DeSoto becomes third Foreign Trade Zone in state

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Published: October 18,2004

Southaven — Foreign Trade Zone (FTZ) status in DeSoto County that became official on October 1 is expected to enhance the county’s ability to attract large industrial warehouse and distribution facilities.

Jim Flanagan, president of the DeSoto County Economic Development Council, said the process of establishing a FTZ at the DeSoto Trade Center in Southaven began two years ago.

“This will be the third general purpose Foreign Trade Zone established in the state of Mississippi,” Flanagan said. “The first two are on the Mississippi Gulf Coast and in Jackson/Vicksburg.”

The North Mississippi Foreign Trade Zone will be located at the DeSoto Trade Center in Southaven. Two years ago Hillwood, a Dallas-headquartered real estate development company owned by Ross Perot Jr., the DeSoto County Economic Development Council and the mayor of Southaven began the process of establishing the state’s third general purpose Foreign Trade Zone.

“We would like to thank the Congressional delegation and our local city and county officials in DeSoto County for helping move this process along,” Flanagan said. “The process was somewhat lengthy due in large part to the expansion of the Memphis Customs port of entry which was delayed in part by the establishment of the Department of Homeland Security. ”

Preston Herold, marketing director for Hillwood, said FTZ status could greatly enhance the county’s competitiveness.

“It’s pretty simple,” Herold said. “If you are a large corporation deciding where to locate your next distribution center, and if you can save money by locating your distribution center at one site versus any other, you are going to locate the facility at the site in which you can save money. With regard to FTZ, some companies benefit greatly, some a little, and some not at all. Those involved in international trade who import heavily will benefit the most from locating within an FTZ.”

Herold said there are several different savings that make up the whole package. One is an exemption from local ad valorem taxes. Foreign product imported into the U.S. and held in a zone or product being held for export in a zone is exempt from local ad valorem inventory taxes.

“With regard to duties assessed on imported products, FTZ status allows you to defer payment of those duties until the product enters the commerce of the U.S. FTZ is considered outside customs territory. As long you are in the zone, you defer cost of payment of duty until the product is sold and goes out into the commerce of the U.S. That is called duty deferral.”

There is also relief from inverted tariffs. For instance, if you are importing components to make a vacuum cleaner and those components have a relatively high duty or tariff rate associated with them, and the vacuum cleaner has a lower or zero duty rate, the lower duty rate on the finished product, in this case the vacuum cleaner, would apply to the imported components instead of the higher duty rate associated with the components. In this way, duty payments can be reduced or eliminated altogether, Herold said.

Hillwood has about 213 acres on Church Road at the intersection with Interstate 55 in Southaven. About 50 acres have already been developed including 846,000 square-feet of industrial facilities. About 365,000 square feet have been leased to Emerson Electric Co., a huge multinational company.

“Emerson was attracted to the site because of our FTZ pursuit, and they intend to activate their space to take advantage of the FTZ once we have been approved,” Herold said. “There is one other group there as well. In August, we began construction of a 400,000-square-foot facility for Conair Corporation, a billion-dollar corporation that manufactures hair dryers and other appliances. They also located in DeSoto Trade Center in large part due to the FTZ. They scoured the central part of the country looking at FTZ sites that would work for them. Conair is a deal that otherwise would not have made its way to Southaven, Mississippi, but for the Foreign Trade Zone. Emerson and Electric and Conair are two huge deals. Having the FTZ was a large part in securing those deals.”

Hillwood considered it a good idea to bring FTZ status to the DeSoto Trade Center because it is located within the Memphis Metropolitan Statistical Area, and Memphis is known as the distribution capital of the world.

“Being the distribution capital of the world means there is a large import/export, international trade aspect to Memphis,” Herold said. “When you look at it further, Memphis has the world’s largest cargo airport, and Memphis is the third largest inland port in the country. We felt like it was a market that had all the infrastructure in place for a top tier international trade point.”

Herold said a major reason the FTZ started back in the 1930s was to retain jobs and capital investment in the U.S. versus those jobs and capital investment going abroad.

“That is why incentives are in place — to even the playing field for U.S. companies,” Herold said. “The Conair deal will bring approximately 33 new jobs to the community.”

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

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