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California Corporate Moves

Report: Southern California has Largest U.S. Manufacturing
Economy

A report prepared by the Los Angeles County Economic
Development Corp. (LAEDC) puts Southern California at the top of U.S. manufacturing hubs, employing 389,300 workers.

LAEDC’s report, called “Manufacturing: Still a Force in Southern California” and published in March, dispels the myths that manufacturing in the region is disappearing and that all manufacturing is moving to low-cost countries.

Nationally, the U.S. is still the world’s largest manufacturing economy, producing 21 percent of the global manufactured products in 2009. U.S. manufacturing generated $1.6 trillion worth of output, which represented 11 percent of total U.S. GDP. Productivity in the American manufacturing sector also is very high, with manufacturing jobs often paying premium wages and benefits, the LAEDC report says.

“Industrial restructuring has intensified, making U.S. manufacturing more competitive than ever,” said LAEDC’s Chief Economist and report author Nancy D. Sidhu, Ph.D. “The U.S. share of global manufacturing has remained at or above 20 percent for most of the past two decades.”

Locally, in Los Angeles County, the manufacturing sector employed 389,300 people in 2009, while the value of manufacturing shipments in the county was $153 billion in 2007 (latest data available). Manufacturing is a “high-multiplier” activity, supporting many local area businesses and jobs in supplier industries such as energy, freight transportation, and business and professional services.

The top five industries in L.A. County (measured by dollar revenues in 2007) were: Petroleum Refining, Computer and Electronic Products, Food Products, Aerospace and Fabricated Metal Products.

Of the manufacturing employment in the county, 56 percent of the workers produced durable goods such as computers, transportation equipment and metal products, while the other 44 percent produced nondurable goods such as apparel and food.

The largest manufacturing sector in the County (measured by employment in 2009) is computer and electronic Products, with 51,323 jobs. The apparel sector had the second highest number of employees, with 48,107 jobs. However, the sectors suffering the largest employment declines over the past decade were computers and peripherals, furniture and textile product mills.

The LAEDC study also reported that the value of total manufacturers’ shipment in the six Southern California counties was approximately $271 billion in 2007, which was up by 32 percent from $206 billion in 2002. In L.A. County, the total value of manufacturing shipments (excluding oil refining) increased by 21 percent between 2002-2007, though the gains varied by sector.

A similar pattern of growth held across the rest of Southern California. In Orange County, over the same period, the total value of manufacturing shipments grew by 26 percent. Riverside and San Bernardino counties both saw increases in manufacturing shipments as well, of 76 percent and 62 percent, respectively. San Diego and Ventura counties boasted gains of 24 percent 42 percent, respectively.

While many believe that manufacturing is destined for low-cost countries with a lower cost of labor, manufacturing in the U.S. has been an attractive investment for foreign investors.

The greater Los Angeles area’s appeal includes some significant advantages. Manufacturers in the region have ready access to global markets and suppliers through the Ports of Los Angeles and Long Beach, as well as Los Angeles and Ontario International Airports. The region also has a wide network of ground and air infrastructure which means fast, efficient connections to the rest of the U.S. And perhaps most importantly, Southern California possesses a large work force, many of whom are highly educated.

The manufacturing report covers Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties, and can be downloaded at: http://www.laedc.org/report /Manufacturing_2011.pdf

March FTZ Includes Skechers Distribution Center

The March Joint Powers Authority recently received written approval to include the Skechers distribution warehouse inside the Foreign Trade Zone (FTZ) it administers for an area surrounding the March Air Reserve Base near Riverside, CA.

Activating and expanding the FTZ at the former March Air Force Base got a big push forward a few months ago, when U.S. Customs and Border Protection agreed to provide a customs agent at no cost. At press time, the March FTZ was awaiting final approval from the U.S. Department of Commerce.

Until this recent concession, the federal agency had said it would cost $150,000 plus use of an office and transportation costs to have a customs agent serve businesses inside the Inland zone. Any foreign trade zone that sits more than 60 miles or 90 minutes away from the outside radius of the Los Angeles ports is required to pay for an agent, according to the agency. The regulation dictated both requirements be met.

