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Third Party Logistics and the Foreign-Trade Zone Program

11/6/2006

By Greg Jones

Because of the range of facilities at their disposal and the capacity to serve relatively low-volume customers that might not otherwise be able to access the Foreign-Trade Zones Program, Third Party Logistics providers (3PLs) have a unique ability to provide Foreign-Trade Zone (FTZ) services for their clients that engage in international trade. Due to the dynamic nature of their client base, 3PLs often serve the needs of new clients with varying logistical requirements. The approach taken to meet their clients’ FTZ needs can have a significant impact on the ability of the 3PL to flexibly and cost-effectively meet those needs.

There are several approaches to setting up a 3PL FTZ operation. In the first approach, the 3PL pays a consultant a substantial fee for activating the facility with CBP and initially setting up the operation and again pays its FTZ consultant to modify its existing operational plan and train the 3PL’s employees each time that the 3PL obtains a new client. This approach introduces significant ongoing costs that are often passed on to the clients, builds unnecessary reliance on consultant services, and can discourage Zone use. To the detriment of the 3PL, this approach reduces the ability of a 3PL to meet its clients’ needs and provide FTZ services.

In the second approach, the consultant sets up a 3Pl with a turnkey solution that gives the 3PL the flexibility to add clients and new procedures without additional fees. This turnkey solution often costs less than the initial setup and activation discussed above, and significantly reduces the need for ongoing costs. While the consultant should be on call if needed, the initial procedures and training should give the 3PL the ability to adapt to its clients’ changing needs without the need for additional costs that get passed on to its clients.

There are numerous advantages associated with the second approach. In the end, the 3PL can increase revenue and maximize flexibility while decreasing ongoing expenses. This provides for a fair and equitable pricing model that promotes FTZ use while ensuring profitability for the 3PL. This turnkey approach enables 3PLs to expand existing customers’ business and attract new customers.

The Foreign-Trade Zone Corporation (www.ftzcorp.com) is a service provider offering FTZ cost-benefit analyses, FTZ Board applications, activation with Customs and Border Protection (CBP), training, assistance in designing, creating and managing Zone projects, and its SmartZone® Foreign-Trade Zone management software (www.ftzsoftware.com). Its clients include Foreign-Trade Zone Grantees, distribution and manufacturing operations, and 3PLs.

    

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Third Party Logistics providers (3PLs) have a unique ability to provide Foreign-Trade Zone (FTZ) services for their clients that engage in international trade.

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