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Business Is Booming

Business Is Booming

Last December, as 2013 ticked to a close, a clutch of more than 200 U.S. fireworks technicians based temporarily in the United Arab Emirates heard the bad news: The four cargo vessels that Fireworks by Grucci, Inc. shipped out had been delayed by Typhoon Haiyan. The missing pyrotechnics were vital to staging what their client, the emirate of Dubai, was promoting as the world’s Largest Fireworks Display.

As the big night approached, executives from Guinness World Records, the self-appointed adjudicators of global superlatives, arrived in Dubai and set up their own camp. The Guinness team would audit Grucci’s display to determine if Dubai’s event deployed more firepower than Kuwait had three years earlier, when it celebrated its 50th constitutional anniversary with a record-setting 77,282 fireworks.

Grucci workers set up some 500 computer-networked launch pads across more than 60 miles of Dubai coast as they awaited the missing containers. The vessels “were delayed for about a week, which upended the entire production process,” says Phil Grucci, the company’s chief executive. “We worked together. We maybe worked a little harder. In the end it all came together successfully.”

Ultimately, the technicians and management team logged more than 5,000 hours rigging the New Year’s spectacular. The display was designed to showcase the capital’s two most renowned structures: the Burj Khalifa tower, the world’s tallest building, and the Palm Jumeirah international hotel.

Twenty seconds before midnight, the Gruccis set off the first round of aerial rockets from high up on the tower, encasing the skyscraper within a grid of exploding lights. Over the next 60 seconds, tens of thousands of fireworks popped thunderously amidst a barrage of aerial illuminations, smoke and explosive cheers.

RISING STAR A 19-year-old Phil Grucci putting some finishing touches on a massive firework.
RISING STAR A 19-year-old Phil Grucci putting some finishing touches on a massive firework.

The program continued into the early minutes into 2014. As hundreds of thousands roared their approval and flashed cellphones, the Gruccis produced a series of customized designs against the night sky: a serial countdown in Arabic numbers; the red, green, white and black flag of the U.A.E.; and a depiction in exploding pixels of an international award recently bestowed on Dubai. An orchestral score composed for the occasion played from loudspeakers, synchronized to the rocketry. Five minutes into the new year, Grucci sent out its final salvo: tens of thousands of fireworks depicting a midnight sunrise along the seafront.

All told, the Gruccis detonated half a million fireworks, an amount more than six times Kuwait’s total. The “Largest Fireworks Display” title was now Dubai’s.

“Truly impressive,” declared Guinness World Records chief Alistair Richards. “All eyes are on Dubai.”

Indeed. As a global business city intent on demonstrating its world-class scale, Dubai had seized the world’s attention and showcased its two preeminent structures as millions around the world watched on TV and the Internet. Grucci, of course, had been instrumental. “The purpose of the show was to raise global awareness of Dubai and to position Dubai as one of the world’s great cities, like Paris and New York,” says Jerry Inzerillo, chief of IMG Artists, the international festival-management company and a frequent Grucci collaborator. “It worked,” he adds.

At a reported price tag of $6 million, the event was Grucci’s top revenue producer last year, as the company’s exports topped its domestic sales for the first time. It won’t be the last. “Grucci is a key player in the global fireworks market,” says Julie Heckman, executive director of the American Pyrotechnic Association. “There are very few American companies that are actively exporting.”

She adds, “Grucci showcases what the U.S. fireworks industry is all about.”

ABOUT TO BURST Phil Grucci with a host of fireworks. The company’s international sales topped its domestic total for the first time in 2013. (Photo by Lauren Grucci)
ABOUT TO BURST Phil Grucci with a host of fireworks. The company’s international sales topped its domestic total for the first time in 2013. (Photo by Lauren Grucci)

Well known as a major fireworks producer serving the New York metropolitan market from its Long Island base, Fireworks by Grucci has been steadily expanding its footprint in recent decades. The company has handled a series of increasingly high-profile shows including seven consecutive presidential inaugurations; the Olympic Games in Salt Lake City, Los Angeles and Lake Placid; and public festivities such as the Statue of Liberty and Brooklyn Bridge centennials. More recently, Grucci has advanced its brand prominently on the world stage, handling such global commissions as the 2008 Summer Olympic Games in Beijing, the grand opening of the Palm Jumeirah and Atlantis Resort in Dubai the same year, and the 2012 World’s Fair in Yeosu, South Korea.

The company’s first significant overseas exposure came in 1979, when the clan competed in what was then the world’s foremost international fireworks competition, in Monte Carlo.