In March 2009, when the Customs and Border Protection agency denied an application from the March Joint Powers Authority to activate the Inland foreign trade zone, the region was considered barely inside the 60 miles, but farther than a 90-minute commute. It would have to pay, the federal agency said.

The March Joint Powers Authority, the agency overseeing redevelopment at the former March Air Force Base and the operator of the Foreign Trade Zone, balked at paying the $150,000 and teamed up with Riverside County economic development agency officials to convince the agency to give them an agent for free.

Foreign trade zones can make importing and exporting cheaper for businesses inside them. One program allows importers to pay a flat weekly fee of $485 regardless of the number of shipments or their value. Outside a zone, the same business could end up paying up to $485 per shipment in fees. For a business importing 10 shipments a week, it could cost $252,200 annually versus the business inside the zone which would pay $25,220.

Since mid-2009, JPA and county officials met with local customs officials in Los Angeles and more recently combined lobbying efforts to convince Customs and Border Protection to relax the regulation. The authority had also been meeting with the U.S. Department of Commerce.

Late last year, the headquarters for Customs and Border Protection changed the policy so that a location farther than 90 minutes away but still inside the 60-mile radius, could have use of a customs agent for free, said Sherri Hoffman, assistant director of trade for the agency’s field office in Los Angeles.

Hoffman said the Inland zone would share a customs agent with LAX or the Los Angeles or Long Beach ports. The agent could also be shared with Ontario International Airport since that airport and LAX are both owned and operated by Los Angeles World Airports.

Lori Stone, executive director of the March Joint Powers Authority, said she would like to think the agency’s lobbying efforts in conjunction with the county caused Customs and Border Protection to change its mind.

“We made a big push with the federal government in the last few months on all fronts,” she said. “I think we made enough noise that headquarters looked at it.”

The March JPA has proposed having a bank of 2,000 acres that could be used for businesses within the boundary who apply for foreign trade zone status. Customs and Border Protection has said that it wouldn’t be able to serve businesses farther south than Perris into Murrieta and Temecula because it would be outside the 60-mile radius, said Danielle Wheeler, assistant director of the March JPA.

Customs has toured the area to define the zone’s boundaries, which could reach as far west as Corona, Wheeler said.

The authority application to the Department of Commerce, which approves foreign trade zones if the authority’s elected commissioners sign off on the plan at its June 16 meeting, Wheeler said.

“We feel very fortunate now to have had this about-face,” said Tom Freeman, spokesman for the Riverside County Economic Development Agency and county foreign trade commissioner. “No single entity should claim victory for this.”

Freeman said the foreign trade zone would put the Inland area on a level playing field with other Southern California cities that were able to offer companies free Customs services and incentives within the zone.

Fresno County EZ Extends to Clovis

Several Industrial and commercial areas of the City of Clovis have recently been approved for addition to the Fresno County Regional Enterprise Zone.

The Fresno County Enterprise Zone is a geographical area in which companies are eligible for exclusive tax state incentives and programs. A business may be entitled to receive up to $37,400 in state tax credits over a five year period for each employee hired.

Other benefits include:

  • Tax credits for sales and use taxes paid on qualified machinery purchases;
  • Interest deductions for lenders on loans to firms within the areas;
  • Accelerated expenses, deductions; and
  • Priority for various state programs, such as state contracts

The Fresno County Regional Enterprise Zone Tax Credit helps businesses create additional jobs, access more resources and increase overall profitability through tax savings.

The Enterprise Zone (EZ) Tax Credit was established by the state of California to provide businesses the opportunity to create additional jobs, access more resources and increase overall profitability through tax savings. Other features of Enterprise Zone Tax Credits include:

  • Sales & Use Tax Credit
  • Net Operating Loss Carryover
  • Business Expense Deduction
  • Net Interest Deduction for Lenders

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