Colorado Foreign Trade Zones-an Overview
| Publication year | 1986 |
| Pages | 175 |
| Citation | Vol. 15 No. 2 Pg. 175 |
1986, February, Pg. 175. Colorado Foreign Trade Zones-An Overview
The Foreign Trade Zones Board, under the authority of the Foreign Trade Zones Act of 1934,(fn1) recently authorized the establishment of two foreign trade zones in Colorado. One of the zones is just outside Colorado Springs and the second is in Denver. While the establishment of the zones received ample praise in the business community as a positive step toward boosting the state's economy, many people do not really understand what foreign trade zones are all about.
This article provides a general overview of the structure under which foreign trade zones operate, the economic advantages the zones can provide businesses and the advantages foreign trade zones offer over bonded warehouses. It also briefly discusses the issue of concurrent state and federal jurisdiction over trade zone activities. However, customs procedures, other technical aspects of foreign trade zones or corporate tax considerations are not discussed.
Foreign trade zones have existed in many forms throughout history. Initially, these zones took the form of free ports that were excluded from the levy of taxes by the local government because of the recognized economic benefit the free port provided the local economy. A free port is a port or section of a port where foreign goods may be handled without customs duties. Hamburg, Bruges and the other Hanseatic League cities of the thirteenth century are examples of this development. While modern-day zones are carefully regulated by customs authorities, the basic concept has not changed. Zones are designed to encourage foreign trade and thereby create jobs and boost economic growth in the area.
The United States first became involved with free ports in the modern sense in 1934 with the passage of the Foreign Trade Zones Act ("Act"). Initially, the zones were intended to be storage, manipulation, and transshipment centers. Legislative history states the Act represented a congressional attempt "to expedite and encourage foreign commerce."(fn2) Many would agree that this is indeed the effect the Act has had.
Since most foreign trade was done by ship, the first zones in this country developed adjacent to U.S. seaports. In 1950, Congress enacted the Boggs Amendment allowing manufacturing to take place as well as the exhibition of imported articles in the zones.(fn3) The ability to incorporate foreign-made component parts into locally manufactured articles eventually made foreign trade zones attractive to non-seaport communities. However, in 1970, there were still only seven general purpose zones and three sub-zones in operation in the U.S.
The greatest growth occurred in the 1970s. With a serious balance of trade problem, the government began to encourage smaller businesses to make use of the foreign trade zone structure to better compete in the world market. At the same time, U.S. high-tech industries discovered that significant savings could be achieved through the incorporation into their products of inexpensive electronic components manufactured in the Far East. Many communities also discovered that establishing a foreign trade zone could be an effective tool in attracting desirable high-tech industries and other businesses involved in import/export to their cities. As a result, by September 30, 1985, there were 117 general purpose zones and eighty-three sub-zones in operation in the United States.(fn4) It is estimated that the zones have created an estimated 50,000 jobs and are doing in excess of $5.5 billion in business today.(fn5)
In 1980, the Colorado legislature enacted the Colorado Foreign-Trade Zones Act, authorizing public or private corporations to apply for authority to establish, operate and maintain foreign trade zones within the state.(fn6) The Colorado Act also exempts merchandise located in the zones from state and local taxes.
On May 11, 1984, Colorado Springs Foreign-Trade Zone, Inc. submitted an application to establish a zone. Colorado Foreign-Trade Zone, Inc. is a Colorado non-profit corporation affiliated with the Colorado Springs Chamber of Commerce.(fn7) The application was approved on November 13, 1984, and a subsequent application to expand the zone has been filed.(fn8)
The Colorado Springs Zone covers 1,333 acres at Colorado Centre, a 3,000 acre planned industrial and commercial community on Drennan Road adjacent to the Colorado Springs Municipal Airport. The zone site is owned by L. P. Associates and is operated by Front Range Foreign-Trade Zone Operators, Inc. The zone offers office/warehouse facilities, as well as construction sites for companies to build their own facilities. The Colorado Springs zone is attracting companies involved in high-tech electronics such as Space Communications Co. ("SPACECOM"),
In November 1984, the City and County of Denver submitted its request for authorization to establish a general purpose trade zone in Denver within the Denver Customs Port of Entry. The application was approved by the Board on August 27, 1985.(fn9)
The Denver zone is located on thirteen acres within the 280-acre Denver Business Center industrial park adjacent to Stapleton International Airport and is operated by Aspen Distribution, Inc. The Denver zone currently offers importers and exporters 130,000 square feet of warehouse, office and showroom space. Aspen operates a public warehouse within the Denver zone so a user can either use the public warehousing services or lease its own warehouse facilities, depending on the user's needs. Construction sites are available within the zone for manufacturing facilities. Aspen Distribution also makes office space available for customs brokers, freight forwarders, banking and insurance services, interpreters and transportation services.
Foreign trade zones are considered by the federal government to be within the geographic limits of the United States, but not within U.S. customs territory. As a result, foreign and domestic merchandise may enter the zone without a formal customs entry, and import duties and other taxes can be postponed until the merchandise leaves the zone or, in certain instances, avoided completely.
The Act created the Foreign Trade Zones Board ("Board") composed of the Secretary of Commerce, Secretary of the Treasury, and Secretary of the Army.(fn10) The Board is authorized to establish zones and a preference is given to the applications of public corporations. The public corporations in turn generally lease the operation of the zones to private corporations.
Zone activities are supervised by the District Director of the U.S. Customs Service ("District Director").(fn11) Customs officers and guards are assigned to all zones to admit merchandise into U.S. customs territory and to protect the tariff revenue.(fn12)
The administration of all zones is shared by the Secretary of the Treasury through the U.S. Customs Service and the Secretary...
To continue reading
Request your trial