At age 16, the future CEO was working after school at the family business when he accompanied his grandparents, father and aunt to Monte Carlo. Along for the ride was George Plimpton, the bon vivant author and fireworks buff. After a shaky beginning, the Americans pulled off a memorable upset, snatching the Gold Medal ahead of a field of far better known, internationally experienced competitors. It was the first time an American fireworks company had taken first prize in Monte Carlo. Thanks to the prolific and participatory Plimpton, several books, a widely-viewed network TV documentary and a series of magazine articles ensued. The media attention introduced the irascible patriarch Felix J. Grucci Sr. and his family to a national audience. When a journalist dubbed the Gruccis “America’s first family of fireworks,” the tag stuck.

After Monte Carlo, the Gruccis accrued a series of high-profile commissions: the Winter Olympics in Lake Placid in 1980; Ronald Reagan’s presidential inauguration in 1981; the World’s Fair in Knoxville, Tennessee, in 1982; the Brooklyn Bridge centennial in New York in 1983. Business was booming.

Then tragedy struck. In November 1983, several months after the Brooklyn Bridge show, the company’s fireworks plant in leafy Bellport was rocked by a lethal explosion. The blast took the lives of Phil’s father James and a young cousin, Donna. Two dozen neighbors were also injured and more than 100 homes damaged. In the tight-knit community where nearly everyone knew a Grucci and the Gruccis knew nearly everyone, the devastation was widely felt and highly personal.

Felix Jr.—Phil’s uncle, and the patriarch’s surviving son—recalled the emotional turmoil nearly 20 years later in an interview with The New York Times. The accident “destroyed the family morale,’’ he told the Times. ‘’But my sister and I decided we couldn’t leave the fireworks business and let that be the final chapter.’’

The company decided to relocate its headquarters to a commercial district in the town of Brookhaven, far from residential neighbors. As for the plant, a location was chosen near a military compound in Radon, Virginia.

As the patriarch’s health declined, operational responsibilities shifted to his two surviving offspring. Phil, having graduated college with a degree in finance, came back full-time. Bean-counting, however, was not in the picture. “I focused on design and manufacturing,” he recalls. “I tried to fill the void left by my father’s death.” His uncle, meanwhile, shifted his attention to politics, pursuing a series of elective town offices that led to a term in the U.S. House of Representatives. Donna’s role increased, as did Phil’s.

The Gruccis “are incredibly proud of Uncle Felix, no doubt about it,” recalls his nephew. “But if having a Grucci in Congress helped the family business any, I’d have to say the answer is no.”

Atlantis, The Palm in Dubai, UAE
Atlantis, The Palm in Dubai, UAE

The family business seemingly needed no help from Washington; it was again doing quite well on its own. Once known mainly for entertaining metro New York crowds on the Fourth of July and other holidays, as local government commissions have diminished, Grucci has branched out significantly, building an international year-round portfolio of events sponsored by hotel groups and luxury brands, professional sports team owners and festival management companies, sovereign states and NGOs. Steve Wynn, head of Mirage Resorts, says, “Grucci has dedication to first-class performances. They make me very confident and safe whenever I put myself in their hands, and I intend to do it as often as possible.”

Major buzz-building shows from the ’90s included the three-city Columbus Quincentennial, both Clinton presidential inaugurations, Yves Saint Laurent’s launch of Champagne Perfume and Macy’s July 4, 1995, festivities.

In the aftermath of 9/11, however, government anti-terrorism restrictions temporarily shut down the public fireworks industry in New York and other population centers. Grucci fell back on its secondary business, providing munitions testing to defense procurers. It also began paying more attention to markets overseas. At the time, exports accounted for perhaps 5 percent of revenues.

The Bird’s Nest, Beijing, China
The Bird’s Nest, Beijing, China

Developing an international market can be a “long, arduous task to achieve the first invitation,” says Phil Grucci. You “must be prepared to invest in travel to physically meet the prospects. There are many communities that respond very positively to the personal handshake and face-to-face meeting.” He adds, “I still believe very much in this style.”

Not surprisingly, Grucci views shipping explosives as the company’s biggest exporting challenge—by far. “We are continually trying to streamline the process but with the many borders that are crossed to get the fireworks from the United States, Europe and China to Dubai, that is a challenge.”

