Tariff-free zone in U.P. would expand if feds approve

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Capital News Service

LANSING — An area in Sault Ste. Marie where manufacturers can import and export without tariffs may soon expand to all of Chippewa County.

“This will allow our area manufacturers to remain competitive in their industry,” said Jeff Holt, the director of the Sault Ste. Marie Economic Development Corp.

And other  supporters say it could benefit the rest of the Upper Peninsula.

Holt oversees the foreign trade zone and is in charge of gaining support for the expansion from the state and federal governments.

The zone was established in 1973 to ease trade with Canada, located just across the St. Mary’s River, Holt said. It also made it cheaper for the city’s manufacturers to export products overseas to countries in addition to Canada.

A tariff is a tax or duty on an import or export and is imposed by the federal government to generate revenue on foreign trade. President Donald Trump has recently created controversy by imposing a series of tariffs on certain imported goods.

Michigan has seven such zones in Battle Creek, Detroit, Saginaw-Bay City-Flint, Grand Rapids, Port Huron, Lansing and Sault Ste. Marie.

“It’ll mostly benefit the automotive industry,” Holt said. “We’ve basically run out of space to build in the city and we have manufacturers not located in Sault Ste. Marie but that are still in the county and would like to take advantage of the foreign trade zone.”

The Sault Ste. Marie Economic Development Corp. says it’s optimistic that the zone will be implemented throughout Chippewa County by the end of the year. It has received support from the state and is hiring a legal firm to file the paperwork with the Foreign Trade Zones Board in Washington, D.C.

“It’s really great news for our community because in our area alone we’ve got over 1,000 manufacturing jobs, and several of them could suffer if we can’t assist them with the high tariff rates of imported products,” Holt said.

“In this case, in rural America, especially on the northern border, this is an opportunity for us to remain competitive.”

The zone in the Grand Rapids area encompasses the entire counties of Kent, Ottawa and Muskegon and has been approved for three subzones. A subzone allows a company outside  the designated city zone to enjoy the same benefits. It  must be at least a 60-minute drive from a U.S. port of entry or 90 miles from a customs port, said Sonja Johnson, the director of the Kent-Ottawa-Muskegon Foreign Trade Zone.

Manufacturers within the zone have benefited most by taking imported products with eliminated tariffs and changing it into something U.S.-made, Johnson said.  

Johnson has not heard of any new zones being created in the state but could see active zones applying for additional subzones, depending on the communities they serve.

The largest beneficiary of the proposed expansion in Chippewa County would be Superior Fabrication, a company that manufactures oil and natural gas equipment and employs more than 100 people in the region, said Chris Olson, president and executive director of the Economic Development Corp., of Chippewa County.

“Superior Fabrication was purchasing steel from Sault Ste. Marie, Ontario, but they were getting hammered with a 25 percent tariff,” Olson said. “They really enjoyed working with them and it was the closest and convenient for everyone.”

Olson expects the impact would be felt through the entire eastern U.P.  if the expansion is approved.

“It’s a trickle effect. There’s people that work in these foreign trade zones that don’t reside in Chippewa County but in Luce or Mackinac counties,” Olson said. “There’s manufacturers and suppliers that live in those counties, as well as trucking companies. There’s not a direct impact to Superior Fabrication but all the effects that support it.”

Foreign trade zones are limited to certain regions and cities because of the needed supervision from Customs and Border Protection, Olson said.

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