Learn about the Delaware’s Foreign Trade Zone Here
During the COVID pandemic, e-commerce sales grew significantly and though life has largely returned to normal, the growth of e-commerce continues.
On a global scale, shares of online sales are projected to increase from 16% in 2021 to 22% in 2025, according to the U.S. Department of Commerce’s International Trade Administration.
Delaware is in a prime position to take advantage of this trend. In addition to having its own international shipping port and being located near major East Coast airports, it’s also easily accessible by road. For example, I-95 runs straight through Northern Delaware, allowing e-commerce shipments to travel from Delaware to Florida and Maine without passing a single stoplight.
Amazon, e-commerce’s biggest player, recognizes Delaware’s advantages. In fact, Amazon’s first fulfillment center outside Seattle is located in New Castle, Delaware. The company, like many of America’s largest companies, is also incorporated in the state.
In 2021, the shipping giant opened a massive 3.8 million-square-foot, five-story-high warehouse near Newport, Delaware. It is the largest operational Amazon facility in the country. The center also features Amazon’s latest technology, including robots that move products and sensors that detect where products are stored.
Altogether, Amazon maintains four fulfillment and sortation centers, three delivery stations, one onsite solar location and two solar farms in the state.
According to a fact sheet provided by Amazon, the company has invested $7.7 billion in Delaware since 2010 and created 9,500 full- and part-time jobs.
Another major warehousing presence in Delaware is Dot Foods, which in 2020 opened a $37 million distribution facility in Bear. Dot is the country’s largest food redistributor and a top 100 largest private company.
“When you look at Delaware’s location in terms of the Interstate 95 corridor and access to the Port of Wilmington, it made an awful lot of sense from a logistics standpoint,” said CEO Dick Tracy at the facility’s opening.
Kango Express: Thriving in the E-Commerce Space
In addition to these big players, there are countless warehousing and e-commerce providers that may be lesser known but are thriving in Delaware. One is Kango Express, a business that repackages e-commerce goods for shipping abroad to more than 200 countries.
“One of our biggest markets is the Philippines, where I’m from,” said CEO Genecris Clark. “Filipinos can’t buy products directly from the U.S. and get them shipped. So they will buy online from merchants in the U.S. and ship their purchase to our warehouse here in Delaware. Then we repackage the purchase and ship it to them at their door-to-door address.”
One of the biggest reasons why Delaware is a good location for an e-commerce-dependent business like Kango Express is that there is no tax on shopping in Delaware. However, the proximity to I-95 also played a role, as Kango Express trucks its processed items to John F. Kennedy International Airport in New York to have them sent on to their destinations.
Another important factor was the support of local officials, Clark said. “Everyone here is amazing and the state of Delaware has been very supportive of us.”
Kango Express has been growing alongside the explosion of e-commerce demand. Since Clark and her husband Michael Brockert started the business in 2016, it has gone through five increasingly large locations. The first was no larger than a dual-car garage, Clark said, whereas the current warehouse is about 5,000 square feet. In addition to its Delaware facilities, Kango Express also has warehouses in places like the United Kingdom, Korea and Hong Kong.
As for the kinds of items Kango Express ships, it can be just about anything — from the latest iPhone to a jacuzzi or a household appliance. “On holidays where everything is closed, people will even ship basics like bottled water or tissues,” Clark said. On an average day, about 1,000 packages arrive at the Kango Express facility. The company’s workers check and process them all to make sure the correct items arrive safely at their global destinations.
Warehousing Opportunities in Kent, Sussex
With I-95 running through New Castle County, many warehousing providers are concentrated there. However, the downstate counties of Kent and Sussex offer terrific location advantages for warehousing and logistics-dependent businesses too.
“In Kent County, we are not far from 95 and we have many industrial parks that are already zoned for warehousing and logistics,” said Linda Parkowski, executive director of the Kent Economic Partnership.
For example, the Duck Creek Business Campus in Smyrna is just a short ride north on Route 13 to I-95. “The Garrison Oak Business Park in Dover is also not far off 95 and is already set up as a shovel-ready industrial park,” she said. “Then we have an industrial park in Milford and one in Harrington, which will also have rail access.”
