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HomeMy WebLinkAboutNew Foreign Trade Zone; Letter of SupportJEFFERSON COUNTY BOARD OF COUNTY COMMISSIONERS AGENDA REQUEST TO: Board of County Commissioners FROM: Mark McCauley, County Administrator DATE: March 20, 2023 SUBJECT: Port of Port Angeles Request for a Letter of Support for their Free Trade Zone Designation Application STATEMENT OF ISSUE: The Port of Port Angeles has asked Jefferson County to submit a letter supporting their application to be designated as a Foreign Trade Zone. For companies that import components for distribution or manufacture finished products that are exported, Washington's Foreign Trade Zones (FTZ) can offer a tremendous competitive advantage. Businesses with operations in a FTZ can receive foreign merchandise for storage, assembly, manufacturing and processing without being subject to formal Customs entry procedures, duties and federal excise taxes. These fees are not due until the merchandise is transferred from the FTZ and is ready for consumption by U.S. customers. If the goods are exported, then no duties or taxes are paid on those items. For the purposes of Customs, FTZs are considered to be outside the U.S. Customs Territory. Since they haven't formally entered the United States, components and merchandise can be shipped in and out of the FTZ exempt from duty payments. Goods can remain in the FTZ for an indefinite amount of time and a business can conduct any number of activities, including assembly, packaging, storing, cleaning, re -packing, distributing, sorting, grading, repairing, testing or recycling. FTZs can greatly reduce the cost of doing business and simplify processing and entry fees as well as the paperwork required. It also allows companies to retain more capital, improving cash flow as goods are moved in and out of the United States. ANALYSIS: During the discussion on this topic in the Board meeting of March 13, 2023 questions arose regarding local tax implications of Foreign Trade Zone designations. County Administrator McCauley spoke with the John Mitchener, Administrator of the Port of Bellingham FTZ. Mr. Mitchener said he was unaware of any adverse state and local tax affects resulting from the FTZ designation. Further, the Washington State Department of Revenue, in Excise Tax Advisory — ETA 3108.2009 states that: "Activities engaged in within a Foreign Trade Zone (FTZ) are subject to Washington state taxes in the same manner as if the FTZ did not exist. Federal law only preempts state and local property taxes on certain goods within an FTZ; it does not affect the imposition of other state taxes." It further states that: "Finally, aside from the express preemption of property taxes in certain circumstances, there is no actual conflict between the Act and application of state tax laws." FISCAL IMPACT: This request has no fiscal impact. RECOMMENDATION: That the Board of County Commissioners approve the attached letter of support. REV WED BY: Mark McC ey, County Administrat r Date P.O. Box 1350 Board of Commissioners MftPORT 338 West First Street Connie Beauvais, President Port Angeles WA 98362 Colleen McAleer, Vice President 360.457.8527 Steven Burke, Secretary of Port Angeles PortofPA.com Executive Director Geoff James February 22, 2023 Jefferson County Attn: Board of County Commissioners P.O. Box 1220 Port Townsend, WA 98368 Jeff BOCC@co. iefferson.wa. us VIA CERTIFIED MAIL AND EMAIL RE: Foreign -Trade Zone (FTZ) application by Port of Port Angeles This letter is intended to provide information to you pertaining to the Port of Port Angeles' application to the U.S. Foreign -Trade Zones (FTZ) Board for authority to use a new procedure (the "Alternative Site Framework") to provide quick and simple access to FTZ service for companies in our region. Our organization is the grantee of FTZ Clallam County/North Olympic Peninsula and currently sponsors a limited number of FTZ sites in our region. The authority we are requesting from the FTZ Board would enable us to quickly bring FTZ designation to any company within our proposed "service area." Our proposed service area includes Jefferson County as well as Clallam County, San Juan County, Island County, Kitsap County, Grays Harbor County, Mason County, Skagit County, and Snohomish County. FTZ designation can provide companies with customs duty savings and logistical benefits that can help encourage them to establish or maintain operations in the U.S. As such, access to FTZ benefits can be an important tool in economic development