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Going The Extra Mile

Going The Extra Mile

For today’s 3PLs, staying up to date is all about combining data with technology—even before getting goods on the path to their destination—as regulatory demands seek more data sooner, according officials with logistics companies. And they are dealing with a wider variety of products that needs special handling and must meet specific requirements.

“You have the breadth of products increasing, the breadth of [required] temperatures increasing and the breadth of services increasing,” says Mark Richards, vice president of Orange, California-based Associated Warehouses, Inc.

“I’m seeing more demand for refrigeration for shelf-life extension,” notes Carl Neverman, regional vice president in the San Bernardino, California, office of ODW Logistics, Inc.

More demands are also being placed on the handling of chemical and hazardous materials, according to Michael Ford, chief compliance officer at Philadelphia-based BDP International. Changes involving requirements and regulations are having the greatest impact, he says.

“Companies over the years have done a very good job at the physical movement of goods, getting them to airports and seaports,” Ford points out. “But they maybe haven’t spent enough time on the data that runs with those orders. The challenge is running your data faster than you can run your physical cargo. “

There is information you must have to get goods out of the country but just as important is the information you need to quickly get those goods into your destination country, Ford says. “Can you tell me now—not when the goods arrive—what I should know about the documents and registration needed for clearing those goods in through that country?”

Ford says U.S. Customs also wants to improve the data it receives from carriers and obtain it sooner, which puts pressure on exporters.

Under one new program aimed at improving risk assessment, Air Cargo Advanced Screening (ACAS), which BDP has joined, U.S. Customs is “asking for the same data they’ve always asked for but they’re asking for it as far in advance as you can get it [to them],” Ford says. In an effort to reduce paper consumption, Customs is also “currently testing electronic submission of manifest from carriers, freight forwarders and service providers that BDP is participating in and will soon submit that data electronically to Customs,” adds Ford, who notes data management must be established now to adapt to new regulations as they occur.

Data is even being used to find the correct carriers, says Douglas R. Waggoner, chairman and CEO of Chicago-based Echo Global Logistics, which has “massive amounts of data” on 35,000 carriers that it uses to not only make decisions regarding the best price, but also to best meet the requirements of the goods being transported. The company’s customer portals, he says, allow them to book shipments as well as track the status and location of shipments.
Technology, Waggoner adds, is being used at more and more levels.

“An industry that used to be very low tech and paper intensive is becoming more and more high tech.”

“You’re going to see a much greater need for technology,” predicts Erik Malin, executive vice president of Chicago-based CarrierDirect LLC. “It’s not very different than a lot of the challenges we see in our domestic marketplace regarding asset allocation to different markets.”

Associated Warehouses’ Richards agrees. “Technology is much more important today,” he says, “especially from a connectivity and visibility standpoint. Things are becoming easier to do all the time. EDI [Electronic Data Interchange] has been around for years and people are still using that. But you’re starting to see a ground swell of API [Application Programming Interface] applications. That’s something that really connects systems and makes it even more streamlined and easier to accomplish.”

Neverman from ODW concurs: “If you’re going to be a player in the market today, you’ve got to be using the latest technology.” ODW, he says, uses EDI and Radio Frequency wireless communication as well as web interfaces. “Radio Frequency,” he explains, “is normal in the industry now. It includes accuracy and it eliminates paper, eliminates errors and provides trackability and accountability.”

“There seems to be more regulations,” says Associated Warehouses’ Richards, “and significantly more for hazardous materials than there was a few years ago. It’s the whole notion of keeping products safe through the supply chain.” Food regulation, for example, has become much more stringent, to the point where some 3PLs have employees who do almost nothing but make sure they are in line with changing regulations, he explains.

“What those regulations are for a chemical,” says BDP’s Ford, “are different than those for a food. As you go across different industries, regulations change. If you’re moving dairy or chemical or food products, things are very sensitive out there in the world market.”
That sensitivity is being reflected in the concerns and responses to the huge chemical explosions that tore through the Port of Tianjin in China last August. “The impact of that reaches beyond the China market,” Ford cautions.

He notes that only one month after the Tianjin disaster, “we found out that Saudi [Arabia] is going to issue changes as to how certain hazardous chemicals arrive in their port and will be asking for advanced data. So that country is implementing some changes because of a situation that happened in another part of the world.

“I’m sure other countries are examining their current regulations, policies and procedures. In the management of hazardous materials they’re taking a second and third look for these sensitive materials and making sure they have everything in place. Other countries that have chemicals flowing through them are going to make changes and may make them pretty quickly.”

CarrierDirect’s Malin forecasts major changes in the ways that freight flows across the U.S.

“There are things on the horizon from a regulatory standpoint that are inevitably going to impact the way that freight moves in our nation,” he says, pointing to the proposed approval of twin 33-foot trailers. “That’s going to have some reverberating repercussions,” he maintains.

“There will be a lot of other opportunities in the near future that could have a pretty substantial impact on the way that freight moves in our nation,” he continues, “and in turn that’s going to impact global trade in the United States because shippers will decide where they’re going to move freight differently than they do today.

“One thing I anticipate seeing,” Malin concludes, “is that what is now the normal freight flow is going to change. Because of West Coast port disruptions, the Panama Canal expansion, right shoring, and the investments that are going into the East Coast ports, it’s likely that today’s general standard freight flows are not what they will be in five, 10, 15, 20 years because of how shippers manage the risks in their supply chains.”

In addition to America’s seven Class I railroads, there are more than 550 short lines capable of carrying the same products, often handling the first and/or last leg of a freight move by rail.

Chugging Along

In addition to America’s seven Class I railroads, there are more than 550 short lines capable of carrying the same products, often handling the first and/or last leg of a freight move by rail. These short-line railroads ensure smooth transitions and are focused on improving switching and port facilities, with growing emphasis on the latest technologies. They’re also placing themselves at the forefront of environmental and safety developments.

It’s all part of the heavy investments short-line railroads are continually making, beginning with acquiring and restoring abandoned and nearly abandoned lines. Acquisitions are also continuing, though not always of rail lines.

“Since the economic recovery, traffic on short lines has taken off,” says Jo E. Strang, vice president of Regulatory Affairs at the American Short Line & Regional Railroading Association (ASLRRA) in Washington, D.C. “Forty percent of all rail moves have some sort of movement on a short line. What short-line railroads offer is better safety records, usually good relationships with their customers and better connections to other railroads. So you don’t have to transfer the goods. It’s a seamless type of transportation movement.”

Peoria, Illinois-based Pioneer Railcorp is currently rehabilitating the recently acquired Maumee & Western Railroad Corp.—now known as the Michigan Southern Railroad Co.—that had suffered from deferred maintenance under previous ownership.

“We purchased this line with the knowledge it is in dire need of rehabilitation,” CEO J. Michael Carr said when Pioneer was starting the process. “Our objective is to rehabilitate the line in order to provide consistent freight-rail service to current and potential shippers.” Track restorations also will provide additional line connections to Class I carriers, he explained.

With the addition of Maumee’s 51 miles of track in Indiana and Ohio, Pioneer now has 25 subsidiary rail operations in 14 states, with more than 600 miles of track serving more than 100 customers.

Darien, Conn.-based holding company Genesee & Wyoming Inc. (G&W), which now owns 113 short-line railroads, acquired the Arkansas Midland Railroad, the Prescott & Northwestern Railroad and the Warren & Saline River Railroad this January. The company also acquired the Rapid City, Pierre & Eastern Railroad last year and, in 2012, acquired Jacksonville, Florida-based RailAmerica Inc., the owner and operator of 45 short-line railroads in 28 states and three Canadian provinces.

“G&W companies serve 41 U.S. states and four Canadian provinces—significantly more than any Class I railroad—and interchanged 1.7 million carloads with Class I railroads in 2014,” says Michael E.

Williams, the company’s vice president of Corporate Communications. “As the first and last mile to customers, our railroads work closely with the Class I railroads to develop optimum service offerings. By combining the local knowledge and operating flexibility of our short lines with the operating efficiency and network reach of our Class I partners, our customers benefit from a seamless rail-service product.”

With the May 2014 startup of the Rapid City, Pierre & Eastern Railroad from an acquisition, Williams explains, agricultural products have become G&W’s largest commodity group. And, he adds, “the transformation of North American energy markets as a result of hydraulic fracturing is reflected in the amount of inputs and outputs transported by our railroads.”

