McAllen FTZ: We’re here to help any and every community in Hidalgo County

McALLEN, Texas – Any economic development corporation in Hidalgo County that has a prospective client looking to house its operations in a foreign trade zone can do so, says Mark E. Garcia.

Garcia is the incoming president of McAllen Foreign Trade Zone. However, he has worked for the nonprofit for more than two decades.

“The McAllen Foreign Trade Zone No. 12 covers all of Hidalgo County. So, in essence, we’re covering 1,600 square miles. The reason we have done this is so we can assist other smaller cities within Hidalgo County and allow them to offer a Foreign Trade Zone service,” Garcia said.

“We’ve done it with companies in Pharr, Hidalgo and Mission. We’ve designated companies in all these other cities because we have that service area.”

The Rio Grande Guardian sat down for an in-depth interview with Garcia in part so he could dispel a few myths.

Garcia said there is no truth to the rumor that McAllen FTZ is full. With 1,600 square miles to play with, how can it be. But, he said, it is true that all the buildings the McAllen FTZ has built are full.

“On a good note, the buildings that we’ve built are all occupied, either through our logistics services or other tenants. That’s a good thing. (That’s why) we’ve purchased another 1,500 acres along in the north of the city around Moore Field.”

Another myth, Garcia said was that McAllen Foreign Trade Zone is part of McAllen Economic Development Corporation.

“The McAllen Foreign Trade Zone is a separate corporation. It’s a 501c6 nonprofit. It’s not associated at all with the McAllen Economic Development Corporation. It’s a separate entity altogether.”

Mark E. Garcia, incoming president of McAllen Foreign Trade Zone. (Photo: RGG)

Another thing Garcia wanted to address was the myth that McAllen FTZ is a huge money-spinner.

“There is not a whole lot of money to be made by being a grantee of a foreign trade zone. And I think that’s another misconception. We don’t make a whole lot of money. We charge annual fees to these companies that want to set up. But if we were to combine all those annual fees with all our operators that we have throughout the county it wouldn’t even cover the salary for an FTZ administrator to kind of operate and oversee a foreign trade zone.”

Where McAllen Foreign Trade Zone has been fortunate, Garcia said, is being able to offer in-demand services to companies.

“We’re unique in that we’re grantee and an operator. We’ve offered the services, we build buildings, we pay them off, build another one and another one and another one. That is where all our growth comes from, development and the services that we provide. That’s allowed us to expand. But if you look at it, a small portion of the services that we provide actually require the Foreign Trade Zone pro program. It’s the services that that we offer, logistics and inventory management, yard management, VMI programs, consignment programs, leasing buildings. So that’s where the bulk of our revenue comes from. It’s not, believe me, it’s not from being a grantee.”

If there is confusion about the area that the entity covers, would it not be smart to rename McAllen Foreign Trade Zone the Hidalgo County Foreign Trade Zone, Garcia was asked.

“That is a good observation because there has been some discussion about changing our name. Our board at this point hasn’t decided that that’s the direction they want to go in,” Garcia responded.

“But, again, the only tie to McAllen is the fact that we’re located in McAllen. And back in the days when it was created, they chose to pick that name, McAllen Foreign Trade Zone. We’re not part of the City of McAllen. We’re a private entity. But you’re right, we are a regional already.”

Garcia reiterated that McAllen FTZ is ready to help any economic development corporation that has a company that wants to be housed in a foreign trade zone.

“We ready to assist anybody, any city within our county. And that’s a good thing. And that’s one of the reasons we wanted to reorganize (back in 2017), because now, the smaller municipalities can market that to companies that they want to bring in (a company), and there’s no cost to them. Because (remember) the cost for the annual fees to set up a foreign trade zone are billed to the client or the company that wants to take advantage of the program, not necessarily the municipality. So, again, we’re here to help everybody.”

History of McAllen FTZ

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Foreign Trade Zones were created back in 1934 under the Foreign Trade Zones Act. Garcia said it was created to allow companies to manufacture and import goods and then re-export them without paying duties and tariffs. “There are a lot of other advantages to that, but and it can get pretty complicated and complex,” he said.

The McAllen Foreign Trade Zone was created in 1970.

“We were one of the early ones that wasn’t located on an ocean port or a major airport,” Garcia said.

“(When we started) we operated under what’s considered a traditional site framework, where we would get approval and our grants would come from the Department of Commerce and the Department of Treasury.”

Originally, the McAllen FTZ stood on 40 acres of land. Then another 40 acres were added, Garcia explained. “Little by little, we’ve been adding parcels, he said.

Garcia gave a shoutout to the founders of the nonprofit.

“People like John Freeland, one of the founders of the McAllen FTZ were visionaries. Back then no one nobody knew what a Foreign Trade Zone was. And you plan to start a Foreign Trade Zone in the middle of a farm field, with nothing around it? So, it was a risk, and they took that risk, and it’s paid off.”

Fast forward to 2017 and a new program that came out of Washington called the Alternative Site Framework, Garcia said.

“Wereorganized within the new site framework back in 2017. One of the biggest complaints we had was, we were working companies and they wanted trades on services. But it would take a long time to get them set up. It was a very cumbersome system. So, by reorganizing under this new framework, it allowed us to take in not only a larger surface area, but get these companies activated within 60 to 90 days so they can operate much quicker and not wait a standard one year. So that was very beneficial.”

As the manufacturing base in Reynosa grew, so did interest in the McAllen FTZ, Garcia said.

“Companies found that there was a lot of benefit in importing products, bring it into the border in bonds, which means not duty paid, andstoring it here in a Foreign Trade Zone. And then export it. So, you avoid the tariffs altogether,” Garcia said.

“So that was a big benefit to companies rather than paying duties at the first port of entry. They move it in transit and bond and store in a foreign trade zone. With foreign trade zones, the transactions are a little easier to to handle than in a bonded warehouse.”

Being housed in an FTZ is not for every manufacturer, Garcia hastened to add.

“It’s not a fit for everybody. I’ll be honest, we’ve set companies up and designated them and activated them and they operate for a year and then came back and say, you know what, just it’s not working for us. So, we in turn deactivate and we go to Customs and they’re on their way. It’s got to fit their business model.”

Garcia concluded the interview by giving more information about the land McAllen FTZ has purchased around the old Moore Air Force Base,

“That isa critical buy because it’s strategically located around an airbase. One of the reasons we did that is… that is one of the directions where all the growth is happening. But it’s also going to be very close to the new (Hidalgo County) Loop. So strategically, it just made sense for us to grow that and purchase property there,” Garcia said.

“So, there’s a lot of plans we have as far as development, along with the City of McAllen. I think we’ve got a great partner in the city, and we’re excited to see what happens. There’s a lot of interest from companies that want to grow in that direction, that don’t need to be on the border, that want to be in a rural area, and still possibly have access to an airport in the future for special unmanned activity and stuff and testing and so forth. So, we’re excited.”

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