In general, Kent County has a very convenient road infrastructure that lends itself to easy transport, Parkowski said. “We have Route 1 and Route 13, which provide good access to anywhere you might want to go in the country. Plus, our land costs are lower than other areas and we already have several large distribution centers that have located here, such as Walmart in Smyrna and FedEx Ground in Dover. All our municipalities have zoning codes that are very friendly to logistics and warehousing.” (Find a list of location opportunities at www.choosecentraldelaware.com/targetsectors/warehousing-and-distribution-choose-central-delaware.)
Sussex County, Delaware’s southernmost county, “is within a couple-hour driving distance of a large part of the population here on the East Coast. From a transportation standpoint, it is easy to get to Baltimore, Washington, Philadelphia and New York,” said William Pfaff, director of economic development for Sussex County. With access to Route 1, Route 9 and Route 13, Sussex County’s logistics businesses can reach I-95 and Wilmington within an hour and a half, he noted.
A business park location in Selbyville that straddles the Maryland state line also provides easy access to Virginia and points south via the Chesapeake Bay Bridge-Tunnel.
Further convenient business park locations can be found in Frankford and Georgetown.
In fact, Georgetown’s Delaware Coastal Business Park is adjacent to the Delaware Coastal Airport and provides access to a local rail spur. One of the tenants there, Great Outdoor Cottages, ships its products as far as South Florida and Ohio from the Sussex County location, Pfaff said.
Then there is the Western Sussex Business Campus in Seaford. “The county has made a $2 million investment in it, along with the city of Seaford and a private company. Those buildings are complete with loading docks and are ready to lease out,” Pfaff said. (Find a list of industrial parks at https://excitesussex.com/industrial_parks.)
Businesses interested in locating in Sussex County also should look into options for financial support, including the ExciteSussex fund, Pfaff said. News of an expansion of the loan program is expected before the end of 2024.
Pfaff also emphasized that Sussex’s size makes it the perfect location for companies that require a lot of space. “For any international business that is looking to do large-scale manufacturing, we have the capacity.”
Add to that the quality of life, proximity to Delaware beaches, low tax rates and a low cost of living. “There is something about Sussex County that is very unique and hard to find anywhere else today,” Pfaff said.
Delaware’s Foreign Trade Zone: Help With Your Cash Flow
Foreign Trade Zone (FTZ) #99 is a key advantage for companies doing international business in Delaware.
FTZ #99 consists of several sites and areas around the state (such as the Port of Wilmington, the Delaware City Refining Co., AstraZeneca Pharmaceuticals, Bloom Energy and the Delaware Freeport warehouse) that are considered outside the U.S. for duty and tax purposes. This means that import duties and taxes aren’t due until the goods exit the FTZ, resulting in potentially significant savings for the importer. (A detailed explanatory video on FTZ #99 can be found at business.delaware.gov/ftz99.) Depending on the type of goods you are importing, duties may not just be deferred, but reduced or even lifted altogether.
“What will make or break a new business is cash flow. Many small businesses have a great product, but they have misjudged the cash flow they need to have,” said Patty Cannon, director of intergovernmental relations and special projects at the Delaware Division of Small Business. “So, let’s say you have a million people who want to buy something you’re crocheting out of yarn, but you don’t have the yarn to make the product for those orders. With an FTZ, you get your yarn, you crochet your product and then you pay your tax later.”
FTZs can also reduce tariffs. For example, if you import an engine from Germany and leather from elsewhere, then use those components to make a car within the FTZ, you will end up paying the duty for a car as opposed to both the engine and the leather, Cannon explained. Or, taking the example of AstraZeneca, there is no duty on pharmaceutical drugs ready for patient consumption, but there may be duties on the components used to make the drugs. Because AstraZeneca is an FTZ site, “they’ll never pay if their materials leave the facility in finished dosage form,” Cannon said.
However, Cannon noted, companies operating within an FTZ always need to report to U.S. Customs and to the FTZ Board what the scope of their work is. If you are hoping to use FTZ benefits for a new product, you will need to report it.
Due to the strategic location of the FTZ around the Port of Wilmington, as well as Delaware’s other logistical advantages, such as the direct connection to I-95 and the relative lack of congestion compared to other East Coast markets, Cannon said, “Delaware is the ideal market to move your goods quickly.”
