By MATT MYERHOFF
NAFTA they’re not.
But free trade zones,designated areas that allow tenants to delay or forgo import and export duties,dot Southern California. And more are on the way.
The latest entrant: a 500-acre zone in Industry just over the county line from La Habra. The proposed zone would cover the 400-acre Grand Crossing industrial park and about half of the 190-acre Fairway Business Center.
The application, filed more than a year ago, should be complete in one or two months.
“In 1970, there were about seven foreign trade zones in the country,” said David Harlow, president of International Trade Consultants LLC in Brea. “Now the numbers are 400 to 500.”
Harlow’s firm is shepherding the application for Grand Crossing and Fairway Business Center on behalf of Industry-based Majestic Realty Co., which manages the larger park and co-owns the smaller Fairway Business Center.
Under a law passed in 1934, the Commerce Department’s Foreign Trade Zone Board can name port or airport authorities as FTZ grantees.
The authorities, in turn, take applications from companies to be administrators of subzones covering an area as narrow as a single warehouse to one as large as an entire industrial park.
In Southern California, Foreign Trade Zone authorities have been started by the ports of Los Angeles and Long Beach, the city of Palmdale and the Southern California Logistics Airport Complex in Victorville.
Santa Ana has two zones, a 92-acre site at Grand Avenue and a 17-acre one near Fairview and Segerstrom avenues.
Applicants don’t even have to be from the area. The Industry application is being handled through the zone in Victorville, in San Bernardino County.
The appeal of the FTZs is that no duties are paid on goods or raw materials brought into the country by a company with an FTZ until they enter the domestic market. If the goods are housed in an FTZ and then exported to other countries, no duties are paid.
That provides a savings to companies operating within the zones and gives developers such as Majestic an added marketing tool.
Kent Valley, senior vice president at Majestic, said several companies were interested in relocating to Industry once the FTZ designation is secured.
“We think it will help us get the property leased that we have left in the complex, when we build it out in the future,” he said.
As a border city, Industry already has lured Orange County businesses, particularly those in need of warehouses.
In 2002, trucking company Megatrux Inc., once one of OC’s larger woman-owned businesses, moved from Brea to Industry.
That same year, Grand Rapids, Mich.-based Steelcase Inc. closed its Tustin campus and shifted operations to a 449,000-square-foot space in Industry.
A company seeking the benefits of operating within one of these free trade zones must apply to the U.S. Customs Service to have it activated.
The process has grown more complex since Customs was folded into the Department of Homeland Security.
“We started this over a year ago and we thought everything would be cleared by now,” said Joe Hollingsworth, general manager of Aldelano Packaging Corp., an Ontario company that packages and re-packages goods for companies that include Procter & Gamble Co.
Aldelano can’t proceed until background checks on the staff are completed and its 20,000-square-foot warehouse, office and assembly space meet federal security requirements for ports of entry.
Operators of warehouses with FTZ designations have more responsibility than those of regular bonded warehouses because they can open seals on shipping containers themselves.
Customs requires they have higher bonding and higher liability coverage if anything goes wrong with regard to smuggling or other problems. Customs officials inspect the sites at least once a year, and can conduct spot inspections.
Those hurdles have not dampened the desire for designation at the proposed 500-acre Tejon Industrial Complex, a joint venture of Tejon Ranch Co. and Rockefeller Group Development Corp., a subsidiary of Rockefeller Group International Inc., in Kern County. The application is being made to the FTZ operated by the Port of Long Beach.
“Last fall, with 70 to 90 ships stacked up at the ports, it became painfully obvious that companies had all their eggs in one basket,” said Barry Hibbard, vice president of commercial industrial development for Tejon Ranch.
And the city of Palmdale, which got an FTZ designation in the early 1990s but never had it activated, recently hired a consultancy to market the city, hoping the FTZ will attract business and quality jobs.
“About a third of our workforce travels south through the L.A. Basin for work,” said John Brooks, senior analyst for the city of Palmdale Economic Development Department. “We’re doing everything we can to maximize the opportunity for businesses to come in and provide jobs in the Antelope Valley.”
Myerhoff is a staff writer with the Los Angeles Business Journal.
