Reaching out from LI’s only Foreign Trade Zone

Global sales: Brad Hemingway, executive director of the Islip Foreign Trade Zone Authority, has good things to say about Ronkonkoma's Foreign Trade Zone No. 52. (Photo by Bob Giglione)
By GREGORY ZELLER //

With a fresh deal and room to grow, Long Island’s only designated Foreign Trade Zone is in expansion mode.

The 52-acre Ronkonkoma industrial park – officially known as Islip Foreign Trade Zone No. 52 – contains three undeveloped parcels. They’re each under 4 acres, but collectively could accommodate some 120,000 square feet of additional professional space.

So, with 35 different companies filling the zone’s 14 existing buildings to capacity, Brad Hemingway’s mission is clear: The executive director of the Town of Islip’s Foreign Trade Zone Authority is busily spreading the word about the open space – and the property tax breaks, tariff reductions and other benefits – awaiting international wheeler-dealers in FTZ No. 52.

“It’s like any other industrial park on Long Island – a little nicer, actually – with a really nice Foreign Trade Zone wrapper around it,” Hemingway told Innovate LI. “That allows companies that import and export to receive goods free of duties and tariffs.”

In the zone: Undeveloped parcels await the right international wheeler-dealer.

In the zone: Undeveloped parcels await the right international wheeler-dealer.

Free, or temporarily free, or sometimes significantly reduced. The “ultimate tariff treatment” depends on many factors, Hemingway noted, with different tariff protocols covering multiple scenarios for zone-based importer/exporters.

There is only one scenario that nullifies all import and export tariffs: if a zone company imports an overseas product and exports it back out of the country, without it ever leaving the zone. In that case, according to Hemingway, it’s “like the goods never came to the United States” and the company can use zone benefits to “completely eliminate” import and export tariffs.

In most cases, two other protocols determine the tariff treatment. The first allows companies to defer import-tariff payments for as long as the imported product remains in the trade zone.

“That lets companies keep their working capital and potentially reallocate those funds while the goods sit in our warehouse,” Hemingway said.

The second is an “inverted tariff treatment” that results in a tariff reduction. When a zone company imports widgets from Romania and builds them into a machine to be exported back to Romania, authorities measure the tariff on exporting the machine versus the tariff on exporting the original widgets, and the lesser is applied.

The zone also offers tax breaks to property owners. While Islip owns the 52 acres, the 14 existing buildings – and any future buildings constructed on site – are privately owned, and those landlords pay “no property taxes whatsoever,” Hemingway said.

The benefits are all reinforced in Islip’s new Foreign Trade Zone contract with Suffolk County, which is granted authority to host an FTZ by the federal Foreign Trade-Zones Board. Originally signed in 1979, that Suffolk/Islip agreement was refreshed this year, with the Town Board adopting it in June and the County Legislature approving it this month.

While it does include some “very technical” changes – it was “recrafted to better align with the guidelines set forth by the Foreign Trade-Zones Board,” according to Hemingway – the new agreement maintains FTZ No. 52’s basic tenets: tariff reductions and those property-tax breaks, which largely benefit property owners but “are passed on to the tenants in the form of reduced rent,” Hemingway noted.

The new deal could keep Suffolk County and Islip Town in the Foreign Trade Zone business well into the latter half of the 21st century. The deal is for 20 years with two 10-year renewals that, absent objections by either party, will kick in automatically – meaning FTZ No. 52 could be tinkering with tariffs until 2056 at least.

By then, the international trade landscape will certainly have changed again – just like it has shifted since 1979, Hemingway noted – and the agreement will surely need another refresher. But with bylaws and incentives maximized for the foreseeable future, the zone is ready to rock, and that starts with shopping around those undeveloped tracts.

One measures 3.61 acres and could support a 55,000-square-foot building, according to Hemingway, who as the Foreign Trade Zone Authority exec is responsible for managing FTZ No. 52’s real estate.

A second 2.72-acre parcel could accommodate a 40,000-square-foot building, while a parcel measuring 1.63 acres could support another 25,000 square feet.

The Islip FTZA has no construction capability – “We will not build somebody a building,” Hemingway said – but the three parcels present interesting opportunities for the right taker, and Hemingway is actively pitching them through the Hauppauge Industrial Association, the Long Island Import/Export Association and the Long Island Forum for Technology, among other business organizations.

“It’s open land and we can be as creative as we want,” Hemingway noted. “There are real opportunities for somebody to come in and build to suit.”

Hemingway, who became FTZ No. 52’s executive director in 2013, said the search will focus at least partially on identifying Long Island companies that would actually benefit from the zone’s particular benefits set. Of the 35 companies currently in the industrial park, only one – global liquor distributor Tri-Link Inc. – takes advantage of the tariff reductions.

That’s “actually fairly common” for Foreign Trade Zones across the country, according to Hemingway, which are “underutilized” because “people don’t know about them and don’t know how to apply them to their specific business.”

Whether or not they apply for tariff benefits, FTZ No. 52-based companies must still meet strict import/export requirements: international importing and exporting must equal at least 30 percent of their purchases and sales to avoid being charged a “deficiency assessment” by Hemingway’s agency.

With the undeveloped parcels, the idea is to avoid that regulation altogether by attracting companies eager to engage the potentially lucrative tariff benefits.

“I would love to see more companies using the benefits,” Hemingway noted. “It’s just finding the right business model that would actually appreciate them.”

Also on the exec’s to-do list is identifying companies that could apply through Suffolk County for remote benefits – all the tariff goodies associated with FTZ No. 52 at an off-site location somewhere in Suffolk.

Those off-site options are one of many selling points Hemingway has at his disposal, along with the possibility that Long Island MacArthur Airport could somebody become an “international cargo destination.” But even a LIMA limited to domestic services is a tremendous benefit to shipping-heavy firms inside the adjacent Ronkonkoma FTZ, and Hemingway’s top priority is filling those undeveloped parcels.

“I want to see companies using the program whether they’re physically here in the Foreign Trade Zone or not,” he said. “But of course I also want to see those properties developed.”

 


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