Foreign trade zone to bring wine, jobs to Cambria
JOHNSTOWN – Military aircraft and small commercial passenger planes are the frequent fliers at the John Murtha Johnstown-Cambria County Airport, but Argentinian winemakers may soon be among their ranks if a proposed foreign trade zone is established in the county.
Airport and county officials are hopeful that establishing a foreign trade zone will help to secure a deal with the winemakers to invest in operations to establish wine bottling operations in Cambria County.
Through the trade zone, raw wine would be shipped to the area for manufacturing. Reduced tariffs will help drive down costs while helping create jobs, officials said.
Cambria County President Commissioner Douglas Lengenfelder, however, cautioned that establishing a foreign trade zone in Cambria County is still about a year and a half or two years from completion.
In February, Lengenfelder led a trip to South America with local business leaders in an effort to solicit support for investment in business opportunities in Cambria County.
Robert A. Gleason Jr., Republican Party of Pennsylvania chairman; Jose Latour, a Florida lawyer tapped to help establish the foreign trade zone; and multiple Cambria County business leaders and their spouses attended the trip.
About $3,000 of county money was used to pay Latour’s expenses as the county’s legal counsel on the trip. Lengenfelder said everyone else paid his or her own way.
Lengenfelder said he has numerous South American business connections dating back to his time as a U.S. defense attache in Argentina up until 2009.
He secured a letter of intent from one of those connections – Jorge Ortiz, CEO of the Tapiz and Zolo vineyards – to ship raw wine to the airport. Once there, local manufacturing companies would bottle, package and distribute the wine, all at reduced costs for the Argentinian company.
The company planned initially to only sell the wine in Pennsylvania, but now it wants to distribute the wine across the East Coast, Lengenfelder said.
“It’s going to be much, much larger than we had expected,” he said.
Lengenfelder is quick to emphasize government is not in the business of creating jobs. Instead, he said he hopes to use his role in county government to establish the foreign trade zone and allow private business to reap the benefits.
“This is a win-win situation,” Lengenfelder said.
Economic Development Authority
Currently, the airport authority is handling the foreign trade zone creation. But an economic development authority of local business leaders and airport officials will need to be created to handle oversight of the zone, Lengenfelder said.
Commissioners approved a resolution creating the Cambria County Economic Development Authority to handle foreign trade zone oversight during Thursday’s regular meeting.
The resolution passed in a 2-1 vote. Democratic Commissioner Thomas Chernisky voted against the resolution but pledged support to the foreign trade zone.
Commissioners need to examine the business report being prepared by Latour before they can begin creation of a board or authority, Chernisky said.
The economic development authority dominated discussion during the public comment period of the meeting.
Controller Ed Cernic requested a $75,000 check written to the airport authority be returned to the county.
“There was such a rush a few weeks ago,” to secure the funding, Cernic said. But commissioners have yet to cash the check, he said.
Lengenfelder said changing legislation forced commissioners to re-evaluate funding for the foreign trade zone. Creation of the economic development authority was one of the outcomes from those discussions, Lengenfelder said.
Lengenfelder said the check would be returned to the controller’s office to be voided out, but $150,000 set aside for the airport authority in the 2013 budget will eventually be used to help establish the economic development authority.
William Polacek, airport authority vice chairman, said the economic development authority is necessary to handle operations beyond the volunteer airport authority board’s capabilities.
“This is going to move a lot faster and have a lot more work involved than the airport authority is able to do,” he said.
Polacek said he envisions the foreign trade zone expanding to draw in businesses from surrounding counties. And the airport authority is prepared to welcome foreign and domestic investment to the airport, he added.
“Part of the purpose of the airport is not only to increase the quality of life, but increase economic opportunity,” Polacek said.
The specifics regarding each potential industry involved in the foreign trade zone, including tariffs on consumable goods, need to be hammered out by the authority before wine bottling could begin in as little as two years, Lengenfelder said.
Foreign trade zones
“What foreign trade zones allow you to do is treat products in different manners to make it more attractive to do domestic manufacturing in the U.S.,” said Tim White, vice president of development at the Regional Industrial Development Corp. of Southwestern Pennsylvania.
RIDC owns 11 business parks in the Pittsburgh region and provides financing for industrial and high-tech businesses, White said. RIDC is also the grantee of foreign trade zone 33 in Pittsburgh, which is home to various manufacturing plants, including one for Mitsubishi Electric Power Products.
The foreign trade zone supports export-oriented companies, generates jobs and helps to import wealth into the economy, White said.
“It’s a good tool. If you look on a national basis, there’s a broad use of foreign trade zones,” White said.
RIDC established and manages the foreign trade zone program, White said.
“It’s a great tool for companies that are focused on creating wealth … and has a multiplier effect on a regional basis,” he added.
Multiple companies have indicated interest in working through the confines of the foreign trade zone. E & M Bottling and W.C. McQuaide Inc. transportation, in Johnstown, were on the South American trip and plan to support wine bottling and shipping operations in Cambria County, Lengenfelder said.
