Triton: South Florida Starts Work on Duty-Free Zone

The following article was posted this week in The Triton:

By Lucy Chabot Reed

In a first-of-its-kind in the nation, the South Florida marine industry has begun the process of work together to create a foreign trade zone, alleviating duty and taxes on imported parts and boats.

Customs and Border Protection officers began in January meeting with more than a dozen marina, shipyard and supplier companies to figure out how the zone will work at each location. Several businesses that have signed up are excited at the potential.

“They haven’t come by here to work out the details yet, but I just knew I wanted to be a part of it,” said Kristina Hebert, COO of Ward’s Marine Electric in Fort Lauderdale. “Anything we can do to further the industry and help these boats come here for service is worth it.”

Basically, the foreign trade zone (FTZ) designation will allow yachts in approved areas of approved marinas or shipyards to import foreign parts or supplies without paying duty. And since there is free trade between FTZs, parts can come into suppliers and sent to those approved marinas or shipyards in the same manner.

“This is going to be fantastic,” said Bob Roscioli, CEO of Roscioli Yacht Center on the New River. “Our yards are going to be more competitive with other facilities around the country, and there will be lots of savings for boat owners. … I haven’t gotten all the details yet, but I think this is going to be great for everybody.”

Traditionally, a foreign trade zone is one specific physical location, such as a portion of a seaport or airport. Businesses had to relocate into a FTZ to take advantage of its protections.

But in 2012, the laws were changed to allow “alternate site framework”, which lets businesses incorporate the FTZ in their existing locations.

Late year, the Marine Industries Association of South Florida was approved by the U.S. Department of Commerce as the operator of the subzone. But because MIASF’s “goods” are its members, member companies can work out the logistics for their specific areas with Customs. Those areas also can be activated or deactivated fairly simply, allowing them to contract or expand the FTZ as necessary.

“There’s a significant cost savings for the end user,” said Karen Reese, the FTZ administrator for the city of Fort Lauderdale. “I don’t see many challenges. I just see opportunities.”

The 16-site marine industry subzone under MIASF is the first recreational marine foreign trade zone in the United States, she said. To be approved by Customs, the individual sites must have restricted access and strict controls to monitor import and export of boats and/or parts. If approved, those sites are considered to be outside of U.S. Customs territory, and as such, can defer, reduce, or eliminate Customs duties on foreign products.

Foreign and domestic products can both function in a FTZ, said Gary Goldfarb, chief strategy officer of Interport Logistics, which is helping marine industry companies get activated through Customs. That means yachts that come into a FTZ to take advantage of duty-free parts can also incorporate domestic parts into their refit without having to relocate out of it.

“That’s the difference between a foreign trade zone and a bonded warehouse,” Goldfarb said.

The zone will also impact the Fort Lauderdale International Boat Show, and that’s the main reason Goldfarb said he’s working to get Bahia Mar Yachting Center activated. These zones allow vessels to leave for things such as sea trials and exhibition without incurring duty.

“We’ve cleared it with Customs that vessels can leave the foreign trade zone for exhibition and be offered for sale to anybody, and then return to the foreign trade zone before clearing out,” he said.

The only hiccup is that no retail activity is permitted in a FTZ. And because the reporting requirements are strict, it is expected that marinas, shipyards and suppliers will most likely only designate certain parts of their properties be activated in the zone instead of the whole property.

Activation of several sites began in January, and Goldfarb expects the first ones should be up and running this spring.

The marine industry around Fort Lauderdale contributes $8.8 billion in economic impact to the region, according to a recent study commissioned by the MIASF. Adding this foreign trade zone is expected to help boost business and jobs.

“This is a monumental achievement for the city of Fort Lauderdale, the marine industry, and the community as a whole,” Goldfarb said. “There are so many more options for the industry under a FTZ and, as a result, we expect this will be a very active sector for jobs for years to come.”