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City Staff Investigating Foreign-Trade Zone Creation

City staff is expected to report to council next month on creation of a general purpose foreign trade zone.

The recent to ask the Port of San Francisco to create a Foreign-Trade Zone subzone encompassing the company's Benicia refinery caught city staff and local political leaders off guard.

Benicia falls within the geographic scope of the Port of San Francisco, which already has a general purpose Foreign-Trade Zone and has the authority to create subzones within its geographic area of influence.   

Valero could have asked the Port of Oakland or the Port of Stockton to create the subzone but chose to work with San Francisco's Port Authority.  It has set up similar subzones for Chevron's Richmond refinery and the Tesoro Golden Eagle Refinery east of Martinez.

According to Randy Scott of Amports, there was a Foreign-Trade Zone subzone in Benicia when Mazda was importing vehicles through Benicia.  That subzone was administered by the Port of Oakland.

Asked if Amports is interested in having the City of Benicia create and administer a Foreign-Trade Zone, Scott said, "We have no comment on a trade zone but the trade zone with the Port of Oakland is still available."

That sentiment was in contrast to Valero's.  

Asked about the decision to make the application through the Port of San Francisco rather than ask Benicia to apply for a Foreign-Trade Zone,  Bill Day of Valero said it was a simple business decision and not a reflection of the relationship Valero has with Benicia.

"It was a business application," said Day.  "It had nothing to do with the city."

"We'd be amenable to working with the city on anything they propose but any delays in the process would make that (letting Benicia go through Foreign-Trade Zone formation) less attractive," said Day.

Mayor Elizabeth Patterson was unhappy that Valero chose to go directly to San Francisco without asking the city to partner in the venture. 

"I find it unfortunate," she said of Valero's decision.  "It's not healthy.  Benicia has a very good record of accommodating business."

"One thing the new city manager is going to do is sit down with Valero and see how we can make communications better," she said.

According to Mario Giuliani, acting economic development director, it would take the city about eight to 12 months to get a general purpose Foreign-Trade Zone established in Benicia.  Giuliani did not have an estimate of the cost of creating the zone, but noted that consultants probably would have to be hired.

He was hesitant to comment on whether creating and administering a Foreign-Trade Zone would be in the city's best interest, saying, "That's probably premature."

"It's a conversation city staff needs to have with Amports," said Giuliani.  "The city would be happy to partner with any company in the Benicia Industrial Park to achieve the benefits of that status, whether it's a subzone or a general purpose Foreign-Trade Zone."

While having a facility inside a Foreign-Trade Zone can have major implications for a company's cash flow as it relates to import tariffs, there is no affect on the ability of local jurisdictions to enact and collect port and wharfage fees, according to an official at the Port of San Francisco.

This is important for Benicia because ownership of the port and wharf revert back to the city when Amports' lease runs out in about 20 years. 

The mayor, for one, is interested in learning more about this issue.  "I'm looking forward to the report from the city manager," she said.

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