 This is Stink Tech, Hawaii. Community matters here. Aloha. This is Rob Hack with another episode of Exporting from Hawaii. Today's guest is David Sikink. He's the administrator of Foreign Trade Zone Number 9 here at Pier 2 in Honolulu, and welcome, David. Thank you. Thank you, Rob. Pleasure to be here. Thank you very much. Let's jump in and start talking about the foreign trade zone. It usually goes by the acronym FTZ, and there's FTZ 9. That suggests to me that there's an FTZ 8 and a 10 somewhere. How many are there and where are they? Well, the Foreign Trade Zone program was started back in 1934 by the Department of Commerce, and their idea really was to create an area, a space on U.S. soil that was outside U.S. territory when it comes to duties and taxes on imported goods from foreign countries. What they did was they created these foreign trade zone program, and so you're able to bring in goods of any type that you'd normally be able to bring in to the United States, fax it to be free, and hold them in these spaces until you decide to do one or two things with them. You either export them, they're a new parent, never pay the duties and taxes, or you'd pay them at the time that you would then actually import them or bring them in. Great. Are companies at your facility that will bring in product, do something, add some value, and re-export? Right, right. So they can either store them and bring them out as a value-added product, or they can manufacture them with them and make a completely different product out of them. Can people just import product and use it as a warehouse and then use the product here locally without re-exporting? Absolutely. Okay. Which of the clients that you have at the foreign trade zone are re-exporting? You know, I haven't looked at the statistics lately, but I do know that we did over $460 million of exports last year alone. That's great. So how many foreign trade zones are in the United States? Right now, there are 191 foreign trade zones nationwide. Every state in the Union has at least one, three in Puerto Rico, and there are a number sequentially. So we say the number nine, there's actually a very significant number because that means it was the ninth ever foreign trade zone ever made in the United States. Whoa. So that goes back quite a while. Right. So from 1934 to 1966 when we came online, there were only eight other foreign trade zones. 1966. Mm-hmm. So we're 52 years old. Now at the foreign trade zone, there's a newer building there, Homer Maxi International Trade Center, or HMITC. Who was Homer Maxi? Homer Maxi was the first administrator of the foreign trade zone here in Hawaii. And to me, he's everything that this program is about. He started the program, kept it going, was the administrator until 1992, and then retired. Oh, wow. I've seen this picture many times. How does the foreign trade zone fit into Hawaii's exporting infrastructure, meaning ... Okay. The foreign trade zone is under D-Bett, is that right? D-Bett, Department of Business, Economic Development, and Tourism. Correct. Okay. So with D-Bett, there's an international trade assistance program there. There's the high step program. There's the Department of Agriculture has a big exporting program. How does the foreign trade zone fit into that ecosystem? We are in a sense partners with those other agencies and other departments or divisions within D-Bett. Our goal really, our focus really is foreign trade zone. So it's utilizing that federal program here locally to help assist state companies and businesses to grow economically within the state. However, an ancillary to that or ancillary mission is really taking the time to work with these other agencies, Department of Ag, the business development and support division, and other agencies such as High-Tech Development Corporation to really grow the economy here locally. So we look for companies where there's a synergistic mix, like HTDC has the MEP program, manufacturers extension program. Since foreign trade zones are predominantly manufacturing driven, I mean that's what they were made for was to be able to bring in those imported goods, make a manufactured product out of it, and bring it out as a U.S. made good. So it really just makes sense that we together as sister agencies work together and work on each other's strong points to be able to develop that ecosystem here in Hawaii. On this show I've talked about many times how the local Hawaii exporting ecosystem is rather cohesive and people work together well through these different government agencies and quasi-government agencies. And at the foreign trade zone there's lots of meetings I see going on there with Innovate Hawaii has some of the manufacturing extension program has a meet, but there's many things going on there. Can you go through a few of those that you've seen recently? We've had several. Like you said, the HICEP program is doing their export readiness and their export assistance as well as the Hawaii Export Council, the District Export Council or Pacific Export Council. They have their programs there as well. Really what I did when we built that Homer Maxi side of our building, we called the Homer