphis Customs port of entry boundary to include DeSoto County.Extending the port to include Southaven is a huge deal. Because customs agents must inspect foreign shipments, the customs office in Memphis could make the short drive down I-55 to the Southaven facility. If the port application is denied, then customs agents from the Jackson, Miss., office would have to make a three-hour trip to Southaven.For example, if the Mazda plant in Olive Branch wanted to take advantage of the FTZ and the port application is rejected, agents from Jackson would be responsible for oversight of the DeSoto County facility. A public hearing on the FTZ application will be held April 27 at 11 a.m. at the DeSoto County Civic Center.CONTACT staff writer Amos Maki at 259-1764 or at [email protected]