Feds require shrinkage of region's foreign trade zone

Under a use-it-or-lose-it policy of the federal government, northern Nevada's foreign trade zone is about to shrink.

And at least one major developer of industrial properties is troubled that the foreign trade zone is growing smaller at a time that international trade is becoming more important to northern Nevada.

At nearly 7,500 acres, the foreign trade zone in northern Nevada is one of the largest in the nation. It's composed of industrial parks and individual industrial buildings stretching from Reno, Sparks and Stead to Fernley and the Tahoe Reno Industrial Center near Patrick.

Within the foreign trade zone's designated areas, customs duties are deferred on imported merchandise that's headed for U.S. markets. Merchandise that's re-exported is allowed into the zone duty-free.

A major retailer, for instance, could import merchandise into a distribution center in a foreign trade zone and delay paying duties until the goods are shipped to its stores.

Importers in the zones also face less cumbersome customs procedures.

The last major expansion of the northern Nevada foreign trade zone came in 2001, when Tahoe Reno Industrial Center and the property now known as Crossroads Commerce Center at Fernley were included.

That set the clock ticking on a five-year review of whether the region needs all the foreign trade zone space that's been approved by the U.S. Commerce Department, says Russ Romine, president of Griffin Transport Services Inc.

His Sparks-based company manages the northern Nevada trade zone on behalf of the Economic Development Authority of Western Nevada.

If there isn't sufficient demand, the federal Foreign-Trade Zone Board requires that a zone be scaled back.

And that means, Romine said, that major owners of industrial property in the region now are talking about the properties that no longer will have the foreign-trade zone designation.

He said ongoing international trade talks have reduced customs duties on many goods in recent years, reducing the attractiveness of foreign-trade zones.

The primary markets for the zones these days, he said, are either very large companies handling a big volume of imports or a niche company working in an industry with high import duties.

Shrinkage of the foreign trade zone in northern Nevada worries DP Partners, the largest owner of industrial property in the region.

"We look at it as a significant issue," says Aaron Paris, chief operating officer of the Reno-based company. "We're sorry to see northern Nevada giving up any of its foreign trade zone rights."

While acknowledging the federal requirement that foreign trade zones need to be used if they're kept on the books, Paris said it's likely that demand for foreign trade zone status is likely to grow in the region.

Rising interest rates give greater importance to the ability of importers to defer customs payments, he said. And Paris said he thinks it's possible that foreign trade zones someday may be used to cut some of the red tape associated with security clearance of imports.

"We've agreed to give up quite a bit," he said of the negotiations to shrink the zone. "But we've been very careful to keep the most logical locations."

Ken Pierson, the director of business development for EDAWN, said the availability of a foreign trade zone can be an important sales point to some of the companies EDAWN recruits to the region.

"It means a lot to the right company," he said. "It's a really nice feather in our cap."