Much pre-event preparation involves setting up lines of communication with various levels of government authority. The Gruccis’ routine advance work includes contacting the police department, fire department, civil defense, coast guard, national parks service, federal transportation department, protective services, private and public security services, aviation authorities and the local bomb squad. Internationally, the list can stretch even longer.

Good logistics and careful attention to safety practices are paramount concerns, he says.

Statue of Liberty, New York, USA
Statue of Liberty, New York, USA

“Overseas, our clients tend to be sovereign states that want their displays to make a statement,” Grucci says. “Often, we’re commissioned as part of a national celebration, an anniversary, a commemoration or a national accomplishment. There’s a great deal of pride involved. The displays need to be perfect in their eyes. There is no room for anything to go wrong. In this industry, you’re only as good as your last show.”

When your last show is hailed as a global success, that’s a good place to be. As Phil Grucci points out, producing a successful international show is the best route to being asked to produce further international shows.

“There is no guarantee that when you take a brand that transcends generations and it’s your last name, just because your father or grandfather was great at something doesn’t mean you’ll be great,” observes IMG chief Inzerillo. “Phil has taken a great entertainment company and has shown the quality and innovation to be the single most powerful brand in his field. It is undisputed that when you say Grucci you are talking about the Rolls Royce of fireworks.”

Free to Trade

Free To Trade: How Free Trade Agreements Open Global Markets

Wente Family Estates has been selling wine in the Republic of Korea since the new century began, targeting restaurants and wine clubs. The Livermore, Calif., company’s growing Korean sales reflect changing taste preferences and alcohol consumption habits in that Asian country, a trend fueled in part by increased business and holiday travel to the West. In 2012, U.S. wine exports rose 50 percent over the previous year, reaching $15 million, a surge many wine exporters—Wente Family Estates Vice President of International Sales Michael Parr included—attribute to the Korea-United States (KORUS) Free Trade Agreement that went into effect in March 2012. Among other things, the agreement eliminated Korea’s 15 percent tariff on alcohol.

In the world’s 14th largest market, U.S. wines compete head to head with wines from Chile, Parr notes. Chile had enjoyed a price-point edge in this competition since Korea and Chile signed their own free trade deal in 2003. With the KORUS in place, that gap disappeared and prices dropped about 8 percent at the consumer levels. “That’s helped us build recognition for our wines,” Parr says.

South Korea now ranks second among Asian markets for the San Francisco-area vintner, behind Japan and ahead of Hong Kong and Singapore. Overall, Wente ships to more than 80 markets, primarily through single-market distributors. Exports account for nearly 25 percent of about 500,000 cases per year.

The KORUS FTA, negotiated simultaneously with similar pacts governing trade with Colombia and Panama, is the most impactful of the three agreements the U.S. Trade Representative has signed so far this decade—and clearly the most important trade deal since the mammoth North American Free Trade Agreement (NAFTA) went into effect in 1994, expanding tri-lateral trade between the U.S., Canada and Mexico. The U.S. has now signed pacts with 20 countries, encompassing nearly half of all export sales. The Trade Rep is currently negotiating pacts with two Pacific trade alliances that, when completed, will extend the free trade umbrella to nearly two-thirds of America’s export markets.

The agreements accelerate imports and exports by slashing or eliminating tariffs, while clarifying what Judy Reinke, acting assistant secretary for global markets at the International Trade Administration, calls the “rules of the road”—the largely informal arrangements that govern commerce. To Reinke, the value of free trade agreements defies debate. “U.S. exports to our 20 free trade agreement partners are up 57 percent since 2009,” she notes. “Our exports to the rest of the world are up 44 percent in that same period.”

While U.S. exports to South Korea overall were flat in 2013, trade with Colombia and Panama—2012’s two other free trade partners—continued to rise. With Panama, U.S. exports increased to $10.8 billion last year, up nearly 10 percent from 2012. Results in Colombia have been even stronger, up nearly 19 percent in the agreement’s first year, to $18.6 billion.

“We export to a number of countries around the world, and the free trade agreements have enhanced our sales,” says Ernesto Pinal, executive vice president at nextScan, a manufacturer of scanning equipment based in Boise, Idaho. In 2013, nextScan doubled sales in Colombia while expanding in Mexico, Canada, Israel and Bahrain—all free trade partner countries.

“In Colombia, before the free trade agreement, you had to submit an application in advance,” recounts Pinal. “At Customs they’d look into the classifications to see where your product falls. You’d get your classification. Six months later, your next Customs guy hits you with a different classification and a different tax code. You have to fight it. It took a long time. Now the codes are harmonized. We fill out the code and we ship.” Moved via express carrier, products now stay under 48 hours at Customs. Recalls Pinal: “Customs used to take two to three weeks.”