Jacksonville, Florida-based Patriot Rail Co. LLC, which owns 13 short-line freight railroads with 500 miles of rail in 14 states, is among the short lines that have been acquiring more than just competitive railroads. It also acquired a railcar repair and cleaning service provider in Keysville, Virginia, in December 2013.

Florida East Coast Railway (FECR), also based in Jacksonville, has invested $35 million of a $53 million construction budget to “open up the centrally located Port of Everglades to both domestic and international shipping,” with the development of a new intermodal container transfer facility—the nation’s first portside rail yard to process both domestic and international cargoes, according to the railroad’s president and CEO, James R. Hertwig.

Built on 43 acres of land contributed by the port, the facility includes 21,000 feet of processing and storage track, separate domestic and international gate complexes, 11 automated gate system (AGS lanes) and the latest technologies that identify trucks, trailers and containers entering and leaving the terminal.

FECR’s rail line has five intermodal container transfer facilities or terminals, Hertwig notes. “Seventy-eight percent of our loads are intermodal. Intermodal reliability is crucial to the advancement of U.S. exports.”

The company, whose 351 miles of track runs from Miami to Jacksonville where it connects with two Class I railroads, contributed $9 million toward the cost of restoring rail to the Port of Miami. Completed in August of last year, the project replaced a 30-mile truck route, Hertwig says. “Rail is a lot more efficient than truck,” he says, noting rail’s importance given the trade increase expected now that PortMiami has dredged down to 50 feet of water to become one of only three East Coast ports capable of handling the mega ships soon to traverse the Panama Canal.

With all these developments, FECR is looking to improve service to existing customers and attract more companies to locate along rail lines. And like many other short lines, FECR has been acquiring locomotives that are more fuel-efficient and environmentally friendly, 24 of which were delivered in December 2014.

The entire 25-locomotive fleet of Wilmington, Calif.-based Pacific Harbor Line, Inc. (PHL) meets or exceeds the Environmental Protection Agency’s stringent Tier 4 emission standards, mostly as a result of retrofitting, according to company president Otis L. Cliatt II, whose firm serves the ports of Los Angeles and Long Beach.
PHL, a division of Anacostia Rail Holdings, started in 1998 as a dispatch-only outfit; it didn’t even have any locomotives.

“Our business continues to grow,” Cliatt says, “because with Class I railroads’ economies of scale it makes better sense for them to haul traffic than do switching. And here within the port, the majority of PHL’s switching is customized for each of the separate marine terminals. We have nine on-dock intermodal marine terminals that are serviced by rail within the port complex and each of them has its own customized switching that we do. That would be much more challenging for a Class I to do.”

With Class I railroads Union Pacific and Burlington Northern Santa Fe as PHL’s largest customers, “We’re the first mile and the last mile for global trade,” Cliatt says.

At municipal-owned Tacoma (Washington) Rail, which has more than 200 miles of track, “all the switching work that Class I railroads don’t like to do is done by us,” says Dale W. King, superintendent and COO, “and our line operates all of the Port of Tacoma-owned infrastructure.”

Logs and finished timber were major export products at one time, but that started to wane in the 1980s. King says Tacoma Rail then opened Port of Tacoma’s first on-dock intermodal facility.

“So as one business went away, another business began to grow,” King points out. “Over 50 percent of Washington State’s gross product is dependent on trade. We handle a fair amount of that business as it comes in by railcar and gets loaded into containers. Up through the Great Recession, about 80 percent of our business was international intermodal, providing the interface between the port and the national freight rail system.”

The additions and improvements to America’s short-line railroads has American Short Line & Regional Railroading Association’s Strang feeling optimistic. “They’re efficient, they’re safe and they’re growing their traffic all the time,” he says. “The future for short lines is very bright.”

Tech Savvy


Logistics software platforms, used widely for domestic shipments, are now catching on in the export market and are including other related services, such as federal, foreign and international export-related rules and regulations, often utilizing cloud technology as an off-site service provider. Such technology developments have been accelerating in number and frequency, logistics officials say.

“Use of the cloud is a natural progression for exporters who want the benefits that domestic shipping has been receiving,” says Ian Hedges, vice president of Foster City, California-based E2open, which has a platform that, among other benefits, connects companies with truck, rail, vessel and air carriers and has more than 125,000 registered users in 69 countries. “But logistics is just one component.”

The cloud and other newer technologies can connect all the steps involved in exporting, including ever-changing rules and regulations, Hedges and others note.

“It’s been a significant evolution,” comments Craig Stoffel, vice president of Global Logistics at Omaha, Nebraska-based Werner Enterprises, “and it comes in almost three- to five-year waves. When looking back, you’ll notice a significant difference every three to five years. We have customer requirements that come out continuously and we’re constantly modifying and improving our platform to accommodate all those new requests.”

Adding new programs to existing platforms is being done by all service providers, not only Werner.

“But the real game changer,” Stoffel explains, “was everything going web-based, cloud-based and mobile. Now everyone’s iPhone or Blackberry or Galaxy has applications that allow them to view inventory levels, monitor shipments, receive status update—all in real time. So technology, as it has advanced, has pushed everything to transparency.”

“Everything we do is in the cloud, including our email,” says Scott Malat, chief strategy officer at XPO Logistics, Inc. “The move, technology wise, has been toward more consistent quick releases. We develop our technology and put out new releases on average once a month, sometimes more often. We have over a hundred IT projects in the pipeline at any given time.”

“The technology tools now available are unlimited,” says Carl Livesay, chairman of the Maryland/D.C. District Export Council.

And data storage—from shipment locations to import and export regulations—can change constantly. This data and other information can be accessible to exporters on one or more software programs, programs that may be proprietary for a specific company or purchasable as a single program or as part of multiple separate programs, Malat and others explain.

Choosing different programs from different service providers, says Werner’s Stoffel, offers the flexibility of switching from one provider for one specific service to another provider who can provide better service in that specific area.

“Most customers are going to engage a technology platform that allows them a single place to look,” he says. “The most successful platforms accommodate various types of traffic, modes of transportation, and different types of transactions, different currencies and even different international standards.”

Due diligence is done, Stoffel explains, on shippers, shipments, destinations and customers, and Werner’s platform keeps up with nations’ rules and regulations for imports.

“Every country has its own rules and regulations for imports,” he says, “and your technology has to keep you in compliance. Dealing with international shipping can’t be done by hand. You have to engage technology that provides an ease of doing business around compliance.

“Companies like ours,” he adds, “have developed platforms that facilitate all the transportation transactions, facilitate a lot of the government-required filings, and really facilitate a lot of the information exchanges that have to happen along the course of exporting.”

Stoffel estimates that most customers are going to want a single view of their supply chain and will try to engage a technology platform that provides a single place to look for information and assistance.

Ty Bordner, vice president of East Rutherford, New Jersey-based Amber Road, notes that there are “thousands upon thousands of documents from around the world that are needed” by companies doing business globally.

His company’s export software generates the correct documents for each export shipment and helps generate such required information as product codes, product classifications, product physical descriptions and measurements, tariff and export control numbers, all of which are needed to be able to flow through the destination country’s customs controls. It also calculates the duties and fees that will be owed and alerts when licenses are required for products being shipped—and the software generates the proper license forms when needed.

“Our software also helps execute logistics,” Bordner points out. “Our transportation management takes your global carrier contract and puts it into the system so that you can book your cargo online. You log into a web-based application, see all the rates and sailing schedules.

“What makes us different,” Bordner stresses, “is that we combine the compliance regulations with a logistics execution. Most providers don’t do that. They don’t combine the two under one single solution. But there’s no reason to have two different pieces of software—one that does compliance and one that does logistics. We think having one piece of software is the way to go.”
With all these challenges covered by one piece of software, not only are export costs reduced but exporters can feel comfortable about their shipments reaching their destinations, Bordner says.

“A lot of people who implement our software now feel confident to go ahead and export, and not have to fear doing something wrong and being subject to heavy fines, penalties, loss of export privileges and shipments not reaching their destinations,” Bordner says.

But before all that occurs, Amber Road’s software performs restricted party screening, using a list in which the names and addresses of the companies on “all the ‘bad-guy’ lists from the United States and other countries” are combined. “We also screen for embargoes against shipping to various countries,” he points out.

