Foreign trade zones (FTZ) are safe havens for companies like Dell and Nissan who are largely dependent on imported goods. Big businesses ship in their parts from overseas, assemble or repair their products, and ship them back out again all over the world—all without amassing substantial duties.

Essentially, FTZs are government-sanctioned areas to where companies can ship and store (and subsequently manufacture, repair, etc.) goods without having to pay hefty U.S. Customs tariffs—in some cases, the duties are eliminated completely.

There are substantial advantages to using such zones. No bond or duty payments are due while the products are stored in the FTZ, and if the manufactured or altered product is, in turn, exported back out of the country, no fees are ever due, says Dean Peterson, director of the Nashville Export Assistance Center at the U.S. Department of Commerce.

There is no time limit governing how long foreign goods may be stored. And also, the delay of duty assessment allows companies to repair or discard unusable materials before they are charged for them, increasing company cash flow.

“Foreign trade zones also reduce the amount of paperwork associated with importation and exportation of goods in the zone,” Peterson says. FTZs permit weekly U.S. Customs logs that are comprised of various shipments, as opposed to the alternative method of filling out a log for each individual shipment.

It’s obvious why large companies can benefit from FTZs. But they are not the only ones who could be taking advantage. Tennessee’s small businesses, particularly the state’s manufacturers and processors, may want to consider whether FTZs could help them financially. There isn’t a single type of business that could benefit most from an FTZ, Peterson says. “You can’t generalize when it comes to this,” he says. “It totally depends on the industry involved.”

However, the common denominator for all businesses that benefit from FTZs is volume.

“A company has to look at its specific operation and see how much volume it’s doing,” says Mike Canty, a trade specialist for the Tri-Cities Regional Airport and grantee contact for the area foreign trade zone. “It all depends on the value and volume of the shipments.”

If a company is doing enough volume on the importing side, and is thereby seeing portions of its expenses go to paying duties and fees, then it might want to consider opting into one of the general purpose FTZs that are set up throughout the state.

General purpose FTZs, unlike larger FTZs that are operated by larger companies such as Nissan for exclusive use, are generally operated by local government organizations and exist for the purpose of encouraging businesses to engage in the foreign market.

Most recently, Johnson City Chemical Co. has begun talks to open a general purpose FTZ for the use of small business owners in the Tri-state area. Mark Williams, vice president of operations for Johnson City Chemical, has worked extensively with consultants to ensure a seamless transition.

The facility in Johnson City would join a host of other foreign trade zones located throughout the state. According to the Web site for the U.S. Foreign Trade Zones Board, there are six registered foreign trade zones in Tennessee, each with varying numbers of subzones, or off-site zones where companies can take advantage of FTZ regulations while using their own facilities exclusively. Registered companies range from Nissan and Saturn in Nashville to Siemens Industrial in Blountville.

However, though the zones exist, experts admit that the foreign trade zone designation hasn’t always necessarily been small business-friendly.

“You have to devote personnel to a foreign trade zone,” Canty says. “A lot of administration is involved. Someone has to act as an operator; there are security issues and software issues.” Such considerations explain why FTZs are mainly operated and maintained by large companies that depend heavily on imported and exported parts or products.

And though Gary Selvy, Tennessee director of the National Federation of Independent Businesses (NFIB), says that the desire on behalf of small businesses hasn’t been enormous, he does get requests periodically from small business owners who feel slighted by the fact that these larger companies have somewhat of an advantage when it comes to avoiding import duties.

“The comments I get on this issue are less like ‘Hey this is necessary for my business to grow,’ and more like ‘Hey, we want to be on equal footing with the big guys,’” he says. The fact that larger companies have traditionally benefited from FTZs in the past doesn’t mean that it will always be that way going forward.

According to Canty, the FTZ board has recognized that it’s been difficult for small businesses to edge their way in and has taken steps to make it easier for small businesses to gain access to local FTZs. They’ve issued new guidelines to assist people in becoming active users and streamlined the application process.

Canty is optimistic that a new general-purpose FTZ in Johnson City would encourage more small businesses in the city to take advantage of the financial benefits of the zones, and is waiting for more local importers to take the plunge.

“Usually, people who invest the time and money to put in an application for a foreign trade zone have done their homework, and the expectation is that it will save money,” Peterson says. “It’s good for their small business and good for the Tennessee economy in general.”