An extremely beneficial but often underutilized aspect of international commerce, U.S. Foreign Trade Zones have been operational for almost 90 years and have evolved since inception to fit the modern global economic climate.
The Port of South Louisiana serves as grantee of Foreign Trade Zone 124 — one of eight FTZs located in Louisiana — where materials entering are exempt from paying duty tax, permitting them to store them free of tariff charges or manufacture/refine those materials into a finished commodity that can then be exported without taxes or duties. When used effectively, Foreign Trade Zones allow companies to increase profit margins and improve their logistics efficiency.
“Having these Foreign Trade Zones helps companies stay competitive and evens the playing field on a global level,” said Paul Aucoin, Executive Director of the Port of South Louisiana. “Having products, in particular oil and gas, come into and come out of our Foreign Trade Zone enhances our reputation in the oil market…and to have that reputation, you have to have the oil storage terminals to make that happen, like we do.”
Not surprisingly, the same attributes that make the Port of South Louisiana the largest tonnage port in the Western Hemisphere — namely, prime location on the Mississippi River, an established and versatile infrastructure, and easy access to fuel supplies like natural gas — are also the reason why FTZ 124 is one of the most active in the United States.
Recently, the U.S. Government released official FTZ data from 2017. In that report, FTZ 124 ranked No. 1 in the dollar amount of merchandise received — reclaiming the top spot after dropping to second place in 2016. Of specific companies located within FTZ 124, Marathon Petroleum in Garyville showed up No. 3 in both merchandise received and product exported in Production Operations rankings, while Valero Refining in Destrehan finished No. 4 in exports.
When asked about FTZ 124’s standing in the 2017 rankings, the Port’s Foreign Trade Zone Manager Lisa Braud said, “This Port stands as a powerhouse not just with the FTZ, but in all port rankings such as #1 Tonnage Port in the Western Hemisphere, #1 Grain Port, and Top Energy transfer port- pretty impressive for a Port that has long struggled with name recognition.”
“The oil and gas industry is big for us, so any fluctuation in the cost of crude will influence our numbers,” Braud says. “The 2016 decrease in the rankings for (Foreign Trade Zone 124) was due to fact that the cost of crude tanked, so even though barrels were comparable to (or more than) 2015, the value of the goods diminished so that dropped our ranking for that year. But we are back on top again in the most recent report.
“(Future) increases (in FTZ totals) will come with new subzones coming on board,” Braud continued. “We had one new active zone in 2018, and we are currently working with three additional companies, all of whom are submitting subzone applications at this time. This will boost our numbers for the upcoming year.”
As Braud mentioned, Oil and Gas plays a major role not just in FTZ 124’s activity, but in every FTZ in the state. A breakdown of Louisiana’s “Top Foreign-Status Products by Value” shows that Oil/Petroleum accounts for 92 percent of all total products. When ranking the Top States for FTZ activity, Louisiana remained at No. 2 for merchandise received behind Texas and ranked No. 3 in exports behind Texas and South Carolina.
In February 2019, a new study conducted by the Trade Partnership provided quantitative and qualitative data on the economic effects of FTZs on the communities in which the zones operate. Click here to read the full report.