Amber Road’s software also automatically files all of its export statistics with the Automated Export System (AES), which is used by governments around the world to capture their trade data.

Bordner explains that the company’s software also enables exporters and shippers to combine shipments for either breakout shipments (a combined shipment that goes to a single destination in a country and then is broken into shipments to other destinations within that country) or for multi-leg shipments (a large shipment that, upon arrival in one country, is broken into shipments to other countries as well as a shipment within the arrival nation).

“Our software helps with both of those,” he says, explaining the shipping and broker cost savings. “Not everybody’s software can do that like our software does. It’s a very unique software that can handle multi-leg, cross-border shipments.”

While Amber Road’s software screens product purchasers, XPO’s software screens carriers—for pricing, availability and routes—helping find the best carrier to a port or other destination for each load.

“We have relationships with more than 26,000 carrier partners,” says Malat. “That’s mostly truck companies, but also air, rail and ocean.”

The software enables exporters to obtain the best shipping price for the domestic portion of shipments before even finding a carrier.

“A customer will call us, for example, and say, ‘I want to get from Denver to the port in Los Angeles,’ and we’ll price them right on the phone and come to an agreement [on price]. And then it’s up to us to find the right carrier for that load,” Malat explains. “That’s where our technology comes in. Our IT team created algorithms that provide actionable pricing information and carrier procurement as well as analytic capabilities for truckload market conditions.

“We can pull in real time market data to highlight demand and availability in specific lanes and regions. This gives our sales people price and capacity visibility,” he points out.
Amber Road’s Bordner sees the export logistics technology market, despite all the advances, as “still a green field.”

“If you look at the domestic transportation market with regard to software,” he says, “it’s been saturated. People have been developing domestic transportation solutions for 30 years and there aren’t many companies that don’t use software for domestic transportation.

“In the global trade world, it’s still a green field. The percentage of companies that are leveraging software to help them export ranges anywhere from 20 to 30 percent to maybe as high as 50 percent. That leaves 50 to 80 percent that aren’t yet using software to help them in this area. That’s good news for us as a growing software company,” he concludes.


The New, Global South


Exports by companies in the seven Southern and Southeastern states are not only expanding—reaching more than $200 billion in 2012, according to Brookings Institution figures—their character is changing from such raw materials as timber, agriculture and other farm products to autos, aerospace, finished furniture, gourmet foods and perfume. Many of these items are high-end consumer products.

New autos—BMWs, Toyotas, Nissans and Volkswagens—are being exported from states in which they now are produced: South Carolina, Tennessee, Mississippi. Vehicles modified for sport drivers by MCM Custom Vehicles in Trussville, Alabama, are finding markets around the globe; and restored used trucks and autos, purchased at major auctions in Orlando, Florida, are being shipped via Port Canaveral to Central America and the Dominican Republic.

“BMW has become one of the biggest exporters in the country,” says Brad McDearman, director of an export-assistance project at Washington, D.C.-based Brookings Institution.
One of BMW’s models is only manufactured in South Carolina and from there is shipped to more than 130 other countries.

At its plant in Athens, Georgia, Caterpillar produces small hydraulic excavators and tractors for its customers in Canada, South America and Europe, as well as the U.S. General Electric exports gas turbines made at its Greenville, South Carolina, facility and aviation components made at its Durham, North Carolina, facility.

In addition, Continental Tires the Americas, LLC and Michelin North America Inc., each with manufacturing plants in South Carolina, are exporting much of their production out of the state’s Port of Charleston, with Michelin being one of the port’s largest customers, according to a State Ports Authority official.

Autos and auto parts now account for the largest segment of all export categories for the Southeast, according to a report written by The Economist Intelligence Unit for banking giant HSBC. South Carolina ranks first among all 50 states in exports of autos and tires.
Aerospace and aviation products also now are being produced not only in Florida, home of Cape Canaveral, but in Georgia, Alabama, South Carolina and Mississippi.

“Florida has a significant amount of exports in the aerospace/aviation sector. We have GE and Boeing and others,” says Gray Swoope, Florida’s Secretary of Commerce and president and CEO of Florida’s principal economic development organization, Enterprise Florida, a public-private non-profit partnership. “And we have a lot of suppliers; component manufacturers like Pratt-Whitney engines.”

Furniture, once a fixture of North Carolina and other Southern states only to be replaced by inexpensive imports, not only is seeing a revival in the Tar Heel state and Mississippi but is finding markets in Asia and the Middle East.

“Exports of furniture as finished products are increasing,” says Bill Martin, director of the Franklin Furniture Institute at Mississippi State University, which even has an export resource service for that state’s many furniture manufacturers.

Klaussner Home Furnishings, headquartered in Asheboro, North Carolina, is 50 years old, but the company only made occasional foreign sales during its first 40 years.

“International buyers would come in our showroom at the High Point [North Carolina] Furniture Market and we’d sell to them,” explains Len Burke, the company’s vice president. “We developed relationships at the Furniture Market. We developed a relationship with Saudi Arabia without going over there. Today we have a team that goes to the Middle East, and now we’re developing the Chinese market.

“We started assembling an international team in the last 10 years, expanding our international sales force to 20 persons. We sell to about 15 countries. Twenty percent of our volume leaves the country.”

As for the attraction of American-made furniture to foreign buyers, Burke says it is simple: “They like what we like. They want that Western [hemisphere] look.”

The six-day, twice-a-year High Point Market, the largest furnishings industry trade show in the world, with more than 2,000 exhibitors, attracts some 85,000 attendees from more than 100 countries. North Carolina even has its Furniture Export Office, a division of the state’s Department of Commerce.

EXPORT ENGINES Boeing and GT are contributing to Florida’s increased exports, says Gray Swoope, the state’s secretary of commerce.
EXPORT ENGINES Boeing and GT are contributing to Florida’s increased exports, says Gray Swoope, the state’s secretary of commerce.

The manufacture of yarns and fabrics is also making a comeback, mostly due to the export of niche and specialty items such as Mount Airy, North Carolina-based Nester Hosiery, which makes specialty socks for firefighters, mountaineers and others. The North Carolina location of the College of Textiles, a leading institution for textile education and research, helps boost that state’s textile industry.

And then there are medical devices and electronics, some new and some used.

“Used medical equipment like x-ray machines are refurbished and exported to South America,” says Sandro Murtas, Atlanta-based regional manager of the Small Business Administration’s Office of International Trade, who notes that exports have gone from commodities to consumer goods.

Large investments have been made in medical research at universities, especially in North Carolina and Florida, resulting in new companies.

“We have a significant presence of medical device companies in the state,” notes Swoope, the Florida commerce secretary and Enterprise Florida CEO. “It’s well over 240. The medical device sector is our fastest growing sector. In the past decade, the state and our universities have made significant investments in research. North Carolina also has had significant growth in the past decade, but we have had greater percentage growth.”

Even such gourmet food items as fruit preserves, sauces and snacks are finding overseas markets.

“A lot of [cooking] personalities have come out of the South. That says something,” says Lois Judy, co-founder of Savannah, Georgia-based Candy Craft Creations, in explaining the export success of Southern gourmet food items, including her own which now go to buyers in a dozen countries. “We’re located in a port city,” adds Judy, whose company is also known as Fondarific, “and are only two miles from the Port of Savannah, which lets us easily ship our fondants internationally.”

Flathau’s Fine Foods sends its award-winning gourmet cookies and other snacks from Petal, Mississippi, to half a dozen Caribbean and Latin American counties. “We’re building a solid network of distributors outside the U.S.,” says owner and founder, Jeff Flathau.

With 18 ports on the Atlantic Ocean and Gulf of Mexico coasts, these states have long handled export products from other states but are now becoming the home for more exporting companies, often with the help of expanding state assistance programs and other efforts.

“What you’re seeing now is a significant amount of those products are being made here,” Swoope points out. “Florida now has almost 60,000 businesses that export. Only California has a higher number. ”
The Southeastern states, especially Florida, have long had relationships with Latin American and Caribbean nations. These countries have become emerging markets, creating increased export opportunities, says Swoope—and states are taking advantage of this.

Rather than continuing to attract companies with incentives, explains the Brookings Institution’s McDearman, Southern states are “helping open up [foreign] markets for products they already have. You don’t have to have incentives for that. You just need to invest more in exporting.”

