Byline: Carol Emert
WASHINGTON — Wal-Mart Stores is gearing for entry into Europe and Central America by seeking foreign-trade-zone status for a second major distribution and processing center, this one in rural Georgia.
Last spring, Wal-Mart opened its first distribution center in a foreign trade zone, a 1.2 million-square-foot unit in Buckeye, Ariz.
Like the Arizona facility, the 1.5 million-square-foot site now under construction in Georgia’s Bullock County, would create savings through operating efficiencies and reduced Customs duties, according to Wal-Mart’s application for free-trade-zone status, filed with the Commerce Department.
“Wal-Mart is presently analyzing expansion of its discount retail operations into other foreign countries, including those in Central America and Europe,” Wal-Mart said in the application. Foreign-trade-zone status would “facilitate this expansion and provide efficiencies of operation that will allow Wal-Mart to open new markets for export goods.” Wal-Mart has stores in Puerto Rico and Mexico and plans units in Canada, Argentina and Brazil. The application did not say which European and Central American countries it expects to enter. Wal-Mart did not return calls for comment.
The application said the biggest savings could come from “zone to zone transfer.” This process allows non-U.S. goods to be transferred to the distribution center from a supplier’s free trade zone and reexported with no duty payment.
If the goods are sold in the U.S., duties would not be levied until items are shipped to stores, a delay that could last months.
Wal-Mart said free-trade status for the center would save $500,000 annually in “cash flow, scrap and waste, and exports.”
While $500,000 is insignificant against the company’s size and the $40 million cost of the facility, Bob Buchanan, a retail analyst with NatWest Securities, attributed the figure to the firm’s tendency to estimate conservatively. Wal-Mart is expected to have $85 billion in sales this year.
It was not clear from the application whether any of its 32 existing distribution centers will be affected by Georgia facility. Wal-Mart has asked the Foreign Trade Zones Board of Commerce for approval of its application by Jan. 1 so the facility can be ready by the time inventory buildup begins in February.
Janet Mangano, a Burnham Securities analyst, suggested Wal-Mart might try to team up with a “strong European partner.” The analyst said Europe is ripe for Wal-Mart because there are no Continent-wide discounters catering to the value-conscious.
Neither expects Wal-Mart to open European stores immediately, since the company needs time to digest the 102 Pace stores and 122 Canadian Woolco units it acquired last year.
— Fairchild News Service