To Preserve Ink Manufacturing Jobs, Quad Seeks FTZ Designation
From an outsider's perspective, things seem to be going smoothly for Quad/Graphics, considering it consumes 250 million pounds of ink per year, according to an article recently published by BizTimes. However, therein lies the problem because "domestic suppliers aren’t able to provide the raw materials needed to meet its demand," BizTimes reports.
Quad manufactures its own offset and gravure inks and, although there are two domestic suppliers of raw materials still in the U.S., the two companies have informed Quad that they are unable to provide the large amount of pigments the printer needs annually, which are the key raw materials needed for its ink manufacturing, Claire Ho, manager of corporate communications, Quad/Graphics, told Printing Impressions in an email.
Ho explained that because the types and quantities of the pigments needed cannot be obtained in the U.S., the company is compelled to import ink pigments under a foreign trade zone (FTZ) designation for its Hartford and Sussex, Wis., locations — of which Hartford is an ink manufacturing facility. Ho says that the FTZ designation will ensure that it is not "penalized for conducting manufacturing in the U.S.A" and will reduce the cost of raw materials needed to continue to manufacture inks in-house, which Ho said "will provide us with necessary resources to invest in our business and our employees."
Unfortunately, without the FTZ designation, the current tariff system favors importing finished inks, BizTimes explains. Ho said that Quad would end up paying a 1.8% tariff on finished ink, versus a 6.5% tariff on the raw materials. Therefore, the FTZ designation is crucial because the current tariffs drive up costs to manufacture products in the U.S. if the raw materials aren't available.
According to Inbound Logistics, the "Foreign Trade Zones Act of 1934 created FTZs to expedite and encourage foreign commerce, and reduce costs for U.S.-based operations engaged in international trade." It goes on to confirm what Quad cites as its reasoning for seeking FTZ designation:
FTZs also help maintain U.S. employment opportunities. While U.S. FTZs account for less than one-half of one percent* of all world zone workers, and a small share of the U.S. workforce, most of this employment is in manufacturing, which has lost a significant share of workers during the past several decades.
"The Foreign-Trade Zones Board has opened a public comment period on the application by Quad and its subsidiary, Chemical Research\Technology, that runs through Feb. 20," BizTimes reports.
*At the time the article "FTZ Basics & Benefits" was published by Inbound Logistics on January 20, 2014.