These Southern and Southeastern states also have foreign-based trade offices to promote exports, many of them in Latin America, as well as export assistance programs at home. Georgia has 10 foreign offices; North Carolina has five; South Carolina has three; Florida has 15, nine of which are full-service offices; Tennessee and Mississippi each have four; and Alabama has one, which is in Tokyo.

The states also regularly lead trade delegations or missions to foreign trade shows and specially arranged overseas meetings.
It’s certainly a globally oriented New South.


Documented Customs Challenges: Avoiding Customs Delays Brought On By Poor Document Preparation 

Exporters seeking markets with the most potential should look to developing countries but be prepared to deal with customs and other regulatory problems.

“You have to look at the customs issues,” says Greg Sizemore, Charlotte-based director of North Carolina’s U.S. Export Assistance Centers. “Many companies that export successfully are exporting to developing countries. Those countries may not have as clear import processes as others, but there’s so much demand for product that it’s worth it for a U.S. company to go into that market although it may be hard to enter.” The issues are little different than they are for other countries, but are more costly and difficult to deal with when problems occur, he says.

As David S. Robinson, special counsel in the Raleigh, North Carolina, office of the law firm Nexsen Pruett, says: “Every country is different. Even in the same country, different ports of entry are different. We have lots of people that get hit with surprises and they’re generally financial surprises. They’re not used to asking all the questions that are associated with an international export transaction.”

“Delays do happen,” Sizemore admits. “The three most common problems are with the product description, the paperwork and the foreign buyer. Often there’s a discrepancy on the documentation going into that country and it’s held up in customs because customs officials don’t understand the terminology on the documentation.”

He explains that when the U.S. Commercial Service in the U.S. Embassy in that country is contacted, someone there can “talk with the foreign customs officials to try to negotiate a solution to that discrepancy, maybe describe why the U.S. company used that terminology on the documentation. If it’s the measurement unit they used, help convert it. That tends to loosen things up and the U.S. product is able to clear customs because there’s a U.S. government official on that end in the U.S. Commercial Service working with foreign customs officials trying to get that U.S. product through customs.

“So it’s representation by the U.S. government in that country,” he says, “that helps get things through customs if there’s a discrepancy.”

Shipments also may be delayed, according to Sizemore, because of discrepancies regarding the three-letter International Commercial Terms—“INCOTERMS”—that relate to contractual sales practices; for example, DDP for “delivered duty paid.”

But the “most common discrepancy” that causes incoming products to be held up by a foreign country’s customs, he says, is the “lack of clarity” over the six-digit Harmonized System (HS) code that is used to determine the levy placed on the incoming product.

“So if customs officials are not quite sure that’s the right number,” Sizemore says, “products are held up at customs. Then the U.S. company may have to go get some sort of official ruling from that foreign government that the HS number is correct.”

Sizemore points out that this typically pertains to the levying of duties on that product. “That’s why the HS number is looked at very closely by customs officials.”

“How you define your product could result in different fees or duties being imposed,” Robinson says. “We always advise people to spend a little money upfront so you can make a case and defend what you want your HS code to be. And defend the duty you think should be imposed on your product.”

A product may fall into two different categories with two different numbers and two different duties, he explains, making it “worth taking the time and the resources upfront to make sure you fit squarely into the lower duty.”

Some avoidable customs problems can be caused by the foreign purchaser or distributor.

“Foreign buyers should not be allowed to take title until the goods are delivered,” Sizemore advises. “We recommend that you keep as much [of a shipment] under your control for as long as possible. Those terms can be negotiated with the buyer. Otherwise you give control over the shipment as soon as it leaves the dock.”

This could leave an exporter responsible for violations of the Foreign Corrupt Practices Act (FCPA), warns Robinson, such as bribes being paid to get your products through foreign customs.

“The FCPA allows for some facilitating payments and prohibits and penalizes harshly other types of payments,” he points out. “A lot of this happens in customs. If it is a customary payment purely for purposes of facilitating routine transactions and everybody knows it’s a customary fee, then the U.S. government is going to say it’s appropriate. Exporters have to make sure they understand that verbiage very carefully because it’s kind of a finite safe harbor.”

Some of the delay-causing problems can be avoided simply by going to the Internet, Robinson stresses.

“You used to have to rely on third parties to look it up for you,” he says. “But a lot of those resources are available on the internet now, such as ‘Table of Import Duties-Nigeria’.”

“You have to go to,” says Tom Robinson, vice president of Kernersville, North Carolina-based ERD Ltd., Inc., which repairs antiquated electronics equipment for international customers. “You can get a wealth of very current information as to what’s going on. That’s part of the key for exports, so we consult that. There’s no better place to go.”

At, which is operated by the U.S. Department of Commerce, companies can find help for dealing with HS codes, tariffs, customs regulations, trade barriers, import licenses and duties and other topics involved with exporting. Also available for download are “Doing Business in. . .” commercial guides for 153 different countries.

Robinson says and the websites of prospective customers help ERD avoid potential problems and even problematic countries. “Brazil is a country that we have pretty much intentionally avoided,” he says, “because the dynamics of change are so drastic day-to-day who knows what tomorrow holds.”

Utah’s Elevated Exports


Exporting had never been on the mind of Tom Dickson, founder of Orem, Utah-based Blendtec, Inc. until he was approached by a staff member of the Governor’s Office of Economic Development (GOED).

“The state literally came to us and said, ‘We’d love to help you export products. We’ll help you go to these different countries and we’ll do everything we can.’ And they assigned a state [employee], who was from Austria, to help us in multiple countries. They were so helpful and it didn’t cost us a penny to get established.”

It helped Blendtec, a manufacturer of consumer and commercial blenders, develop an international program that now spans 90 countries with its dealers and distributors. But this export assistance wasn’t the first time the company received help from the state. Founded in California in 1978, when Blendtec moved to Utah in 1989, it needed and obtained from the state an $80,000 loan and the deed to land by the City of Orem.

The company has also benefitted from participation in state trade missions. “I just got invited to join a trade trip to Mexico and I’ve been on other trips,” Dickson says.

Utah has been active in its co-sponsoring of trade missions, often cooperating with such entities as the U.S. Commercial Service, FedEx and Zions Bank, one of the nation’s major SBA lenders and a recipient of the SBA’s Export Lender of the Year award.

Besides co-sponsoring trade missions—most recently one to Colombia and Panama to take advantage of last year’s free trade agreements with those countries—the bank, every May, has “a large trade and business conference where we focus on business and economic opportunity, including foreign trade,” explains Mark Garfield, a senior vice president for International Banking at Zions Bank, who also chairs Utah’s District Export Council.

“In recent years,” Garfield points out, “we’ve really increased our focus on supporting small- to medium-sized enterprises as they reach out to other countries to export.”

The bank, an SBA Export Express lender, also manages one of the state’s 14 Business Resource Centers.

In the past decade, Utah has assisted businesses—particularly in exporting—by establishing the Governor’s Office of Economic Development, an International Trade and Diplomacy office, a fellowship and internship program, a Corporate Recruitment and Incentives program, federal and university Small Business Development Centers, the Utah District Export Council, World Trade Center Utah, private non-profit centers such as the Utah Economic Council and the Economic Development Corporation of Utah, and the 14 Business Resource Centers created under a state act approved in 2008, not to mention funding the federal State Trade and Export Program (STEP).

In addition, says Vincent Mikolay, managing director of the Governor’s Office of Economic Development, “The governor leads foreign trade missions twice a year. This year, those will be Mexico and Brazil. In the past, the governor’s trade missions have gone to China, the U.K., Israel, Canada and Mexico.”

The 2014 Mexico trade mission was preceded by a Mexico Business Symposium aimed at educating business leaders on steps to strengthen Utah’s business relationship with Mexico.

One of his office’s goals, Mikolay explains, is to help small businesses “understand international markets and have an export-readiness plan in hand. Ultimately,” he adds, “we connect them with buyers and potential partners in other countries, matching foreign needs with Utah companies.”

“Utah,” says SBA Region VIII administrator Matt Varilek, “has developed a comprehensive export assistance network. The state, local resource partners and the SBA strategically work together to open the international marketplace for small business.”

How well has it worked? Exports have nearly tripled since 2007.