The bottling company will set up shop at a Richland Township warehouse owned by the McQuaide company, said Rex McQuaide, co-owner.
“It’s a good business opportunity for our community, because what the commissioners are putting together is a template for all businesses to use,” McQuaide said. “But it’s not enough to have a template – it takes business initiative, businesses that want to seize the opportunities of working in a foreign trade zone.”
Establishing the foreign trade zone and setting up wine bottling operations is just the start, McQuaide said.
“We’re pretty excited about it,” he said. “It is really refreshing to us here at McQuaide Trucking to see politicians taking the bull by the horns and doing something for our community. We think the establishment of a foreign trade zone is a great idea and it’s one that will benefit everyone in our community that takes advantage of the opportunity once it’s presented.”
“This isn’t just about wine. This is just the tip of the iceberg,” McQuaide added.
Officials said they are hopeful other international companies will invest in Cambria County, which could create more jobs for area workers.
“We hope to get these businessmen excited or interested in our zone here,” Lengenfelder said.
According to U.S. Customs and Border Protection, the foreign trade zone program levels the playing field for companies that import raw materials and components used in domestic manufacturing.
“The program encourages U.S.-based operations by removing certain distinctiveness associated with manufacturing in the United States,” according to information available from U.S. Customs and Border Protection at cbp.gov.
Domestic manufacturers, including automobile companies and other technical manufacturing processes, typically import large quantities of parts used in domestic manufacturing. Instead of paying a higher rate for each part, the overall manufactured good is assessed rather than each individual component.
For wine imports, the raw wine would not be taxed until it is bottled and shipped from the foreign trade zone for consumption, Lengenfelder said.
“The FTZ program corrects this imbalance by treating products made in the zone, for the purpose of tariff assessment, as if it were manufactured abroad. At the same time, this country benefits because the zone manufacturer uses U.S. labor, services and inputs,” according to U.S. Customs and Border Protection.
Pennsylvania has seven designated foreign trade zones, including ports in Philadelphia and Pittsburgh. About 250 foreign trade zones are located throughout the country, Lengenfelder said.
“Why come to ours and not Pittsburgh?” Lengenfelder asked, before answering that a dollar goes further in Cambria County. Even the cost of renting a forklift to move supplies is cheaper when compared to larger cities, he said.
And with access to railways and roadways, the county is in a prime location for distribution on a large scale, Lengenfelder said.
Other South American countries have caught the eye of Pennsylvania investors interested in expanding business opportunities.
A delegation of Pennsylvania companies lead by Gov. Tom Corbett is scheduled to visit Brazil and Chile next month as part of Corbett’s “Jobs First” mission, said Steve Kratz, Department of Community and Economic Development communications director.
“The two South American countries have growing economies and are attractive markets for Pennsylvania manufacturers and agro-business,” according to a Jobs Mission press release. “Both countries are also major exporters to the USA, and the Port of Philadelphia has regular weekly service with both countries. These cargos provide jobs for Pennsylvania longshoremen, truckers, warehouse workers, freight forwarders, customs brokers, agents, cargo inspectors, tug boat crews, river pilots” and others.
Pennsylvania businesses participating in the trip will meet one-on-one with potential investors and business partners in both countries, Kratz said.
The goal is to connect Pennsylvania companies with potential export markets and to market the commonwealth to foreign investors, he said.
“It’s almost a sales mission for the governor,” Kratz said. “He’s acting as Pennsylvania’s chief salesman to promote Pennsylvania as a great place where companies can set up business.”
With a $570 billion gross domestic product and 20th largest economy in the world, Pennsylvania presents an attractive opportunity for foreign investment, Kratz said. About 8 percent of the state’s GDP is from exports to other countries, he said.
The job missions have proven successful in the past, Kratz said. Visits to France and Germany last year helped to secure seven trade agreements and about $1.2 million in new export sales, he said.
Foreign investors are attracted to Pennsylvania for multiple reasons, including the state’s natural resources and low costs of energy, Kratz said.
“We’re certainly competitive in a global economy,” he said. “There’s tremendous opportunity for Pennsylvania companies to expand worldwide.”
While the governor’s trade mission is separate from the county’s foreign trade zone ambitions, the goals of bringing business interests to the commonwealth remain the same, Lengenfelder said.
He said Sen. Pat Toomey, R-Pa., has expressed his support of Cambria’s proposed foreign trade zone. U.S. Rep. Keith Rothfus, R-12th District, and State Rep. Frank Burns, D-Cambria and Somerset, also pledged support of the foreign trade zone, Lengenfelder said.
Companies must first feel secure doing business with area companies and investing millions of dollars in the area, Lengenfelder said. And securely establishing the foreign trade zone is worth the time and careful consideration, he said.
“These things, they just don’t happen quickly,” Lengenfelder said.