THIRD PARTY LOGISTICS FIRMS OFFER BENEFITS TO THOSE OPERATING IN FTZs
Companies involved in the import of global products into the U.S. and considering the utilization of a foreign trade zone (FTZ) in their business may want to consult with a third-party logistics firm to get an in-depth look at what access to an FTZ may mean for them—and what a 3PL could offer in terms of benefits and efficiencies while operating within an FTZ.
According to U.S. Customs and Border Protection (CBP), FTXs are secure areas under the agency’s supervision that are generally considered outside CBP territory upon activation. Located in or near CBP ports of entry, they are the U.S. version of what are known internationally as free-trade zones.
Imported products can be brought into the country through an FTZ and no duty is paid on these products until they are moved to their U.S. destination. Products can sit or be warehoused in FTZs for lengthy periods and if it is determined these products are no longer required, they can be returned without duties being paid.
“Most importantly, the FTZ program is a U.S. government program-driven around compliance and is unique in that it covers the full supply chain,” says Trudy Huguet, senior director of FTZ Product at GEODIS in Americas, in an interview.
An international firm with a strong North American presence and operations, GEODIS is a logistics company that offers services in several lines of business: supply chain optimization, freight forwarding, contract logistics, distribution and express, and road transportation.
Huguet offered that the expertise of the 3PL that offers foreign trade services has many benefits but, most importantly, they usually can serve on compliance and efficiencies. For instance, she noted a 3PL may have better access “to operational systems and data flow that is needed for multiple systems to run an FTZ” or systems integrated with a foreign-trade zone system. She said a 3PL may also be able to serve certain shared costs with the availability of facilities such as warehousing, as an example.
“3PLs are driven by customers’ needs, like customization and square footage, along with services, staff and team members to run that FTZ for them,” she said.
Addressing a company’s needs is extremely important, in or prior to a peak holiday season, said Huguet.
She noted that many years ago companies used to administrate their own zones but that meant the expertise had to be in-house, necessitating the need to cross-train employees. However, by contracting with a 3PL, “those risks with these programs go away,” Huguet said.
GEODIS has molded programs to fit customers’ needs “so we will work with customers to determine how they can get the biggest bang for their buck,” and where they can find the greatest savings within the FTZ, she said.
Because the U.S.a U.S. FTZ is a sister program to the global free-trade zone, “We are unique in regulations and how we operate and very strong in compliance and most industries and manufacturers, producers and distributors,” Huguet said. “If they are importing into the U.S., they have the opportunity to benefit from this program.”
Getting involved in an FTZ is “kind of a three-stage process” that, Huguet says, involves consultation with the FTZ board where designation is obtained. Activation with local customs and security is followed by building the operational side of the FTZ to run parallel with in-house systems.
Paul Killea, senior vice president of Freight Services Compliance & Security in Americas for GEODIS, oversees import and export compliance for the U.S., Canada, Mexico, Brazil, Chile, Argentina and Colombia, in addition to running an FTZ product. He stressed that “compliance is very big part of the FTZ.”
“Compliance is the process of ensuring that all of our services and our customers’ services are performed in a compliant manner and adhere to all (government) regulations” in and out of the U.S., Killea says. “So, we are responsible to ensure that we have the right processes in place, the right tools for auditing and reporting and in doing so, create visibility to outside parties, specifically the government and our customers, to show them we are compliant.”
GEODIS provides an array of services such as air freight, ocean freight, warehousing and trucking, and the 3PL has a top goal to be compliant itself and to make sure its customers are, too. “First and foremost, GEODIS has to be compliant but obviously we need to make sure our customers are compliant as well. It is a global principle we hold in high regard at GEODIS,” he says.
Strong compliance would definitely be beneficial to a company looking at the benefits of a 3PL with access to FTZ, he noted.
On the security side, GEODIS has a team that manages various aspects of security. The company is a member of Independent Air Carriers and freight forwarder that adheres to the U.S. Transportation Security Administration regulations. The company not only transports air freight, “we are also a certified screening facility in six locations,” Killea notes. “So, my team manages all of that air freight security which is also beneficial to clients.”
Huguet points out that more companies are becoming interested in FTZs “so what we have seen are more companies trying to improve their supply chain dealing with all the various supply chain challenges and bottlenecking with merchandise. Everyone is looking for a better solution and FTZs will help with that.”
In addition, they can assist with some of the governmental trade issues that have been put into place, such as dealing with China.
Challenges created by the COVID-19 pandemic and port congestion have created issues for companies that 3PLs with access to FTZs can assist with, such as creating additional warehousing within the FTZ to store products longer.
“Because of port congestion and because of COVID, merchandise is sometimes being delayed and not moving as quickly as it should,” Huguet concedes. “The FTZ program has certainly helped.”