All this activity in a state that accounts for less than 1 percent of the nation’s total population has certainly been a factor in Utah being ranked as best state in business strength and economic growth and third for exports by the U.S. Chamber of Commerce in 2013; best state for business in 2010, 2011 and 2012, and third best in 2013 by Forbes; and the best state for small business in 2013, according to a survey by Thumbtack and the Ewing Marion Kauffman Foundation.

The state also provides ETIFs—economic tax increment financing—to companies that meet such specific expansion goals as hiring a certain number of new employees at 125 percent of their county’s average wage. A company can then deduct a designated amount from their state taxes the following year.

IM Flash Technologies, a Lehi, Utah-based manufacturer of flash memory chips for electronic products, has received three ETIFs totaling $54 million, according to GOED Director of Communications Michael Sullivan.

“The jobs have to come and the capital investment has to take place,” says IM Flash’s Governmental Affairs officer Stan Lockhart. “And then they give you a post-performance rebate on some taxes. There are other places—in fact, a majority of other places—that have far more generous incentive packages, but it’s the can-do attitude of the governor’s Office [of Economic Development] that really makes a big difference for us.

“When we want to get some additional skills out of our workforce, we can have presidents of local universities or officials from the public education community in our office in a few days to have discussions; or maybe people from the governor’s Office of Economic Development; or maybe it’s a group of legislators or the governor or a federal delegation. They’ve all been to IM Flash and spent time wanting to know what they can do to help us succeed. It’s a wonderful working relationship.”

IM Flash, which once accounted for as much as one-fourth of the state’s non-precious metals exports, hires so many engineers that it needed to go out of state to find sufficient numbers, according to Lockhart. To fix the issue, he met with the governor who then worked with the legislature to increase the state’s Engineering Initiative program by $2.5 million to enhance university engineering programs.

Hycomp, Inc., a Hyde Park, Utah-based manufacturer of oil-free air and gas compressors, had no intention of exporting. Then its website prompted inquiries from companies in India and China, says company president Robert James.

“We hooked up with the Utah District Export Council,” he explains, “and they’ve been of tremendous help. Figuring out how to ship [to international customers] and what you can ship certainly was a challenge without them. And the DEC has helped hook us up with customers overseas. We also attend DEC classes in Salt Lake about twice a quarter.

“Shipping from Utah is not as hard as it seems,” James points out. “Everything we ship has to be on a flatbed because it’s going overseas, about 95 percent of the time, by ship. We contract with a Salt Lake freight forwarder. We don’t do the containerization ourselves.”

Other help has come from the company’s revolving line of credit with the SBA’s export loan program, and from the local Export Assistance Center, James says.

“The local Export Assistance Center has never turned us down,” he says. “If they say they can’t help us, they’ll usually tell us who can. Once, someone from the Export Assistance Center even came out and visited us.

“Utah is a great place to do business,” James concludes. “There’s good support for business. And it has access to everything we need.”



The 2013 federal government shutdown and mandatory federal budget cuts (or “sequestration”) are prompting more Beltway companies to look to foreign markets, building on the export growth already occurring in Maryland, Virginia and Washington, D.C.

“Companies are realizing that they have to do something to diversify where they are selling their products because they can’t rely on U.S. government procurement,” says April Redmon, senior international trade specialist in the Arlington, Virginia, office of the U.S. Export Assistance Center (USEAC), which also has offices in Washington, Baltimore and 116 other cities. “You have a lot of defense contractors in this area and they were really hurt by sequestration and by defense spending cutbacks.”

“We were affected by the government shutdown,” admits Cynthia Peters, CFO of Annapolis Junction, Maryland-based FiberPlex Technologies LLC, a manufacturer of secure fiber optic communications equipment that has relied on the federal government for 80 percent of its sales.

The company also was affected by the sequester, she says, with a “serious decline” in government sales during the summer, followed by “the largest September bookings that we’ve had since 2006, and then in October we started over again with no [government] spending.” She notes that government sales can be both volatile and seasonal.

“These companies need help,” says Redmon, “and they’re coming to us for assistance in commercializing their products, maybe selling them to foreign militaries overseas but also taking those products and expanding them into the security environment.

In addition to USEAC, District Export Council (DEC) and Small Business Development Center (SBDC) help in Maryland, Virginia and D.C. “You’re seeing state legislatures dedicate funds,” Redmon says. “Virginia appropriated [in August 2013] $2 million for Going Global to help the state’s defense-related companies export.” She says the Virginia SBDC received an SBA portable-assistance grant to provide export assistance to small businesses impacted by defense contract cutbacks. “We’re all trying to focus on helping these companies grow their business internationally as Pentagon cutbacks occur and sequestration continues.”

Companies that relied on federal government contracts not only are starting to find success in exporting, they are finding that their past successes in selling to the U.S. government help foreign sales.

“We’re really excited about launching international [sales] because we think that’s going to mean exponential growth for us,” explains FiberPlex Technologies President and CEO Buddy Oliver. “And supplying equipment to the U.S. military and the State Department is great to point to when going overseas.

“When talking to foreign entities, we can say we’ve had stuff on every ship in the U.S. fleet, that every U.S. embassy in the world has our stuff and all of the agencies in the United States use our equipment. That certainly carries a considerable amount of weight for us to break into those markets.”

Oliver says exports currently account for only 10 percent of total sales, but with the help of USEAC and other federal programs, FiberPlex Technologies is starting to make sales in the U.K. and continental Europe.

“We’re executing a plan to be more proactive in [foreign] sales and expect to see a significant amount of business because the market is very strong for our products,” he says. “We’re really excited about launching internationally, because that’s going to be exponential growth for us.

“We’re starting here, right near the Port of Baltimore,” he adds. “And there’s lot of freight forwarders all around the airport here. It’s just a great location for exports.”

Similarly, Robert R. “Bobby” Patton, president and CEO of Patton Electronics, a manufacturer of wireless routers, ethernet extenders and other electronic products headquartered in Gaithersburg, Maryland, says his company’s Beltway presence alone is helping as it seeks to further increase foreign sales, which now account for 70 percent of his business, with shipments going to some 130 countries.

“We have been able to leverage a lot of resources here in the Maryland region,” he says. “We have a pretty close working relationship with the U.S. Export Assistance Center and, as we identified market opportunities in regions of the world, we’ve been able to leverage some of their services, and we pretty extensively utilize the Ex-Im Bank.”

In spring of 2012, Patton testified before the Senate in support of the re-authorization of the Ex-Im Bank. Convenience, he says, was certainly a factor in being chosen by the U.S. Chamber of Commerce to make the argument.

“There are probably tens of thousands of companies that would have been equally qualified to testify, but I’m only half an hour away,” Patton says. “So it’s easy for me to be available for that kind of thing. And I’d say the Ex-Im Bank is probably the most important federal government relationship that we have because we wouldn’t have been able to do what we’ve done without that resource.

“And when we’re doing business with a company that hasn’t heard of us,” he adds, “and they look us up and see that we’re a real company and in fact the CEO has been in front of the Senate, that helps our legitimacy.”

USEAC’s Redmon notes that much of the upsurge in foreign sales by federal government contractors is in the technology and security areas.

“Some of our best prospect sectors include information technology, healthcare, environmental technologies, renewable energy and security and defense because we are seeing client demand from those areas,” she says.

“Cyber security is a big priority here [in the U.S.] as well as overseas,” she says. “Western Europe is a big market and markets in Asia are also prominent. Health IT is also a huge sector. And it kind of overlaps with ICT or information communications technology where U.S. firms are viewed as technology leaders.

“The refocus by a lot of the defense companies around here has been dramatic,” Redmon concludes. “These companies have some really great technologies and great ideas on how to sell them overseas.”



Advanced Superabrasives, Inc., (ASI) had made several unsuccessful attempts to expand its export business into China before trying to break in through a joint venture with a Chinese company. That not only failed, the Chinese freight forwarder held a container of the company’s machinery used to make abrasive wheels and “tried to extort money from us” for its return, says Jonathan Szucs, general manager of the Mars Hill, North Carolina-based company’s international division.

“We were really naïve when we started exporting,” he now admits.

But the North Carolina Export Assistance Center (EAC), part of the U.S. Department of Commerce, provided advice and assistance to retrieve the container for what ASI actually owed and put Szucs in contact with “a real freight forwarder who was able to tell me things I needed to do.” Afterward, the EAC also helped him file a grievance with the maritime law authorities against the offending freight forwarder.

