A West Michigan company is offering a way for manufacturers to avoid customs charges on defective imported parts.
Battle Creek-based STEWART Industries now has 100,000 square feet of space marked as a foreign trade zone, which is an area considered to be outside of the U.S. for customs purposes only. These are areas where imported goods can be stored, distributed, processed and used without being subject to customs duty. Importers are charged once the product leaves the facility and enters the U.S.
FTZs help U.S. companies compete in the global marketplace by eliminating, deferring or reducing duties and potentially reducing other costs.
STEWART Industries has provided quality inspection services and assembly services for the past 19 years, serving automotive, aerospace and medical industries.
As sub-assemblers, STEWART employees inspect the parts and pieces within the FTZ for defects. Items that don’t pass inspection will be destroyed, meaning the customer is only subject to customs or duty charges for parts that are used.
“As we became a foreign trade zone, I'm able to do those same services with parts from outside of the country, and it helps my customers save money on duty,” said Erick Stewart, president of STEWART Industries.
If a company’s product is assembled at STEWART and then exported to another country, the client company would not be forced to pay customs charges on those products at all, he added.
The company gets paid by splitting cost savings with customer companies, he said.
He said the company’s FTZ services are available to any company throughout the U.S. He added the company is marketing to the East Coast, where there’s an issue with capacity limits. Companies that import a large number of units that need to be delivered in the Midwest could see significant savings with the STEWART service, he said.
Those savings and the zone itself create economic benefits.
“Not just does it bring commerce into our county, but it creates jobs that may not have existed before,” he said.
The new zone will allow Stewart to hire workers needed for assembly, and companies can reinvest their savings into their own companies.
Stewart said he chose to launch the zone after hearing a speech from Battle Creek Unlimited, the city’s economic development arm, which has been spreading information about FTZs to companies in the community for about two years.
The economic benefit that FTZ will create is the reason why Battle Creek Unlimited is supportive of the project, said Adam Reid, manager of the FTZ for Battle Creek Unlimited.
“The incentive for us is we want companies like STEWART Industries to continue thriving here,” Reid said. “If this tool — the foreign trade zone program — is one other way that they can realize that success here, then that's what's in it for us.”
Stewart started the process of launching the zone earlier this year, which has included increasing security and limiting access to the facility according to federal guidelines.
STEWART launched the zone amid the trade war as a solution to companies losing additional money to tariffs. Companies have been looking for ways to avoid the increased costs, leading some STEWART customers to reroute production to Mexico, Stewart said.
National reports over the past weeks have said trade deals should end in early 2020, putting an end to a tariff war that has lasted two years.