MCALLEN, Texas - The Rio Grande Guardian has written a similar story before, but Mark E. Garcia says it is worth repeating - McAllen Foreign Trade Zone does not just service McAllen, it covers all of Hidalgo County.
Garcia is president and CEO of the organization.
“We are a regional foreign trade zone. We're not just here servicing McAllen. Although we have McAllen in our name, and we are here in the City of McAllen. We've always supported and promoted McAllen, and we continue to do so,” Garcia said.
“But with this new service area, that we have been part of now since 2017, we want to make sure that we service companies within Hidalgo County, no matter where they're located.
“That is important to us. We've helped companies establish in the city of Hidalgo, Pharr, Mission, here in McAllen, Edinburg. So, we consider ourselves as a regional foreign trade zone.
Garcia made his comments in an in-depth and wide-ranging interview with the Guardian. He pointed out that the McAllen Foreign Trade Zone is officially known as Foreign Trade Zone No. 12. That is because it was the 12th to be established in the United States.
Garcia made his comments in an in-depth podcast with the Guardian.
“We have about 303 foreign trade zones now and probably double that as sub-zones. But we were No. 12, the first inland foreign trade zone ever established that wasn't located on an airport or an ocean port,” Garcia said.
"You know, back then, when our founders when created the FTZ, people thought they were crazy. There was nothing out here. We were in the middle of a farm field. The maquila industry hadn't really taken off at that time. Now look at this whole area. It's not just the trade zone, but this whole industrial sector over here.”
Garcia explained in detail how FTZ No. 12 moved from just covering an industrial park in McAllen to the eighth largest county in Texas.
“We were originally under what was called the Traditional Site Framework, when we first got our permit or a grant from Washington. And that was the old way of doing things. We had to go back to Washington for any kind of expansion, for any new company we wanted to bring into the zone that was actually outside our originally approved area - which at that time was our 80-acre park.
"It took about a year to actually get approval from Washington to be able to bring or allow other companies outside our industrial park to operate as a Foreign Trade Zone, which we call activate, in FTZ lingo. It was a very cumbersome system. It took a long time to get things done.”
Things changed in 2016, Garcia recalled.
“The Department of Commerce allowed a different type of approval process, which we call the Alternative Site Framework, or ASF program. This allowed us to do a lot of the work at the front end. And then, when companies came to us and said, ‘hey, I need FTZ activation now, we want to be in the program,’ we were able to set them up within 30 days, compared to over a year in the past.
“And what came with that was also a change in the service area we were able to operate in. Before it used to be within our fenced area. Now we can actually take in service areas as big as a county.
“We thought it was a great advantage, because technically, we can now activate a company no matter where they're located in Hidalgo (County), as long as Customs agrees.
“It was a great opportunity for us, and that's why we chose to go ahead and reorganize, which took some time to do. But we knew that once it was done, it was going to allow us to be more proactive and be able to get these companies on board a lot faster.”
Asked for examples of how FTZ No. 12 has helped companies outside of McAllen, Garcia said:
“Well, we're working with a company, I won't say their name yet, because it's not public information. But it's a high tech company in Pharr that produces transistors, capacitors, printed circuit boards. They're a maquila in Reynosa that recently chose to operate on the US side as well, to take advantage of the program, what with the issue of tariffs and so forth.
“So, we were able to get them. They ended up leasing a building. We talked to them, we took them by the hand and said, this is the process. We engaged a consultant to work with them, because it's not only a matter of allowing them to operate in the program. There are several operational requirements and regulations and covenants they need to make sure they comply with to operate as a trade zone.
“So, we don't get involved with the day-to-day operations, but we brought them in with a consultant, and they're getting ready to start operations here fairly soon, with the approval and the activation from our local city team.”
Garcia then explained the origins of foreign trade zones and the advantages they bring to manufacturing and distribution companies.
“The Foreign Trade Zone Act was established back in 1934 to help create a more competitive playing field for our US manufacturers. There were a lot of advantages with the various trade programs and trade agreements that gave the advantage to companies that were actually manufacturing in other countries. Our US based manufacturers found themselves in positions that made them not as attractive when it came to pricing and tariffs and the like.
“So back in 1934 Congress said, we’ve got to do something to help our manufacturing base. And so, what came out of that act was several things. One, is that allowed the companies to bring products into a foreign trade zone, manufacture, repair, etc., without paying duties on these products, and either re-export it to another country and not pay duties or tariffs or sell them to the US at the end of the day, if they chose to.”
Another advantage, Garcia said, relates to ad valorem taxes.
“As long as you're in an activated space - and this was big for some of our companies, when you consider you're holding $1 million, $2 million, worth of inventory - you don't have to pay ad valorem tax, as long as it's for export under the program. This was one of the big benefits that we saw that companies really took advantage of.
FTZ No. 12 has certain programs to help manufacturers, and others to help distribution programs distribution companies.
“There are a lot of opportunities, especially being here on the border, where these companies can actually import as a third party products from other countries, store them and ship them and supply the maquilas in Mexico without paying duties, Rather than paying duties at the first port of entry, bringing it in, shipping it to Mexico at the end of the day, and realizing, well, I'm just paying duties on stuff that's not staying in the country. Why am I paying for something that I shouldn't be? So, that allows them to flow that product through the US into Mexico without paying duties.”
McAllen Foreign Trade Zone's website also explains what the entity is all about. it says: "McAllen FTZ is a federally designated Foreign-Trade Zone designed to support businesses involved in import, export, and manufacturing. Operating within a secure, duty-free environment, companies here benefit from reduced customs costs, improved cash flow, and expedited logistics. With over 775 acres of developed property and modern facilities, McAllen FTZ offers a turnkey solution for companies looking to thrive in today’s fast-paced global market."
Asked if Hidalgo County should be thankful for the vision of FTZ No. 12’s founders, Garcia said:
"Absolutely? That's a great question because the Foreign Trade Zone was one of the first industrial parks to be out here to begin with. And we're actually a very large developer. If you look at it, next to probably the Killams in the Sharyland area, we’re one of the biggest developers. We have 108 acres here, almost a million square feet, that we own and operate.
“And we've also purchased, with, along with the City of McAllen, close to 1,500 acres in north McAllen. So, if you look at the trade zone as a developer, which we do as well… not only do we provide services as a 3PL and buildings and stuff, but we develop property and we build our own buildings. So, we've been developing this area for some time, and so we consider ourselves a very important part of McAllen, when you really look at the amount of acreage we have and the number of buildings that we put up.”
Editor's Note: The above story is the first in a four-part series on Foreign Trade Zone No. 12. Part Two will be featured in our next edition.
