Foreign Trade Zones can be a big benefit to international business, but many U.S. firms refuse to capitalize on the opportunity. Blount International has taken the plunge, and Dino Scott is leading the effort.
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Next year marks the 80th anniversary of the Foreign-Trade Zones Act, which created an important—but what has been an underutilized—weapon for U.S. business. The law established Foreign Trade Zones, or FTZs, secure areas located in or near U.S. Customs ports of entry but legally considered to be outside the Customs territory for the purpose of tariff laws and entry procedures. There, goods may be handled, manufactured or reconfigured, and re-exported without the intervention of customs authorities. Only when the goods are moved to consumers within the country where the zone is located do they become subject to the prevailing customs duties.
Despite the advantages of FTZs, most U.S. companies don't take advantage of them. There are about 600 zones and sub-zones in the U.S., a fraction of the number in existence worldwide. One company that has moved to take advantage is Blount International Inc., a Portland, Ore.-based designer and manufacturer of equipment used in the forestry, farming, ranching, and construction sectors, among others. At the helm of the effort is Dino Scott, Blount's Kansas City-based global compliance and FTZ manager, who has spent 22 years plying his trade on four continents. The Panamanian-born Scott holds bachelor's degrees in business administration and supply chain, and expects to get his master's this month in transportation and logistics.
Scott was interviewed by Senior Editor Mark B. Solomon about the benefits of an FTZ, the challenges Blount faced in implementing the program, why it chose Kansas City, and why companies engaged in international trade should look hard at establishing a zone regardless of the cost and effort involved.
Q: When did the Blount FTZ open?
A: Our FTZ was launched on Aug. 5. At this time, it is the only manufacturing FTZ designation in the Kansas City area.
Q: What was your objective in establishing an FTZ, what benefits has Blount derived from it, and what, if any, changes did this demand of your internal procedures? A: The primary objective was to support and improve the flow of inbound and outbound inventory. The implementation of an FTZ operation allows any company to review, revise, and improve its inventory management skills. The secondary goals include the cost-savings that come with duty-inversion, duty-avoidance, and duty deferral.
The integration of the FTZ into Blount's established supply chain and distribution infrastructure required that certain practices undergo a review and revision process. A reassessment of Blount's receiving and shipping methods allowed our management to analyze the required practices at the FTZ, determine where inconsistencies lay in our current 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.
Q: Duty 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 inversion. 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 stakeholder—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.
Q: Blount 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.
Q: In 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 primary 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.
Q: Some 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.
Q: What are the key metrics an importer or a shipper should evaluate before taking this step? Are there companies that engage in international trade whose operations would not be suitable for an FTZ? A: Individual businesses will likely use different sets of [Key Performance Indicators] to evaluate the benefits of incorporating 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.
Q: Do 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.
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Two European companies are among the most recent firms to put autonomous last-mile delivery to the test with a project in Bern, Switzerland, that debuted this month.
Swiss transportation and logistics company Planzer has teamed up with fellow Swiss firm Loxo, which develops autonomous driving software solutions, for a two-year pilot project in which a Loxo-equipped, Planzer parcel delivery van will handle last-mile logistics in Bern’s city center.
The project coincides with Swiss regulations on autonomous driving that are expected to take effect next spring.
Referred to as “Planzer–Dynamic Micro-Hub w LOXO,” the project aims to address both sustainability issues and traffic congestion in urban areas.
The delivery vehicle, a Volkswagen ID. Buzz battery-electric minivan, will feature Loxo’s Level 4 Digital Driver navigation software, a highly automated solution that allows driverless operation. The van was retrofitted to include space for two swap boxes for parcel storage.
During the two-year pilot phase, Loxo’s Digital Driver will navigate a commercial vehicle several times a day from Planzer’s railway center to various logistics points in Bern's city center. There, the parcels will be reloaded onto small electric vehicles and delivered to end customers by Planzer’s parcel delivery staff.
Following the completion of the pilot phase, Planzer and Loxo will build on the program for rollout in other Swiss cities, the companies said.
The partners said the project addresses the increasing requirements of urban supply chains and aims to ensure the “scalability of their disruptive solution.” With largely emission-free delivery, it contributes to greater levels of sustainability for the city as a living space, they also said.
“The uniqueness of this project lies in the fact that it will have a direct impact on society,” Planzer’s CEO and Chairman Nils Planzer said in a statement announcing the project. “We didn't just want to integrate automated technology into existing systems, we wanted to develop a completely new concept and a new business model.”
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.