FTZ zone

Cellusuede Grows Market Share with FTZ Strategy

Import duties are eliminated from Cellusuede’s raw materials, reducing cost and improving competitive position

The textile industry is increasingly competitive, and few companies in the industry can maintain their U.S. operations due to costs. Many textile companies have moved operations offshore, taking with them jobs and investment. Fortunately, Andy Honkamp, President & CEO of Cellusuede is always seeking ways to reduce costs and improve his competitive position with his customers.

To reduce costs and reinforce the competitive position of Cellusuede’s Rockford, Illinois operation, Andy partnered with FTZ #176 to make his facility a Foreign Trade Zone. The FTZ allows Andy to import his largest volume raw material duty-free, and then he manufactures the raw material into a new product that has a different product classification that is duty-free, thus eliminating the duty entirely. This is called the “inverted-tariff benefit,” one of the many benefits of using a foreign trade zone.

The foreign trade zone allows companies to pay the duty on what they sell to the U.S. market, rather than the duty on what they imported. In some cases, this means a change to the duty rate allowed by the inverted tariff benefit, in other cases duties are eliminated when imports are re-exported, and sometimes it is simply a deferral of the duty since it is paid upon sale to the U.S. market rather than upon import.

Using the inverted-tariff benefit, Cellusuede saves more than $120,000 annually which allows the company to keep prices low and gain more market share. For a company with 32 employees, this is a significant impact.

“FTZ #176 has allowed Cellusuede to grow market share by reducing our costs on raw materials. The implementation and ongoing administration of FTZ procedures from Cellusuede’s standpoint have been fairly straightforward, and the folks from Greater Rockford Authority, CBP and Carrie Zethmayr have been easy to work with.”

Andy HonkampPresident & CEO of Cellusuede Products, Inc. in Rockford, Illinois

UniCarriers Leverages FTZ to grow Marengo Operations

UniCarriers Americas Corporation is a Marengo, IL manufacturer of forklifts and material handling equipment supplying to customers around the world. As an international firm, they manage a complex global supply chain and are always looking for opportunities for cost savings. Competing with manufacturers in low-cost countries can be difficult, but fortunately UniCarriers leverages the foreign-trade zone to make manufacturing in the United States a competitive advantage.

In addition to deferring duties paid on imported aftermarket and service parts, UniCarriers also takes advantage of the FTZ #176’s inverted tariff benefit. Currently, forklifts have a duty rate of 0%. Unless there is a trade remedy applied, the duty associated with parts imported that become part of a finished forklift is shifted to the rate on the forklift: 0%.

UniCarriers cites other benefits, including reduced Merchandise Processing Fees, reduced risk of delays in shipments, and an overall reduction in transit time. The decrease in operational costs associated with imported components was to afford UniCarriers an opportunity to remain competitive in the domestic and export markets. UniCarriers has been able to invest in advanced manufacturing technologies and its Marengo-based workforce.

“Becoming an FTZ was one method used by UCA (at the time as Nissan Forklift Company) to mitigate competitive disadvantages associated with manufacturing forklifts in the United States. Higher productions costs such as design, material costs, labor, and duty expenses may not be shared by overseas competition. To retain manufacturing levels in the US, FTZ subzone status was essential to regain competitiveness, maintain employment levels, and promote future capital investment.”

Sheila JamehdorCompliance Manager, UniCarriers Americas Corporation
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