A Maxi International Trade Resource Wing of our facility. When we built that the idea really was to have a meeting place or a gathering place for those that are in the international trade community to come together and to be able to exchange ideas, exchange information, talk, find out where there's synergies between different companies, really just again to build that ecosystem. And so that's really when we opened up that conference room specifically for that was to have that meeting place because I noticed before that time we never had that. It wasn't available and so that's really what our idea was to do. I think it's working exceptionally well. As you know I've had a lot of meetings in there myself and I've attended others that I didn't organize, but I do find that there is a center of gravity there that people in the exporting world come together to, we network, we talk, we have lots of great meetings and seminars in there and it's a fantastic facility. So I'd like to thank you for having that facility available. And it's funny that you mentioned that too because since we've opened it, that room is busy at least four out of the five days every week. There's something going on, you know, whether it's a chamber meeting or it's an export meeting or a manufacturer's meeting. How can people, audience members, find a list of those types of programs? Do you maintain any kind of list on your website? We try to as much as possible, but that's only those companies or organizations that give us the information that we'll put up. Otherwise we leave that up to the organization because it's their marketing push that we do it. So also there are offices at the foreign trade, so that companies can rent. Right. What kind of companies are there? There are several different types of companies. Like I said, we do manufacturing companies. We do import, export companies. We also do import, export, assist companies. So those are like your customs brokerage, your shipping agents, your logistics people. We have NYK Logistics, which is the main shipper out of China located their headquarters or at our facility. So really the idea is to bring together that community. Again, that was kind of the idea of Homer Maxie years ago, was to bring together that community and have one central location where we call the hub of international trade in Hawaii at one location down at Pier 2. So if you need to find it, in fact, out of the, actually, there's eight licensed customs brokers here in Hawaii. Seven of them are independent. The eighth one is DHL, but out of the seven independent, we have four of them locally, and we're going to get the fifth one here very shortly. So we'll have a majority of all of the shipping agents or customs brokers here in Hawaii located our facility. I often notice right part next to your building of your facility are huge cruise ships, right? Do you have, does FTZ have anything to do with that? We have nothing to do with that other than having to work through what we call boat days when the ships are in port at Pier 2. We share the facility with them. They have the Makai end of it. We have the Maoka end of that facility. So we do share that, but other than that, it's a different agency, different department. Could we bring up slide one, please? I'd like to show, this is probably not the most recent photo because I don't see the solar panels on there. That's the CRPV array up there, yeah. But this was just to give viewers an idea of the geography here. You're looking at, if you look off to the right of the screen, you would be basically at the end of Punchbowl Avenue and the large federal building at 300 Ala Moana. Maybe, how about slide number two? Could we bring that up? There's our PV array. How many photovoltaic panels did you put up there? Do you know what the capacity is? That's fantastic. It is, it actually is the largest photovoltaic array in the downtown core area. We would have to. So we hold that, at least for now. I think we're probably about 30 or 40 PV panels above what the previous one was, which was the Kalani Mocha building down closer to the state capitol. But this particular building, for that array is I think 1,073 and it's a 370 kilowatt system, 550,000 annually. And last year, we exceeded the annual rate of it. So it's an incredible array. And you can see right there that it's a lot of sunshine that we get right down up here too. And of course, it's a beautiful way to operate our facility. When we put it in, we actually underpowered it a little bit, and that was because we're putting in new chiller units for our Makai end. And realistically, that's the biggest energy draw of our facility is when those fire up in the morning to get the building cool, it takes a huge energy spike. But beyond that, once they're up and running, that system takes care of all of the power needs we need or have during the day. So it's fairly self-sufficient now, the whole. Pretty much so, yeah. And what do you recall? What is the square footage or, probably go by acreage, it's so big. It's square acreage, yeah. We actually have, out of the facility, it is a seven acre facility site and the warehouse itself is six acres of