Deal Puts City on Investors' Map Creates First Foreign Trade Zone in Canada

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The creation of Canada's first-ever foreign trade zone at CentrePort Canada will put the country back on the menu of options for international site selectors.

And the sole Canadian city on that menu will be Winnipeg.

As the country's only inland port, the foreign trade zone (FTZ) component of CentrePort Canada could become a powerful new engine for economic growth exclusive to Winnipeg.

The announcement last week of federal government support for a foreign trade zone in Winnipeg means $3.5 million in federal marketing resources will focus on Winnipeg. The money will help CentrePort to set up its office and create a single-desk marketing window for the new FTZ.

The announcement was the result of a year-long effort by CentrePort Canada's board to make the concept more accessible in Canada.

"There was legislation making FTZs possible, but it was not understood by investors or easily comparable to what's out there in the U.S. and Mexico," said Diane Gray, CEO of CentrePort Canada. "Because of that, Canada had been written off the site selectors' menu. That was our biggest problem in Canada -- we were not speaking the language of international investors."

"Now we will have federal support to back it up and market it globally," she said. "We can tell people there is GST deferral, duty deferral, bonded warehouses in a way that is understood in the global international lexicon."

There are about 200 FTZs in the United States that handle about $170 billion worth of merchandise annually.

"Everyone in the international trade business knows what an FTZ is, but there has been nothing in Canada until now," said Greg Dandewich, Destination Winnipeg's vice-president and director of economic development.

CentrePort Canada, a 20,000-acre inland port and trade area west and north of Richardson International Airport, is to be transformed into a hub for international transportation, manufacturing, distribution and warehousing.

Dandewich said investors assume that an FTZ would be part of an inland port, and now Winnipeg will become the first Canadian version of what has become commonplace internationally.

Essentially, FTZs allow companies to defer duty and GST payments on imported goods that are not sold into the domestic market, but instead are warehoused or distributed at a later date to the international market as a non-processed product or as part of a value-added product. Legislation exists to allow companies to apply for duty or GST refunds after the fact.

"The problem is that it is a cumbersome process involving as many as three different federal government departments," said Dandewich.

The latest commitment by Ottawa means CentrePort Canada can streamline the process.

Ron Koslowsky, Manitoba vice-president of Canadian Manufacturers and Exporters, said in the past manufacturers would pay value-added taxes throughout the manufacturing process and then apply for rebates after the goods were exported. "The new scenario focused at CentrePort could allow for a much easier process," he said.

But it does not mean that firms already operating in the city will have to move to CentrePort to take advantage of the FTZ benefits.

"We are not going to become a great sucking sound (making existing operations pull up stake and move into CentrePort)," Gray said. "This is about new greenfield international investment for Manitoba that will create new jobs."

She said CentrePort Canada will become a one-stop shop to help existing operations benefit from existing legislation.

Foreign trade zones

FTZs are typically defined as secured areas where goods can be stored or processed (value added) without customs duties, excise or inventory taxes applied.

2,700 -- the number of FTZ's in existence in 100 countries in 2007

63 million -- the number of people employed in global FTZs

$170 billion -- the value of merchandise handled in about 200 U.S. FTZ's annually

Republished from the Winnipeg Free Press print edition October 14, 2009 B5