According to the U.S. Customs and Border Protection (CBP), Foreign-Trade Zones (FTZ) are areas which are supervised and secured by the CBP in a CBP port of entry although they are considered to be outside the CBP territory (U.S. Customs and Border Protection, 2018). The FTZs are established under the FTZ Board which operates under the Foreign-Trade Zones Act of 1934 (U.S. Customs and Border Protection, 2018). Within the FTZ, the operation of foreign and domestic goods such as processing, manufacturing, assembly, exhibition, and storage takes place without legal prohibition.
Just as in Free-Trade Zones, foreign goods and merchandize are exempted from the procedures and payments of duties to the CBP as long as they remain within the FTZ. Duties on these merchandize are only levied when the merchandize leaves the FTZ and enters the CBP territory for domestic consumption (U.S. Customs and Border Protection, 2018). At this instance, the importer is given a choice of paying for the duties at either the rates of the complete products or the rate of the original foreign material (as it entered the FTZ). The laws and regulations within the FTZ are exerted and policed by both the federal government and state’s government.
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According to Min and Lambert (2010), FTZs were introduced in the USA during the great depression with the aim of stimulating jobs and US exports. As such, an FTZ is primarily important in stimulating the economy of the host state. In the case of the Illinois International Port District located in Chicago, the FTZ has assisted the locals and Illinois’ economic development efforts (Illinois International Port District, 2008). The FTZ in the Chicago port also benefits the state creating employment opportunities for the locals. A number of foreign companies such as Dyson and Lenovo (Bergen, 2014) have recently invaded Chicago increasing the competition with local firms. The FTZ acts as a public service whereby it provides special customs procedures to assist the local firms to conduct international trade related activities in order to favorably compete with the foreign plants (Illinois International Port District, 2008). In short, the FTZ at the Chicago port can be said to benefit the City by facilitating and expediting international trade for the local and US firms in general. Finally, the FTZ at the Chicago port benefits the City by attracting investors to carry out offshore activities and, thereby, encouraging the retention of domestic activities. This increases the revenue channels for the State of Chicago and, consequently, the federal government.
The Port of New York and New Jersey is considered one of the largest ports in the world as well as the busiest of the East Coast terminals. Once a container arrives at the Port of New York and New Jersey it is navigated through the channel to three of the four main container terminals. After unloading of the containers from the ship, they are stacked where they can easily be accessed at the transfer point. Suppose the customer chooses to transit the container to Chicago via trucks, then the container will take about 13 hours to cover the 826 miles. To access Chicago, the truck will have to take the I90 to I86 route. This route passes through I-80 in central Pennsylvania.
Due to the port’s processes, a container might take about at least 36 hours to arrive at the Chicago port after being unloaded from a ship at the Port of New York and New Jersey. However, if the customer wishes to transit the container through rail, then various routes can be utilized. They include the Pennsylvania railroad, Erie railroad, Baltimore and Ohio railroad and Alphabet route. Using the railway system, the container will arrive at the Port of Chicago after approximately 19 hours.