that. That's a pretty good size. And how many, do you have any clue, how many companies use the facility in a year? We do, in fact it's funny that you mentioned that because out of all the foreign trade zones in the nation, the one in Hawaii has the most clients, by far the most clients of any foreign trade zone. If you combine all the ones in Puerto Rico together, the three into one, they would exceed the number of clients that we have. But we have, I think last year it was 463 clients total that use foreign trade zone in Hawaii. That's fantastic. And how many tenants are there that rent space? Out of that we have 75 offices. So they're probably about that number. I think a couple of them got double offices. So they're probably about 73 that are different clients. Wow, that's fantastic. And trucking in and out of the facility looks fairly easy. It's easy to get large vehicles in there. Right, now it is a federally bonded facility. So in other words, there are goods that are still in bond. In other words, they have a cleared customs. So there's a level of security at that facility and any trucking or shipping company that's coming in does have to go through our security to get into the facility. Oh, I've noticed. The offices are separate since there are 24 seven buildings. We have people that come in at midnight one o'clock in the morning to make their calls to the east to do their business. But when it comes to the actual warehouse facility that's a bonded facility. Okay, we'll take a short break and after the break we'll be back again with David Sikink of the Foreign Trade Zone. Thanks. This is Think Tech Hawaii, raising public awareness. When I was growing up, I was among the one in six American kids who struggled with hunger. But with the power of breakfast, the kids in your neighborhood can think big and be more. Go to hungarees.org to make breakfast happen for kids in your neighborhood. If you're not in control of how you see yourself, then who is? Live above the influence. Hello, I'm Dave Stevens, host of the Cyber Underground. This is where we discuss everything that relates to computers that's just gonna scare you out of your mind. So come join us every week here on ThinkTechHawaii.com 1 p.m. on Friday afternoons. And then you can go see all our episodes on YouTube. Just look up the Cyber Underground on YouTube. All our shows will show up and please follow us. We're always giving you current, relevant information to protect you. Keepin' you safe. Aloha. Welcome back to Exporting from Hawaii. I'm Rob Hack and our guest is David Sikink, the administrator of Foreign Trade Zone number nine here at Pier Two in Honolulu. So we were talking about the capacity of the Foreign Trade Zone where you are and that it's the only one in Hawaii. So how many staff are there? It seems like a very busy place. It is a very busy place, but we have a very limited number of staff. And just to give you a little background, we are a state agency. So many people think state agencies are like, ah, man, I'm gonna go there. I'm gonna have to wait in line. I'm gonna have to have issues with getting what I wanna have done. We operate very much like a private business. Reason being is that we are what is called special funded. In other words, we take none of the state's general tax funds. All of the funds we use to operate our facility are garnered through the revenues that we generate from operating our facilities, the offices, the warehouse, as well as our sub zones and other zones throughout the state. Great. And we, oh, getting back to your question about how many, we have 17 staff. 17. Yeah, I've noticed security there is very tight and it's a very secure place. The staff that I've ever interacted with and I know colleagues of mine who have dealt with the staff there are very extremely professional. Very business-like. It doesn't, as you said, it doesn't feel like government whatever that means. State agency, right? Yeah, it doesn't feel that way. It's a really fantastic facility. So. That's the benefit of our staff because I try to impress upon them that our revenues and our operation and how we do our business reflects on us as an organization. And because the way we get our revenues to be able to operate and offer the services that we have, you know, customer service is number one. I want to make sure that people understand that when they come to our offices, whatever problem it is or whatever issue it is, even if, like I said, we were talking about the people showing up for cars that actually is the next peer that we treat them with respect and say, oh yeah, let me see if I can help you out. Let me show you where you need to go or let me get the information or the form that you need. That's great. The staff that we're there of the 17 are how many of them would be experts in exporting or export documentation? Is there anybody there like that? There would be. There are probably about three of us. And the reason why is the other ones pretty much are focused on the warehouse or the business, the financial end of our operations. The other ones are like myself, the administrator, my operations supervisor, Scott Yoshida, and our business