It was the beginning of ASI’s ongoing relationship with the EAC and its Export University, which has trained numerous ASI employees. And if U.S. Commerce can’t help, North Carolina’s Commerce Department can, Szucs says. “We use both interchangeably.”

The state has a trade office in Hong Kong that he says has provided great market assessments. “I also had them do background checks on a couple customers in China to make sure I wasn’t selling to the wrong people.”

China now is ASI’s top export destination, followed by Brazil and Canada, which once was the company’s sole export market. Szucs worked closely with a representative in the Brazilian trade office of the North Carolina Commerce Department’s International Trade Division (ITD) who has kept him informed on the country’s changing import laws.

The ITD was instrumental in ASI expanding its export program to 16 countries, destinations often opened through recommended contacts and market assessments. As a result of its growing exports, the company received the President’s “E” Award for export expansion in 2013.

North Carolina’s ITD also has trade offices in Mexico City, Toronto, Frankfurt, Tokyo and Shanghai, with staff who know the local language and business environment. It’s a “tremendous asset,” says David S. Robinson, special counsel in the Raleigh office of the law firm Nexsen Pruet PLLC, a provider of legal and other assistance to exporters. The foreign offices, Robinson explains, show that North Carolina is committed to developing business relations with these countries and regions.

“Some states are now pulling back their international offices or their investments in global operations,” he says. “But North Carolina continues to fund its international offices, which we make use of all the time.”

The ITD organizes trade missions and often has exhibition space at trade shows to promote North Carolina and specific companies serving that trade.

“Throughout many administrations,” says ITD director Jean Davis, “funding for the Division has been maintained.”

In September 2013, the North Carolina Commerce Department led a trade mission to Turkey, and two more—second trips to both India and China—are in the planning stages, according to ITD’s Davis. “We do about two big trade missions a year,” she says, noting that they are led by either the governor or commerce secretary.

Michael Viniconis, president of Charlotte-based Argus Fire Control Inc., praises another of ITD’s services. “One of the things the Trade Division does is let you know when there’s a trade show coming up that would be in our market,” he says. “In China and Mexico we actually were in booths operated by the state.”

Teams from ITD attend more than 21 trade shows annually, often bringing officials from North Carolina companies with them, says Davis.

Argus, which manufactures customized fire protection equipment primarily for the textile industry, now does business in 50 countries thanks to state and federal help identifying potential distributors, Viniconis explains. “That was a key part of our original growth,” he says.

Stephan Janz, vice president of Business Development and International Sales at Leland-based Flow Sciences Inc., says his company obtained lists of potential distributors in other countries from both the U.S. and North Carolina commerce departments.

“Going to trade shows in our target countries allowed us to start developing relationships and screening some candidates,” says Janz, whose company designs and manufactures containment enclosures for toxic or noxious materials that require safe handling in laboratories. Janz adds that the presence of U.S. and North Carolina commerce departments at these shows meant he “always had a place to hang my hat and grab a cup of coffee.”

North Carolina has “a long history of pulling our industries together, especially around global challenges,” says ITD’s Davis. “A group of small North Carolina companies called American Search Exporters has banded together to try things like eight furniture companies hiring one rep in Mexico to represent all eight of their furniture lines. That kind of collaboration is amazing. So we’ve seen growth in companies learning how to increase international sales.”

The volume of North Carolina’s exports continues to grow, totaling $14.8 billion in the first half of 2013, up 6 percent from $14.1 billion for the first half of 2012.

Janz says he received a grant through the state’s STEP program that helped him with the costs of attending a conference in Singapore, where he connected with a new distributor. Now he is seeking a second grant for travel costs to Belgium in hopes of finding another distributor.

“Right now we have export dealings in about 25 countries,” he says. “Ten years ago it was like three.”

Janz has also worked with the Small Business Technology Development Center (SBTDC) at the University of North Carolina at Wilmington. A service of the University of North Carolina, the SBTDC is administered by North Carolina State University in partnership with the SBA with the aim of providing “export-related guidance and assistance to small and mid-sized businesses.”

It consists of 10 regional service centers and development units at 16 constituent institutions, all of which operate as a single program statewide, making it, the program boasts, “the most fully-integrated [small business development center] program in the country.”

The North Carolina Lawyers for Entrepreneurs Program—known as NC LEAP—provides free business-related legal advice to “low-wealth entrepreneurs and business owners;” a unique endeavor in that it serves all of the state’s 100 counties.

“While many other states have programs similar to ours or even modeled after ours, it’s my understanding that there are no statewide programs such as ours,” says Mary A. Horowitz, director of Public Service & Pro Bono Activities, at the North Carolina Bar Association Foundation.

Free mentoring is offered to new and young companies throughout the state by the Blackstone Entrepreneurs Network (BEN), which has partnered with Duke University, North Carolina Central University, North Carolina State University and University of North Carolina at Chapel Hill.

Yet another sign of statewide cooperation: All 68 of North Carolina’s community colleges have been engaged by the ITD to “help us do training for companies outside of metropolitan areas,” says Davis.

EAC’s Export University has helped ASI and North Carolina companies such as Charlotte-based Refiner Products Manufacturing (RPM), which builds equipment that grinds wood chips into individual fibers for the manufacture of paper and fiber board.

“That Export University thing is a really good program,” says Richard X. Taylor, co-owner of RPM. “Different experts speak on topics you have to know in order to export efficiently.”

The courses are designed by the U.S. Commercial Services and the volunteer non-profit North Carolina District Export Council, which also provides other benefits to business leaders, including Argus’ Viniconis and Flow Sciences’ Janz, who are members.

Also a North Carolina focus, helped by federal commerce officials, is to encourage companies to join the DEC and apply for President’s “E” Awards. Having received a President’s “E” Award for export achievements and been a member of the DEC, Flow Science’s Janz says both have helped him gain export business.

“Part of being on the District Export Council allows me to show someone that I have gone through some learning,” he says.

The “E” Award, he points out, “gives us additional credibility when we want to enter foreign markets. When you are talking with distributors and show them a federal award that has a gold eagle on it, that makes them feel better. It says the government says we’ve achieved something. Most people then say, ‘Let’s do business.’”

That inviting attitude also applies to North Carolina. In 2013 it was ranked the third-best state for business by Chief Executive magazine and the third-most competitive state by Site Selection magazine, which had ranked it No. 1 for best business climate in 2012. That same year, Forbes ranked North Carolina the fourth-best state for business and a CNBC survey ranked it fourth among America’s Top States for Business.

Located between port-heavy states Virginia and South Carolina, the Tar Heel state offers exporters many choices.

For export shipments, the North Carolina State Ports Authority operates ports in Wilmington and Morehead City, plus inland intermodal ports in Charlotte and Greensboro—although some North Carolina companies use more convenient and larger ports in South Carolina and Virginia.

Deborah Murray, executive director of the Caldwell County Economic Development Commission says, “The state is working to broaden our exporting opportunities by opening up the Port of Virginia to North Carolina businesses.”

The Virginia port has terminals in Newport News, Norfolk and Portsmouth, all just across the border from North Carolina.

Two major railroads, CSX and Norfolk Southern (NS), and several small short-line railroads serve the state. NS has intermodal facilities in Greensboro and Charlotte, though the land-locked facility in Charlotte is to be replaced with a larger one at the Charlotte-Douglas International Airport.

“That’s part of our Crescent Corridor project,” says Norfolk Southern spokesman Robin Chapman. “Most of the freight that travels on that corridor is hauled by truck so there’s a tremendous opportunity to get more of that freight off the highways and onto rail.”

Developing that intermodal facility for train, truck and plane, says North Carolina Commerce Department Secretary Sharon Decker, is “going to be incredibly important for North Carolina’s economy.

“North Carolina is a very attractive place to do business,” she concludes, “and we want to make it even more so.”


The Cornhuskers are Upping State Incentives and Exports

Jack Schreiner, president and CEO of Bruckman Rubber Co. in Hastings, Nebraska, always wanted to expand the sales of his company’s industrial rubber products through exporting. “But when you’re a little rubber company out in the middle of Nebraska how do you do that?” he asks.

Exports to China, Japan, the Philippines and Mexico now account for about 16 percent of Bruckman Rubber’s total sales, a figure he sees reaching 30 percent.

How did his “little rubber company” do that? Its international success is rooted in Bruckman’s participation in state-sponsored trade missions to Japan and Taiwan, but a major boost came when he joined 34 other Nebraskan business leaders on a seven-day trade mission to China led by Gov. Dave Heineman in the summer of 2012.

