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FTZ magnet site, or one designated to attract and serve multiple users. In 2018, Delaware exported $4.4
billion in manufactured products.
Top exports included chemicals ($1.6 billion), transportation equipment ($864 million), machinery other than electrical ($367 million), and petroleum and coal products ($353 million).
In an FTZ, companies can import components but defer payments until that component leaves for the U.S. market. In some cases, companies can avoid tariffs if that component
is exported overseas again.
For example, if a warehouse is
approved to import batteries and flashlights separately, it could defer paying the duties — approximately
5% — while the imported materials “They would pay the 5% duties in this example on any materials they shipped outside the FTZ to allow it to ‘enter’ U.S. commerce, such as shipping to local department stores as inventory,” said Patricia Cannon, who oversees
the state’s FTZ program. “But if they
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shipped from the FTZ back outside the U.S. to another foreign country, the U.S. would not collect the 5% duties.”
The other significant benefit for Delaware manufacturers may be inverted tariffs, or when the duty rate for the overall finished good is lower than the duty rate of the component parts. Hypothetically speaking, a car manufacturer may face a 2.5% duty rate on cars and radios with a 5% duty rate. When the radio is installed in the car, the company will pay a duty rate of 2.5% on the whole car.
Sussex County Economic Development Director Bill Pfaff is banking on these incentives to fuel even more growth at the rising Delaware Coastal Airport Business Park, a 175-acre industrial park which has recently been designated as an FTZ.
“We’re the only one in Sussex County and the Eastern Shore with this designation, and it makes it highly attractive for businesses who need
to ship things across the country to manufacturers,” Pfaff said. “No one
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has activated these benefits yet, but we’re hoping that with some discussions that will change. If you have the opportunity to ship things with no
tax, that can make it very attractive
for businesses to come here.”
ALOFT AeroArchitects, one of the industrial park’s oldest tenants that designs and installs auxiliary fuel systems in commercial aircrafts, has its own arrangement, Pfaff said. The lure of an airplane manufacturer could inspire more to follow.
But for now, Pfaff said his sights are on a new venture that would make the Delaware Coastal Airport Business Park a possible freeport for southern Delaware and the lower Maryland shore.
“We hope to launch a warehouse where businesses can ship several parts to store and defer tariffs,” he said. “If you’re a manufacturer, this can be attractive to roll in your tax with the price and make it way more profitable on the bottom line.”
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