Page 14 - World Trade Center - Delaware

FOREIGN TRADE ZONES HELP COMPANIES SAVE MILLIONS
BY KATIE TABELING
Back in 2019 when Second Chances Farm was looking at opening for business, its founder Ajit George was working on a plan to lessen or avoid taxes on importing parts to run its hydroponic farm.
Second Chances Farm operates in Wilmington’s Riverside community, growing vegetables in an indoor farm and exclusively hires people who have left prison. Because the startup needs LED lights from China and other hardware to control the temperature in the vertical farm from Ireland and Poland though, it faces significant duties and taxes before it could
start making revenue.
In seeking a solution, George found
a little-known tool to avoid that added cost. He applied to turn Second Chances Farm into a foreign trade zone (FTZ)
to avoid paying tariffs on any parts he imports and will use on site.
“It’s purely a defensive measure because 80% of the parts we require come from China, and depending on the current [presidential] administration, the tariffs levied can go as high as 33%,” George said. “We estimate that we’re saving $300,000 on every million.
If we’re talking about revenue in
the $3 million to $5 million range,
that’s serious money.”
Congress passed the Foreign Trade Zone Act of 1934 as part of the New Deal reforms, namely to allow companies some respite from bringing imported goods to shore and store them without paying tariffs, so long as they were
not sold domestically. FTZs help manufacturers compete in a global market, especially when needed
parts for a product can cross international borders.
Caleb Brown checks on some of the plantings at Second Chances Farm in Wilmington. The company is receiving increasing investment and attention. PHOTO BY JACOB OWENS
There are nearly 300 FTZs across the country. In Delaware there are nine, ranging from general purpose warehousing — such as Bayshore Fine Art and the Delaware Freeport — to production authority like the Delaware Refinery and manufacturing. The Port of Wilmington is designated as a
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14 | WORLD TRADE CENTER 2021 | WTCDE.COM