It was the state’s 10th such trade mission since Heineman became governor in 2005, three of which were led by him, including one to China and another to Japan. The destinations of the seven others included Hong Kong, Taiwan, Cuba and, again, China and Japan.

“I don’t think there’s any other way to do it,” Schreiner says of the trade missions. “For a company our size it’s just not practical to do it on your own. You’ve got to have help. You couldn’t just hop on a plane, go to China, get off and start to do business. And with the trade missions led by the governor, that opens a lot of doors.”

China, says Nebraska Department of Economic Development (DED) director Catherine Lang, is a country where the government’s sponsorship of trade missions has an impact, especially with the governor’s leadership.

“You kind of enter China through the government,” she says, “so it’s very helpful to have a government entity supporting businesses getting into China. That’s why we’ve put a lot of our effort into China. We can help open doors and make introductions. In other countries, state involvement is less important.”

Nebraska’s China-bound exports doubled to $488.24 million from 2002 to 2012, says Lang, while total exports reached $7.45 billion. The state’s largest export markets in 2012 were, in order: Canada, Mexico, China, Japan and South Korea. China was in fourth place only a year earlier, according to Lang.

“We have a strong Pacific Rim focus,” she says. “We’ve found that’s really where a lot of our opportunities for non-agricultural products lie.”

MAN ON A TRADE MISSION Jack Shreiner has seen a bounce in his rubber company’s exports thanks to state-led trade missions to various countries.
MAN ON A TRADE MISSION Jack Shreiner has seen a bounce in his rubber company’s exports thanks to state-led trade missions to various countries.

With financial assistance from a grant offered through the STEP program, Schreiner returned to China on his own in the spring of 2013 and worked with people from the Nebraska Center China in Shanghai who lined up business meetings, made hotel reservations and, best of all, “helped interpret stuff,” as Schreiner says. The Shanghai office, opened in March of this year, is a center similar to one Nebraska opened in Tokyo in November 2006.

Nebraska’s DED also sponsored reverse trade missions in 2008 and 2011, welcoming government leaders from 25 countries in an effort to attract foreign investment to Nebraska, says Lang. The resoundingly successful events enticed 35 companies—10 from Japan, seven from China and 18 from 10 other countries—to invest in the Cornhusker State.

Craig Stoffel, vice president of Omaha-based Werner Global Logistics, says these Chinese entries into Nebraska include two Chinese companies that purchased existing businesses—one on the verge of collapse—and two other companies that established operations for the export of meat and other farm products. Stoffel is proud to report Werner now handles some of the new shipping.

“These are examples of companies that [were] introduced to Nebraska on a trade mission or a reverse trade mission, liked what they saw and the state got aggressive attracting them here,” says Stoffel, whose company co-hosts the state’s trade offices in Shanghai and Tokyo.

“Our business in Nebraska is growing [nearly] double digits every year,” he says. “Most of that growth is the small and medium-size businesses that are finding new markets overseas and don’t know how to get their product shipped over there.”

Many of Nebraska’s exports are agricultural, but there are also products developed to support these businesses—either biomedical or equipment such as irrigation systems.

“You have a lot that is tied to the ag sector,” says Richard Baier, executive vice president, Nebraska Chamber of Commerce, “but it’s spilled over into a lot of other products.”

“Because the [irrigation system] business started in Nebraska and the four key players are here, [the state] has been a hub of activity for international growth,” says David B. Downing, president of international operations at Omaha-based Lindsay Corp. The company has a manufacturing plant in China but still exports from Nebraska to Canada, South America, the Middle East, Australia and New Zealand.

“Irrigation is Lindsay’s primary business,” Downing says. “It will continue to grow and the international space will continue to grow because there’s very little efficient irrigation that’s employed in the international space, especially in China.”

Jim Snyder, director of International Business Development at Reinke Manufacturing Co., agrees that China has “real water issues.” His Deshler-based company exports its product to more than 40 countries, China included. “The Chinese government is interested in irrigating more efficiently and have embraced our technology. That’s what’s driven the market in China.”

Despite the sprawling, picturesque cornfields so readily associated with Nebraska, its exports extend beyond agriculture and ag-related equipment.

Kawasaki Motors Manufacturing Corp. USA manufactures watercrafts, all-terrain and utility vehicles in Lincoln, breaking the Cornhusker state’s mold. About 20 percent of these Nebraska-made vehicles are exported, says Ryan Rikli, the company’s assistant manager of Logistics and Compliance. He says Kawasaki has received state assistance in the form of tax credits and other incentives that encourage its investment in Nebraska. “We also utilize the state’s internship program,” he adds.

Nebraska, like some other states, offers tax credits for angel investments and research and development, says the state chamber’s Baier, a former director of the Nebraska Department of Economic Development. The investment tax credits, he says, apply to all industry sectors and, as with the research and development tax credits, are refundable.

“You have no tax liability and can still get a check back from the State of Nebraska,” he explains.

The state’s “Nebraska Advantage” offers numerous tax incentives and programs, including separate funds for business innovation and site building, a Microenterprise Lending Program and the Nebraska Economic Gardening Program (NEGP), which was authorized by the Small Business Innovation Act (SBIA) to provide technical assistance and data analysis.

Invest Nebraska Corp. is also available to the state’s startups and emerging companies with high-growth potential. The private non-profit corporation works directly with entrepreneurs, researchers and companies to help commercialize technologies and access needed capital.

Logistically, Nebraska’s central location with two railroads and nearby major interstates is also attractive to businesses.

“Nebraska is home to two of the largest trucking companies in the country,” says Baier. “We also are home to Union Pacific Railroad and then Burlington Northern Santa Fe’s main line runs through Nebraska. Those things have really helped us solidify the transportation sector. You can use truck or rail to carry goods.”

Werner’s Stoffel agrees. “The rail infrastructure in and out of Nebraska is very good,” he says. “Going west there’s the Union Pacific and the Burlington Northern. Going east you cross over to the Norfolk Southern and the CSX. And then heading south you have service with the Kansas City Southern clear down into Mexico. The rail infrastructure plays a huge role in our state for supporting exports in all the different directions you’d want to go.”

And it’s getting even better. Burlington Northern is currently building a rail shuttle loading facility in Laurel for Agrex, Inc., an agricultural trading company, and it built a rail spur in Imperial for another exporter, AK Acres Popcorn Co.

The state’s successes haven’t gone overlooked; it has been at or near the top of numerous rankings.

Nebraska was the nation’s second-most business-friendly state in 2013 and fifth in terms of providing incentives and other tools conducive to business growth, according to research by Pollina Corporate Real Estate, Inc., a Park Ridge, Illinois-based national leader in corporate site selection.

Forbes’ rankings of best states for business placed Nebraska sixth and CNBC named it the fourth best for business in 2013. The U.S. Chamber of Commerce, in the most recent edition of its annual Enterprising States Report, ranked Nebraska 13th in overall economic performance in 2013, 23rd for exports and 11th for export growth since 2002.

Nebraska’s strong economic performance, the U.S. Chamber stated in its report, can be attributed at least in part to a robust, decade-long upswing in exports: More than 1,900 of its businesses now export products to markets outside the U.S.

“We’ve been watching from our offices the national rankings that come out,” says Baier from the state’s chamber. “With Nebraska among the top five or 10 states in the country in which to do business, what you’re seeing is really a reflection of a lot of work that’s been done over the last 10 or 15 years in Nebraska to really put a focus on job creation by establishing an environment in which it is easy for companies to do business.”



What can your logistics center do for you? If you’re Randy Redmer, director of Global Business Development, the answer is, “Open up new markets.” Working with Port Lansing Global Logistics Centre, the maker and supplier of components for special vehicles and equipment decided to leap into the global marketplace. “We had planned to export and Port Lansing was a real encouragement to us,” Redmer says of Michigan’s new distribution center. “It’s been a huge help in a number of ways. They’ve helped us acquire a couple new customers; they’ve helped us find and partner with some great freight forwarders; they’ve put us in contact with a law firm that helped us comply with export requirements and helped us resolve some issues we had with customs.”

The staff at Port Lansing Global Logistics Centre, which was developed to increase the Greater Lansing region’s involvement in global commerce, also introduced Redmer to the U.S. Commercial Service and Michigan Economic Development Corporation, from which his company has received two grants and applied for a third “to expand our exporting operations,” he says.

