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August 14 2023

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Page 48 of 63

SPECIAL ADVERTISING SECTION August 14, 2023 | Journal of Commerce 49 FOREIGN-TRADE ZONES THE UNITED STATES INTERNATIONAL Trade Commission (USITC) Foreign-Trade Zones investigation, a groundbreaking study on the effects of trade policies and practices on US firms operating in FTZs and similar programs in Canada and Mexico, has shed light on the competitiveness of US FTZs and highlighted the challenges faced by these firms. This comprehensive investigation, initiated by the United States Trade Representative (USTR) in December 2021, involved extensive research, data collection and analysis. The National Association of Foreign-Trade Zones (NAFTZ) played a crucial role in supporting the investigation, providing resources, oral and written testimonies, and facilitating on-site visits to FTZs. The resulting report, published in May 2023, offers valuable insights into the state of US FTZs, summarizes key impacts on various industries and signals an opportunity to level the playing field in the future. Key takeaways include: Abundance of comprehensive data More than any study in the last 30 years, the report presents an extensive collection of trade data and statistics, including macro- and micro- level information on FTZ-type programs in the US, Canada and Mexico. It provides valuable insights into admission data, zone status splits, employment data, export splits and investment trends. Additionally, the report incorporates findings from other FTZ research and published literature, enhancing its credibility as a comprehensive resource. Disparity with Mexico's FTZ-type programs Mexico demonstrates significantly higher utilization of FTZ-type programs, particularly in the automotive sector. The IMMEX and PROSEC programs have incentivized manufacturing investment in Mexico, attracting a larger number of establishments and employees compared with the US FTZ program. This highlights a competitive disadvantage for US FTZs in the region and the need for action to level the playing field for American manufacturers. Competitive disadvantage for US FTZs Due to restrictions imposed by the USMCA, US FTZs face challenges hindering their competitiveness compared with firms operating under Mexico's FTZ-type programs. The requirement for US FTZs to pay duties on foreign-status materials used in production for USMCA exports creates a significant cost disadvantage, while Canadian and Mexican firms have multiple mechanisms to reduce or eliminate duty costs through similar regimes. This disadvantage directly impacts US FTZs'

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