3 min read

Mainers are concerned about tariffs, and understandably so.

Recent trade policies — most notably, tariffs on Canada and Mexico — would increase prices on gasoline, energy resources and daily groceries. As it currently stands, all products except those that fall under the U.S.-Mexico-Canada free trade agreement are subject to 25% tariffs.

Then there are tariff-related trade tensions, which could drastically reduce Canadian tourism to our state this summer, and consumer activity with it. Maine businesses that rely heavily on tourist activity are nervous about tensions with our northern neighbor.

Maine trades more than $6 billion worth of goods and materials with Canada — most of that coming from Canada to our state. Decades-long trade supports businesses large and small here, such as Eimskip, Luke’s Lobster and Wyman’s. A threat to them is a concern for us all.

However, there is good news. We have a tool to help offset the adverse effect of tariffs: The U.S. Foreign-Trade Zone (FTZ) program. The FTZ program provides businesses that engage in international trade with the means to decrease overall costs and increase supply chain efficiency.

How does the FTZ program work? FTZs are designated sites at which special customs procedures may be used, allowing domestic activity that involves foreign goods to take place prior to formal customs entry. In these zones, domestic and foreign merchandise is considered outside of U.S. Customs territory, so businesses can defer, reduce or eliminate customs duties on imported goods.

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Maine has four active FTZs that cover various regions of the state, consistently creating and retaining jobs while also boosting capital investment in the U.S. For instance, the Oakland-based FirstPark — where I serve as executive director — is located in FTZ 186. This zone covers nine counties in Maine, where there are several opportunities to deal with tariffs.

A key example is duty delay and reduction. All goods entering the U.S. are subject to a “duty rate” based on formulas for imports from U.S. Customs. Under normal circumstances, duties are paid at the time of entry into the U.S. However, under the FTZ program, duties are only paid on goods when they are removed from the FTZ, producing a strong cash-flow benefit to businesses that store goods in their FTZ. Only when the finished products are removed from this zone is the duty calculated — based on the duty schedule of the finished good, not its components.

In other words, FTZs make duty exemptions more common. Here’s another example: Whether a good comes from Canada, Mexico or elsewhere, no duty is placed on that good if the import is later re-exported from the zone.

Duty exemptions have the potential to benefit a wide range of Maine businesses, their employees and consumers as well. Any business that manufactures, assembles or processes with imports should look into the FTZ program. The same goes for businesses that export previously imported materials.

In Maine, we are still bracing for the cumulative impact of tariffs in the coming weeks and months, and how new trade policies may affect daily life. On the bright side, foreign-trade zones can help soften the blow — for business leaders and those they serve. There’s a reason why businesses are increasingly looking into the FTZ program for much-needed support.

When our business community is strong, the state economy is strong. In today’s economy, that means using every tool at our disposal.

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