manager in those capacities. All three of us are pretty much well versed in import and export. Now, do shipping vessels come up to the facility and pick up containers or where, if somebody was exporting from your facility, where would the product actually go? Most goods that come and go out of the state to an international location all come and go out of Pier 1. So Pier 1 literally is just diamond head of our facility, just on the other side of the immigration building. So anything that comes in would have to go through Pier 1. There's a customs station there, an examination station. So it comes in through Pier 1, would come to our facility, literally right around the corner at Pier 2, and then anything going out forward would have to go that same route in reverse. Okay, great. Now, what we've talked about, as you know, I'm very sensitive to what's going on on the neighbor islands, so what we've talked about here to four was all Honolulu focus. Now, if you were an exporter on Kauai, Maui, the Big Island, Molokai, somewhere, not on Oahu, how could a company there utilize the foreign trade zone for exporting, and if also feel free to give a pitch for importing? Sure, sure. You know, it's funny because the neighbor islands, it's a little more difficult for them because all the main international shipping comes into Oahu. Sure. For them, there's gonna be that extra expense from getting it from Oahu, putting it in bond, in other words, having a bonded carrier, take it then to their location somewhere else prior to it being brought in. So what happens is a lot of the goods come into Oahu and they're cleared in Oahu before transiting out to the neighbor islands. So, but that doesn't preclude them from being able to do foreign trade zone if they want to. If they wanna do that type of manufacturing or wanna have their own bonded facility to hold goods in, they can certainly do that. It's interesting that you did mention that because for the 50 some odd years, 52 years that we've been in business as foreign trade zone number nine, we've been what's called an alternate site framework. Now that alternate, excuse me, traditional site framework. What traditional site framework means is that we as a foreign trade zone, we're also what's called the grantee. Now the grantee, what we do is we were given that charter by the federal government to be able to go through our zone project area. And for us, that's the entire state of Hawaii. For parts of Texas or some of the larger states, it might be just a county, it might be a small economic development zone, something like that. But for us here in Hawaii, we have the entire island or the whole island chain. So we have the entire state. So for us, what we used to have to do was go through a very lengthy application process to the foreign trade zones board. So we'd find a client that would be applicable to foreign trade zone. They would then go through the whole application process, submit it to us for review. We go back and forth trying to prove the economic case for this particular company that would like to do foreign trade zone. And then submit it to the foreign trade zones board in Washington, DC for review and approval. Along with the board approval, we also have to get customs and border protection. Because as you know, when customs is involved, they have to be within 90 minutes or 60 miles of any given location so that they can get there in a reasonable timeframe. So you need both foreign trade zone board, customs and border patrol approval, as well as the foreign trade zone grantee, which is us here at foreign trade zone number nine. So we wear two hats, really. We're the grantee for the state. We're also an operator in the state as well. Now, as grantee, we would look for those companies. So like our two refineries, both what is now IES downstream, independent energy systems downstream, and power petroleum, power Hawaii petroleum are refining. Both of them are foreign trade zone. So what they do is they bring in the crude oil from foreign sources. They refine that into jet fuel, bunker fuel for boats, automobile fuel, fuel for the military. And any application such as one, let's say a plane coming in from Japan lands at Honolulu International Airport, they can take fuel that they've created, keep it in a bond state, move it to the airport and put it on that plane, fly it back out to say Japan and never pay the duties on those particular items because it never entered U.S. commerce. So for them, that's a benefit and for us as a state, they offer not only the infrastructure that they develop here, energy independence, as well as jobs and other economic development aspects of their business. So for us as a state, that actually helps very dramatically. That was all in a traditional format or the traditional site format. So we ended up having to work with these companies that long, almost a year, year and a half process. Sounds complicated. Very complicated. What we did recently this last year was we went to the foreign trade zones board and they developed something called alternative site framework. Now what alternative site framework allows us to do is to essentially predesignate the