As with many distribution centers, Port Lansing is located in a foreign trade zone (FTZ) offering duty-free importation on goods used in assembly then exported. Redmer plans to utilize that duty-free status to bring in components from Asia for solar-powered survival lights that will become part of internationally sold survival kits. The company also plans to use the Port Lansing center to export modified vehicles and assemble tanks that will be sold into Asia, Africa and South America.

Port Lansing’s work with Redmer is part of a trend that has seen the rise of distribution facilities across the U.S., and a growing number of freight forwarders and third-party logistic providers (3PLs) are working with these facilities to provide advice to manufacturers, including encouraging companies to expand or, as in Redmer’s case, begin exporting.

COMIN’ ROUND THE MOUNTAIN Norfolk Southern recently opened three intermodal facilities and will open a fourth this year, bringing the rail line’s total to 23 such facilities.
COMIN’ ROUND THE MOUNTAIN Norfolk Southern recently opened three intermodal facilities and will open a fourth this year, bringing the rail line’s total to 23 such facilities.

Port Lansing, which has been designated as an inland port by an act of Congress, is being used by “a handful of shippers,” according to Brent Case, director of Foreign Trade Zone and Global Logistics Development for the Capital Region Airport Authority, which established and manages Port Lansing. Case says that “the purpose [of the port] was to increase the amount of international freight moving through Lansing and to encourage area businesses to look at exports and international trade.”

Currently there are about 500 importers and exporters within 50 miles of Port Lansing, according to Case, with “a growing critical mass of people getting interested in international trade and looking at exports.”

A wide range of services—freight forwarding, logistics-operation management, trucking, warehousing, freight consolidation and containerization—are provided to Port Lansing users by members of the Port Lansing Global Logistics Cooperative. These intermodal services are being offered by an increasing number of distribution facilities.

By bringing together such private entities, a facility is at the forefront of providing all kinds of logistics efficiencies, explains Jeff Jorge, executive partner with Royal Oak, Michigan-based Global Development Partners, a member of the Port Lansing Cooperative.

“We’re seeing this trend start to migrate toward some of the more forward-thinking folks,” he observes. “Private industry is making these global gateways more aware of how they can incorporate those systems to make what they do even better for the exporters surrounding a particular location.”

More distribution and intermodal facilities are being opened, often by railroads, to carry exports to sea ports by rail and even air as trucking costs continue to rise and delivery time becomes more important. The aim is to place distribution facilities near producers of goods bound for export and reduce the dependence on slower, more costly trucks.

TRAINED FOR BUSINESS BNSF’s intermodal parks, like Logistics Park Chicago pictured here, are built alongside its rail tracks to reduce dependence on costlier, less environmentally friendly trucks.
TRAINED FOR BUSINESS BNSF’s intermodal parks, like Logistics Park Chicago pictured here, are built alongside its rail tracks to reduce dependence on costlier, less environmentally friendly trucks.

Burlington Northern Santa Fe (BNSF) and Union Pacific (UP) are among those railroads which have been building their own distribution centers along their tracks in areas with high import and export activity, while Kansas City Southern (KCS) has partnered with selected warehousing, trucking and logistics firms for the operation of distribution facilities, or “TransLoad Centers,” as the company calls them. KCS has some 50 small TransLoad Centers in 10 central U.S. states that serve nine gulf ports in Texas, Louisiana and Mississippi. It also controls five larger intermodal facilities in Kansas, Mississippi and Texas and extends its rail line into Mexico, where it serves three gulf ports and one ocean port.

Union Pacific operates some 30 intermodal facilities—“the largest intermodal network in North America” with “the most intermodal capacity in the industry,” the company says—from Chicago to the Pacific Ocean and south to the Gulf of Mexico. It is currently constructing what it terms a “new, state-of-the-art rail facility” in southern New Mexico, the Santa Teresa Logistics Park, to provide that state with its first key inland port. The logistics park, scheduled to open in March 2014, will feature an intermodal ramp, fueling facilities and an intermodal block swap/switching yard.

The most ambitious logistics park being built is BNSF’s Logistics Park Kansas City Intermodal Facility (LPKC). Krista K. York-Woolley, a corporate director, says LPKC is “set to become among the largest, most modern freight logistic centers in the industry, a master-planned distribution and warehouse development configured to suit the broadest range of multi-modal needs.” The logistics park will add to BNSF’s intermodal facilities in Stockton and San Bernardino, California; Alliance, Texas; Chicago and Memphis.

Located 25 miles southwest of downtown Kansas City, Kansas, on a FTZ site with 535 developable acres, LPKC will offer direct rail service to and from Pacific and Gulf of Mexico ports and immediate access to Interstate Highways 35, 70 and 29. It will feature container and trailer service, six 8,000-foot strip tracks, five wide-span cranes and an automated gate system.

Norfolk Southern Railway, which has rail lines in 22 eastern states and the District of Columbia, recently opened new distribution facilities in Memphis; Birmingham and Green Castle, Pennsylvania; and will be opening a fourth new facility in Charlotte, North Carolina, at the end of 2013. According to Jeffrey Heller, group vice president for International Modal Operations, these additions will bring Norfolk Southern’s total number intermodal facilities to 23.

“The new facilities are like others in terms of features, Heller explains. “We have gates that allow trucks to go in and out without a physical check. We have locations so trucks know where to go to pick up their boxes. The goal is to get a truck in and out of the facility as fast as possible.

“They’re located either in areas that have some manufacturing or some consumption, which are the bigger cities or where there’s additional land that could help foster new activity, whether it be imports or exports,” he says. “Intermodal is now our fastest-growing segment. That probably speaks for most of the other railroads as well.”

TAKE A LOAD OUT Workers unload a Kansas City Southern train at a customer facility in Dallas, Texas.
TAKE A LOAD OUT Workers unload a Kansas City Southern train at a customer facility in Dallas, Texas.

What’s driving this increase? “Conversion from truck to rail,” Heller explains. “The potential business is in the majority of the freight that currently moves over highways. Fuel costs are going up. Highways are becoming congested. And there’s the whole environmental issue. We can move 280 to 300 boxes on one train, which would be 280 to 300 trucks on the highway. That causes us to add more capacity.”

Other efforts to create distribution facilities without direct railroad participation are under way.

Sean Wilcock, vice president of Imperial Valley Economic Development Corp., says his company is working toward establishing a distribution facility in the area east of Los Angeles that has a Union Pacific line running to the Long Beach and Los Angeles ports and could be used by exporters. Raw materials, using a reopened old train line, could be shipped to maquiladoras in Mexico for assembly, with finished goods being brought back, he explains.

“There are no other distribution facilities in this general area,” Wilcock says.

Central Indiana also is becoming a major distribution hub, says Charlie Podell, a senior vice president of Indianapolis-based Duke Realty Corp. Duke Realty recently co-developed AllPoints Midwest on land outside Indianapolis as a logistics headquarters and distribution park for Beloit, Wisconsin-based Regal Beloit Corp., which makes electric motors and generators and mechanical motion control products that it sells internationally. With the area crisscrossed by major interstates and rail lines, as well as being home to an international airport and FedEx’s second-largest hub, there is much export and import activity, providing Regal Beloit and others multiple transportation options.

Increasing land costs near sea ports make inland distribution facilities more attractive for both importers and exporters, says Olen Wood, president of Freeport, Long Island-based EMO Trans Inc., a freight forwarder with a new logistics office and warehouse operation at Port Lansing that opened in March. Wood says the facilities are especially attractive to exporters solely interested in getting goods onto vessels, not distributing imported goods throughout the U.S.

“The closer to a port you get, the more expensive the square footage becomes,” he notes. “So if you’re not doing business that’s tied directly to an importation process, or if the goods are not of high value, then part of your cost-basis is having the lowest possible costs for the warehouse space itself.

“So you see that logistics centers, distribution centers, warehousing centers, container freight stations and terminals are being opened because they can play a significant role in the cost and efficiency of delivering goods to a rail terminal and then using rail to move those goods to a port for export,” explains Wood.

“It’s very much an intermodal type situation that utilizes truck, rail and then ultimately ocean freight services,” he says. “Intermodal is a huge part of the industry and one that’s been coming into its own in the last 20 years.”