Corks from Portugal. Wine barrels from France. Bulk wine from Chile. Napa County companies that import these goods and more will soon have an opportunity to reduce, defer or even eliminate import duty taxes paid on such items.
Most of Napa County is about to become part of a foreign trade zone, via an expansion plan by the Port of San Francisco.
The trade zone expansion includes most of Napa County — except Lake Berryessa and Calistoga — along with most of Sonoma County and all of Solano County.
“It’s an excellent tool for us,” said Chris Messina, CEO of the Napa Chamber. “It’s a tool we can use to retain and attract new business to the area.”
Being included in a foreign trade zone “is an excellent opportunity for businesses to enhance their competitiveness in the global economy,” and will hopefully stimulate trade-related business and create jobs in the area, Jim Maloney, maritime marketing manager at the Port of San Francisco, said.
The trade zone program is managed jointly by the Port of San Francisco, the U.S. Department of Commerce and U.S. Customs. Companies that choose to participate can be eligible for a range of benefits. Those include duty deferral, where duties are only paid on goods when they leave the foreign trade zone to be sold or distributed. Duties could be also reduced or even eliminated. Companies could save on duty processing fees as well.
Maloney said wine distribution centers are a big user of foreign trade zones in the U.S. Those centers are able to delay the customs duty owed on imports until the wine leaves the foreign trade zone to be sold, improving cash flow, he explained.
Companies that import from foreign “free trade” zones such as Mexico and Canada would not benefit from this agreement. Most items from those countries generally come into the country duty free, Maloney said.
However, for a company like Portocork America, being included in a trade zone may be an advantage.
Based in South Napa, Portocork America sells more than 350 million corks a year, all imported from Portugal, said President Dustin Mowe.
The duty savings or deferral could be a benefit to his company, said Mowe. “I would like to learn more about it,” he said.
Until now, Napa was not part of any foreign trade zone. Other parts of the Bay Area are already part of other trade zones, Maloney said. Lake Berryessa and Calistoga are not included in the trade zone because of the distance to those areas from the Port of San Francisco, he said.
The cost for the program could be a factor for smaller businesses, he acknowledged. There are one-time fees totaling $7,000 and a $14,000 annual fee to administer the program, Maloney said.
“We are checking around to see if it can be any benefit to our businesses” in the area, said Larry Florin, director of the Napa County Housing and Intergovernmental Affairs Department.
“If a business is servicing the wine industry and they want to be close (to Napa), this could be another tool that could be used to lure them here from another area,” he said.
“It sounds like it’s something worth looking into more deeply,” said Rex Stults, industry relations director for the Napa Valley Vintners. “It could have some economic advantages for some of the larger wine producers in the Napa Valley, especially those that import barrels from France, corks and so on,” he said.
According to Glenn Proctor, partner at Ciatti Company, a bulk wine broker, approximately 35 percent of wines sold in the U.S. are imported from outside the U.S. About 500,000 tons of bulk wine is imported into California each year, he estimated.
Companies importing bulk wine might benefit from reduced or deferred duties, he said.
“Everyone looks for ways to save costs,” Proctor said. “There will be some opportunities there.”
However, the fees could be prohibitive. “That’s a lot of money,” he said of the application and annual fees.
“It boils down to basic economics,” said Robert Eyler, chair of Economics at Sonoma State University. The trade zone “will benefit larger volume and larger margin businesses,” he said. “It’s a matter of how well they generate enough revenue to afford the costs” to participate in the program.
The trade zone expansion should be approved in the next six months, said Maloney.
In the meantime, Maloney would like to spread to word to Napa County businesses about the program. “Our goal is to work more closely with folks up there to see if there is some opportunity we can develop,” he said.