entire state of Hawaii as a potential foreign trade zone. So that opens up the door. So if a company, let's say they are in Kauai and they say, you know what, I really want to become foreign trade zone. Instead of being a year long process, all they do is put together the economic case, submit it to us, we review it, we give it off to the foreign trade zones board for review. So instead of being a year long process, it's maybe as limited as four months. So it's a much more condensed project. If there's a manufacturer, like one of our manufacturing foreign trade zones is specific allied products, then they call the plastic recycling bottles that we have here, water bottles on Island. They also do all the fulfillment for Coke and Desani products. Again, for them it makes sense because why spend the money to ship water over water when they can do the fulfillment here on Island and really only produce the bottles instead of having to produce the, or import the entire product. So for them it makes a great sense because the PET they call it, which is the resin they make the bottles out of is anywhere from three to 5% of the duty. So for them it pencils out to make sense to become a foreign trade zone because they can keep that in bond until they are ready to deliver that product. So for them it's a cost savings. That's the same for us. It's also a cost savings because we don't have to pay that exorbitant cost of either the shipping to get the water here or the production fulfillment to have that done. I wonder if a budding tariff war has any impact on this kind of activity. I would think it could force some people's hands to think differently. It does. For foreign trade zone it's kind of a touchy situation for us because the way the foreign trade zone worked is when you brought that product in you could declare it either as, I'm gonna pay the duties now so I'm gonna keep the duty rate of whatever that is. Let's say I make ukuleles and I bring the strings in from Italy and those duty on the strings are 10% just number out there. I'm not sure what they are. It's something like hypothetically. But if I were to import ukuleles the duty on that would be 3%. Well then it wouldn't make sense for me to manufacture it, right? So I can bring in those goods, manufacture it and use what's called an inverted tariff where all the goods that I put into the strings, the tuning keys, the frets, the rosewood for the body can all be brought in at that 3% rate. I would do that, right? So it makes sense. So I'd actually reduce the cost of my, the tariffs that I'd have to pay. Well that was the way that it worked before these tariff wars started. When they put the tariffs, the recent ones against China and some of the other countries in place, they didn't add that caveat. So what happens is you bring that in at, say, 25%. It stays at 25%. Now you do get that duty offset so you don't have to pay that right away. You do pay it when you do bring it into U.S. commerce for our consumption, but it isn't paid until that point. So you do get that relief during that time. However, you don't get that inverted tariff, especially on the goods coming in from China that's made in manufacturing. And really the reason why is because I think they wanted to add a little bit of pain into what they were doing in terms of getting people to say, hey, this is causing business hassles. We need to get this fixed. Sure. Back to this alternative framework. If a company, either on Oahu or a neighbor island, they were interested in pursuing this kind of free foreign trade zone around their facility or their area, how would they start that process? Who do they contact? They would probably start by contacting me or anybody in our office and later ultimately we end up directing to me, but contact me and we'd start the process. We'd start the discussion, look for the economic business case for that and then start the application process if that were applicable. Are there people that work in your organization or debat or someone related on neighbor islands that can be talked to or should they just contact you here in Honolulu? I would say directly to me because in terms of foreign trade zone, a lot of the other organizations, our sister agencies and people like yourself at the Pacific Export Council know about us, but there are some intricacies into the program that we would need to discuss to the client. So how do people find you? Your website is ftz.9.org. ftz9.org. Foreign trade zone 9.org and your telephone number, your email, and everybody else's as well. We also have Twitter and Facebook and you can find us there as well. Great, I didn't know you had a Twitter account. You have a Twitter account. I follow you on Facebook. Okay, that's fantastic. So with that, I'd like to close and thank David Sicking. He's the administrator of the Foreign Trade Zone 9 here in Honolulu at Pier 2. One more time, the website is ftz9.org. Lots of information there. It's a fantastic facility. Great resource for Hawaii's exporters. Please look into it more. And thank you again, David. This is Rob Hack, signing off on the latest episode of Exporting from Hawaii. See you again in two weeks. Bye.