Dwight Schultz was hit by a (Ron Paul?) conspiracy caller while sitting in for Michael Savage – the caller was reporting there are 50 square miles of Foreign Trade zones where foreigners are controlling our territory.
What they actually are:
http://ia.ita.doc.gov/ftzpage/tic.html
http://www.cbp.gov/xp/cgov/trade/cargo_security/cargo_control/ftz/about_ftz.xml
Their main purpose is to be places to hold items that are to be used in a plant in the United States and the finished product is not going to be sold in the United States. So let’s say you make BMW’s in South Carolina and import the engines from Germany. Half of the completed cars are sent back to Europe.
The engines are sent to a warehouse in the free trade zone and no tariff is collected for importing them into the US. When the cars are sent to Europe, no import tariff is due because nothing was actually imported. If the completed car is sold in the United States, the tariff on the imported parts is paid at that time.
So you might say “but they should make the engines here! That’s costing American jobs!”. If you do that, they’ll just make the entire car somewhere else.
Foreign trade zones are a legal distinction for tariffs. They aren’t a fort guarded by Red Chinese soldiers keeping out local police.
Beyond the reexport benefit, another reason is while those materials are in storage in the FTZ, they are not subject to local property taxes. Another advantage is where there is a difference in tariffs between raw and finished goods. Let’s say the tariff on aluminum is 1%, but the tariff on an aluminum engine block is 5%. You can import the raw aluminum into the warehouse, cast the engine block in a factory within the FTZ and pay a 1% tax on the finished product. Only the raw material was imported – the added value was created by American Workers in the United States. If the finished engine is sent to Mexico, no tariff is due.