efforts. If the FTZ Board approves our application, Port of Port Angeles will be able to bring FTZ designation to companies anywhere in the proposed service area based on those companies' trade -related needs. We also note that FTZ access will be made available on a uniform basis to companies across the service area, in a manner consistent with the legal requirement that each FTZ be operated as a public utility. Regarding any local taxes for which collections may be affected by FTZ designation of sites, FTZ Clallam County/North Olympic Peninsula application to establish its "service area" under the Alternative Site Framework does not propose any specific new FTZ sites (and therefore can have no impact on tax collections). At the time that any specific new site is proposed for FTZ designation in the future, we will contact parties potentially affected by the site's proposed designation (such as the county government) so that they can indicate their views on the impact on tax collections related to the proposed designation. If you have questions about the Port of Port Angeles' application to the FTZ Board, please contact Caleb McMahon at Port of Port Angeles at calebM@portofpa.com. If you have comments you would like the FTZ Board to consider regarding the proposed inclusion of Jefferson County in the proposed service area of FTZ Clallam County/North Olympic Peninsula, please provide your comments to the staff of the FTZ Board by March 20, 2023. The FTZ Board staff also welcomes any questions you may have — the staff can be reached at 202-482-2862 or ftz@trade.gov The Port would appreciate your support of this FTZ in our region. We have included a support letter example. If you could please send a support letter to my email by March 1, 2023, we would appreciate it. Sincerely, Caleb McMahon, Director of Economic Development Port of Port Angeles P.O. Box 1350, Port Angeles, WA 98362 360-417-3366 desk Calebm@portofpa.com A40- NPORT ■ of Port Angeles February 22, 2023 To Whom It May Concern: P.O. Box 1350 338 West First Street Port Angeles Washington 98362 360.457.8527 Board of Commissioners Connie Beauvais, President Colleen McAleer, Vice President Steven Burke, Secretary Executive Director Geoff James The Port of Port Angeles is applying for a Foreign -Trade Zone (FTZ) in Clallam County. Clallam County doesn't have an FTZ. We have attached our information letter to you of this exciting opportunity for our region. The Port would appreciate your support. We have provided a sample support letter, which you can customize and return to us to be included with the Port's application. If you have any questions, please contact me at 360-417-3366. Sincerely, Caleb McMahon Caleb McMahon, Director of Economic Development Port of Port Angeles P.O. Box 1350 Port Angeles, WA 98362 360-417-3366 Calebm@portofpa.com WE BRING PEOPLE, RESOURCES AND INDUSTRY TOGETHER TO FOSTER LIVING WAGE JOBS _D9AFT LC-TIC2 [Use letterhead appropriate for the county official signing the letter] Date Grantee Official Name Grantee Organization Address Dear [The following paragraph is standard for all Service Area letters:] The purpose of this letter is to document the support of this county for inclusion within the Service Area of Foreign -Trade Zone (FTZ) [insert FTZ number]. We understand that this means that the grantee, [insert name of grantee organization], will be able to apply to the Foreign -Trade Zones Board for authority to serve sites located within this county based on businesses' trade -related needs. We also note that the zone will be made available on a uniform basis to companies within this county, in a manner consistent with the legal requirement that each FTZ be operated as a public utility. [The following paragraph must be included if the zone is in a state where FTZ designation of specific sites may have an impact on state/local tax collections (for example, ad valorem property taxes in Texas or real property taxes in Arizona):] Regarding state or local taxes for which collections may be affected by FTZ designation of sites, this letter is not intended to provide a position on state or local tax issues for any site within this jurisdiction. At the time that any specific site is proposed for FTZ designation, parties potentially affected by the site's proposed designation (such as a local school board) will need to provide their own correspondence indicating their views on the impact on tax collections related to the proposed designation. [Signature of county official] [Title of county official]