FTZ 126: Northern Nevada’s Trade Secret

Above and beyond Northern Nevada’s great tax benefits and legal advantages for businesses, our state’s multiple national rankings for being business friendly, and the (also nationally ranked) lifestyle we all know and love, Reno has another notable draw for large corporations looking to set up shop in the area. Foreign-Trade Zone 126 (FTZ 126), as it’s designated, is one of the largest and most flexible FTZs in the nation. It’s primed to be one of the most utilized, and it’s role in Reno’s future isn’t a small one.

Understanding our Foreign-Trade Zone

FTZs are located all over the country. Essentially, they are restricted-access sites in which regular customs procedures don’t apply to imports and exports. These zones are still most definitely within the territory and jurisdiction of the United States, but they act as a buffer from certain tariffs, taxes, and commercial laws to facilitate the manufacturing and transportation of goods. Inside FTZs, domestic and foreign goods are treated like they are outside the commerce of the United States.

Our local zone is enormous, covering southern Washoe County; all of Douglas, Carson, and Storey Counties; western Churchill County; and northern Lyon County. It’s also incredibly flexible in terms of business location and set up for quick approval of zone activity because of its Alternative Site Framework (ASF) status, which benefits single-operator/user operations especially. The zone, which is centered around the International Customs Port (Reno-Tahoe International Airport), is so flexible that “in Nevada, we have the opportunity that if a business is located in a specific place, we can draw a line around their company. They don’t have to move. They can qualify their location as (a foreign-trade zone),” says Director of the Nevada Governor’s Office of Economic Development Steve Hill. Better still, the size of this foreign-trade is so large that companies can have multiple locations within. In the same Reno Rebirth article as the previous quote, Brian Kulpin of Reno-Tahoe International Airport  said, “a company can import raw material and process it in different locations within our zone–welding in South Meadows, final assembly in Sparks and distribution from Stead,” which ” allows a company to focus on cost-effective operations and not on having to be in a certain location.”

Businesses taking advantage of FTZ 126 get additional benefits because of the aforementioned ASF designation, including:

• Duty deferral: Goods are not technically imported until they leave the FTZ, so customs duty is deferred until the final product officially enters the U.S.
• Duty elimination: Products that are re-exported never see a customs duty. The same goes for imported materials that are used up or spoiled during the manufacturing process.
• Inverted tariff relief: A component or raw material may come with a higher customs duty than the finished product. To give U.S. manufacturers the same advantages as importers, FTZs provide relief from this .
• No time constraint on storage: Everything within the FTZ can remain there with all of the tax breaks and benefits indefinitely.
• Easy satisfaction of export requirements: Because products are already in the secure active FTZ, exportation requirements are already partially taken care of.

Because of the enhanced security of FTZs and the advanced infrastructure required to operate in within them, many insurance and security costs drop, as well.

To get a better idea of some of these benefits, let’s say that a major smartphone manufacturer sets up shop in FTZ 126. They avoid tariffs on the pieces of the device they have to import from other countries, like the capacitive touch screen, for example, which might have a duty rate of 4 percent. They take all of these parts from around the nation and world, put them together in a high-tech manufacturing facility to create their own product, package that in a warehouse closer to town, and import (officially) only the finished and ready-to-ship product, which likely has a much lower or non-existent duty rate than all of the component parts and raw materials together. If the product is shipped back out of the country, no duty is ever due to the manufacturer, eliminating a large part of the burden to domestic manufacturing.

The Fertile Ground of FTZ 126

Northern Nevada’s future in technology and advanced manufacturing couldn’t have better ground to grow from. Our great state’s abundance of renewable energy, proximity to all the major business hubs in the West, beautiful setting, data transmission infrastructure, business-friendly climate–with the Foreign-Trade Zone, these all come together to make Reno one of the fastest growing cities and best places to live and do business in the nation. Things here in the Biggest Little City are beginning to bloom.