Foreign trade zone status granted to Cape Breton Regional Municipality
SYDNEY — The federal government says it will establish a foreign trade zone in the Cape Breton Regional Municipality as a way to encourage importers and exporters to drive more traffic through the port of Sydney.
During the announcement Saturday, federal and municipal officials indicated local businesses would have a competitive advantage with the trade zone, particularly in the manufacturing sector and fishery.
Sydney-Victoria MP Mark Eyking said this is major step in developing a container terminal at the port.
“It really makes a big difference if we’re going to have the container ship business here. For various businesses, it opens (the market) up,” he said following the announcement.
Eyking, who is the chair of the House of Commons standing committee on international trade, made the announcement on behalf of Navdeep Bains, the minister of innovation, science and economic development.
The Port of Sydney and the Sydney airport — considered two key assets for the transhipment of goods — would provide companies’ access to tariff and tax exemptions to purchase or import raw materials, components or finished goods.
The federal government has six other foreign trade zones — Halifax, Calgary, Edmonton, Regina, Winnipeg, and Niagara, Ont. — where materials and goods “can generally be stored, processed or assembled in the FTZ for re-export” while having tariffs waived or shipped domestically and have those taxes and duties deferred until it reaches the market, the Department of Finance noted on its website.
Dannie Hansen, a former municipal councillor who is now the vice-president of sustainability for Louisbourg Seafoods Ltd., said his company has been waiting for the foreign trade designation for a long time.
He said the trade zone tax incentives could mean a significant boost in employment by increasing capacity to store seafood at its three CBRM-based fish plants brought in by more fishing trawlers enticed to unload its catch there.
“We try to get the ships from Newfoundland to come here and we would service them,” Hansen said.
“A free zone means cleaning vessels, groceries, laundry, all of the docking fees, not just simply having a warehouse to put stuff in.
“The spinoff from free zone areas is significant. When I say 30 per cent increase (in employment), I’m probably low.”
Unlike other foreign trade zones in Canada, this one will cover the entire municipality, said CBRM Mayor Cecil Clarke.
“We actually applied for the entirety of the CBRM geography so that if something could be developed in Louisbourg, it could have a competitive advantage and that it could be incorporated under the foreign trade zone,” he said.
A $150,000 joint cost share agreement between the Atlantic Canada Opportunities Agency, CBRM and the Port of Sydney Development Corp. will be used to market the new trade zone to companies immediately, Clarke said.
The municipal and port’s share of that expense is $75,000.
The mayor said the money had already been budgeted for through CBRM chief administrative officer Michael Merritt’s office.
All of the programs under the foreign trade zone will be made available through Business Cape Breton, making it easier for companies interested in a “one-stop shop” method to international trade, said Eyking.
The CBRM has had its economic development agency, Business Cape Breton, work to pursue the trade designation since last summer.
Business Cape Breton CEO Eileen Lannon Oldford said the federal government accepted the municipality’s proposal in September, and that was followed up with the creation of an advisory committee in October to move ahead on the project.
The committee, with the assistance of provincial and federal officials, will now work to see businesses access the trade zone programs, she said.
She said Business Cape Breton would be applying for more federal and provincial dollars to support marketing and development efforts “directly related to the CBRM promotion of the foreign trade zone.”
WHAT IS A FOREIGN TRADE ZONE?
The federal government does not provide a precise definition of what constitutes a foreign trade zone, except to say it “refers to a specific location within a country that is officially designated for eligibility for tariff and tax exemptions” in the purchase or import of “raw materials, components or finished goods.” These materials and goods can generally be stored, processed or assembled in the FTZ for re-export where taxes and duties would not apply.
For domestic trade, taxes and duties would be deferred until the product entered the marketplace.
WHAT DOES IT MEAN FOR INVESTORS?
The duty-free treatment of manufacturing or processing equipment reduces costs and increases profitability of investors’ global operations. By reducing the cost of production, the elimination of tariffs encourages innovation and allows businesses to spent money in other areas such as equipment upgrades. This is particularly important to small and medium-sized foreign investors who choose Canada as a place to invest and as a base from which to operate and export.
The elimination of tariffs will also reduce customs compliance costs, simplify the tariff structure and eliminate the administrative burden of complying with multiple rules and regulations.
This article was originally published May 14, 2016.