Drop in oil prices skews foreign trade zone production data
The value of merchandise received in U.S. Foreign Trade Zones fell noticeably in fiscal year 2002 to $204 billion from $225 billion the year before, according to the federal entity that manages the trade facilitation program.
Communities seek foreign trade zone status to promote economic development and help companies be competitive by deferring or reducing duties on imported merchandise that goes through a designated zone.
The amount of merchandise, both foreign and domestic, that entered general purpose free trade zones with multiple customers rose to $32 billion in fiscal year 2002 from $29.5 billion in 2001, according to a summary of the latest annual report to Congress by the Foreign-Trade Zones Board, which operates within the Department of Commerce. Merchandise activity dropped for subzones, foreign trade zones that typically encompass a single company that makes a very specific product, to $172 billion from $195.7 billion.
Dennis Puccinelli, executive secretary of the board, attributed the $15-billion decline to the fall in the price of oil, because oil refiners constitute such a large proportion of the businesses that participate in the Foreign Trade Zone program.
'Oil refining is the largest user of foreign trade zones now,' representing almost two-thirds of the commodities flowing into these special trade promotion areas, he told trade industry officials gathered at the National Association of Foreign-Trade Zones legislative seminar in Washington Monday. The drop in the price of oil from $25 per barrel to $22 per barrel, coupled with the fiscal 2002 first quarter decline in economic activity following the Sept. 11, 2001 attacks on the United States, reduced the value of refined oil products produced during the 2002 period, he said.
Imports of crude oil and other petroleum products refined in foreign trade zones fell to $44.7 billion from about $60 billion in 2001, confirming that oil refineries were the culprit for the decline in goods processed through FTZs, Puccinelli said.
Merchandise produced in foreign trade zones for U.S. domestic consumption accounted for $133.6 billion, or 65 percent, of all merchandise received, while goods produced in foreign countries that entered the country through an FTZ accounted for $70.5 billion in 2002, down from $86.5 billion.
