rent shipping and receiving areas, and correct those inconsistencies. We also spent
much time and great care auditing the
[Harmonized Tariff Schedule] numbers
associated with each part listed on Blount’s
SAP system before fully integrating the FTZ.
QDuty inversion (which exists when the duty rate for the finished good is lower
than the duty for the component parts) is
considered a powerful benefit of an FTZ
because it allows U.S. importers to manufacture in the U.S. while taking advantage of a
lower duty rate. Yet it requires precise recordkeeping and a significant investment in traceability systems and resources. Has Blount
captured benefits from duty inversion?
A Blount is benefiting from duty inver- sion. Recordkeeping and traceability
issues have been alleviated by using a “bolt-on” FTZ system
supported by [FTZ software provider] Integration Point.
Through extensive training, we have made every stakehold-er—team leaders, line supervisors, managers, and the production employees—aware of the importance of maintaining accurate inventory counts, accounting
for waste produced during the process, and
minimizing the errors associated with
“pulling” the elements used for production.
QBlount located its FTZ adjacent to the Kansas City airport. Yet Blount’s
products are not designed to move via air
cargo. What drove the company’s decision?
A Kansas City is an ideal location for distribution centers. It is located
nearly in the geographical center of the
United States. It is the crossroads of trucking and railroad services. Movement via
truck or railroad is basically three days
from the East or West coasts. UPS and FedEx have major
handling facilities in the area. Improvements by the BNSF
Railway and other railroads are shortening the transit times
from either coast. FTZ operations are permitted to request
“direct delivery,” which provides an additional reduction in
container transit times. The Kansas City metro area does
not face the same congestion problems as the ports of entry
on the coasts, and it has a well-educated and highly experienced workforce.
QIn the U.S., FTZs have been around for nearly 80 years, and they are considered a powerful tool for
companies involved in international business. Yet they are
not as widely utilized as one might expect them to be. Why
do you think that is?
A A lack of understanding of the FTZ processes is the pri- mary reason many companies choose not to embark on
such an operation. Some assume that the costs of establishing
an FTZ are overwhelming. A lack of compatibility with an
existing ERP [enterprise resource planning] system could be
another obstacle. An organization’s ERP system may not be
capable of handling the information required by the FTZ.
QSome companies may be deterred by the compliance requirements for maintaining FTZ status. Should
they be?
A The compliance requirements established by the FTZ regulations are very similar to the requirements that are
listed for the [Customs-Trade Partnership Against
Terrorism]. Compliance issues should not be considered a
deterrent to employing an FTZ model. On the contrary, compliance issues are one of the unknown or unmentioned benefits when a company is weighing the FTZ option. Product
shrinkage, improved shipment accountability, protecting
against cargo diversion, and ensuring that export and import
processes are properly followed all stem from the discipline
that comes from ensuring proper FTZ compliance.
QWhat are the key metrics an importer or a shipper should evaluate before
taking this step? Are there companies that
engage in international trade whose opera-
tions would not be suitable for an FTZ?
A Individual businesses will likely use different sets of [key performance
indicators] to evaluate the benefits of incor-
porating an FTZ operation. Companies need
to carefully review their import and export
processes in order to determine if an FTZ
operation is right for their organization. In
my opinion, any company that is importing
and exporting has an opportunity to find
some advantages to operating in an FTZ environment.
QDo you plan to do more manufacturing within the FTZ, and would that involve more nearshoring, or
on-shoring, back to the U.S.?
A It is too early in our operation to answer that. What I do know is that although all FTZs follow the same rules
and regulations, each FTZ, over time, develops its own personality. What may work well at one FTZ may not have the
same positive effect at another. As Blount’s FTZ matures and
we gain more experience, we may well find additional uses
for the FTZ and incorporate other ideas or products into the
operation to enhance its value to us and our customers. ;