To Eugene Laney, vice president for International Trade Affairs at DHL Express, the big benefit of free trade is the introduction of what he calls “increased efficiencies” through eliminating the broad range of annoying practices and policies that protect domestic supplies—the hodge-podge of origin quotas, informal favoritism, arbitrary regulations and sheer bureaucratic inertia. With trade deals in force, regulatory bodies on both sides of the trade equation “agree to accept the other country’s certifications,” says Laney. “In this way, markets open up.”

Free trade agreements generally introduce international dispute mechanisms, reducing the risk of doing business in markets where the legal infrastructure is murky. “When you feel you can protect your intellectual property, you’re more comfortable selling into a new market,” adds Laney.

Free trade advocates contend the pacts benefit consumers by widening choices, reducing protectionism and lowering prices. As consumer markets mature, demand for U.S. products rises.

“We ship a lot to South America, and the free trade agreements—especially with Chile and, before that, Mexico—have been good to us,” says Manny Fernandez, executive vice president of Logistics Operations for Flagler Global Logistics in Coral Gables, Florida. Chile’s domestic retail industry has matured in the years since the U.S.- Chile Free Trade Agreement was signed in 2004. U.S.-based chains like Walmart and Home Depot add efficiency to distribution strategies, as middle-class tastes and expectations grow. “In their winter, Chile now buys huge amounts of oranges and lots of other produce from the U.S.,” Fernandez adds. “That wasn’t so before.”

Cast into the national spotlight, each new free trade partner finds itself courted in turn by American companies suddenly eager to initiate or expand business. “Our evidence is that trade agreements drive two-way trade 50 percent higher than it would have been,” says Gary Hufbauer, senior fellow at the Peterson Institute for International Economics in Washington. “Trade peaks in five to eight years, and stays at that level.”

Support for the current round of trade agreements, which would extend free trade terms to Japan and a dozen much smaller economies, is avidly supported by figures like DHL’s Laney. “When the U.S. signs a free trade agreement, we experience a huge increase in commerce,” he says. “Each agreement represents a huge opportunity. Yet even now, many exporters are unaware of the opportunities opening up.”

The State of Indiana

The Hoosiers’ Export Focus Is Paying Dividends 

Back in 2006, seeking to diversify its 95 percent-domestic customer base, Hoosier Gasket Corp. hired Oleg Gostomelsky and tasked him with cultivating a clientele in Eastern Europe. A personable engineer who speaks fluent Russian as well as English and had studied international policy at West Point, Hoosier Gasket’s new vice president could presumably sit down with prospects across the former Soviet bloc without need of either interpreters or back-up engineers.

He could indeed, and set out to do just that.

Key resources emerged close to home. After meeting Mark Cooper, director of the U.S. Commerce Department’s Indiana office, Gostomelsky registered with Commerce’s Gold Key program. Perennially popular among manufacturers, Gold Key helps identify distributors and potential customers in their overseas territories, then arranges introductory meetings on behalf of export managers. U.S. embassies are often pressed into action to support the new connections.

In 2008, Gostomelsky flew to Kiev for a series of meetings Gold Key had set up at factories across Ukraine. His seventh sit-down, in the headquarters of the giant Kharkov Tractor Plant known by its Cyrillic acronym XTZ, produced a major win: The company committed the bulk of its gasket purchasing budget to Gostomelsky’s employer. Since then, back home in Indiana, the globe-trotting vice president has turned to Gold Key for additional matchmaking missions, while following home-grown customers deeper into international waters.

When Chrysler sold a manufacturing license to the Gorky Automotive Plant, the Russian automotive giant known as GAZ, Hoosier Gasket piggybacked the deal, forming its own connection with GAZ, then with other original equipment manufacturers in Russia and Ukraine. Gostomelsky, whose grandparents spoke Russian at home, also helped form a joint venture involving his company’s Indianapolis neighbor Cummins and the Kama Automobile Plant, the large-truck producer. The market for U.S.-made vehicle parts in Russia has surged in the wake of normalized trade relations in 2012.

In seven-plus years at Hoosier Gasket, Gostomelsky has helped expand the company’s international base considerably; exports now account for about 15 percent of its $25 million in annual revenues, with a growing overseas customer base in China, Brazil, India, Australia, Russia and Ukraine. In 2012, Hoosier Gasket received Commerce’s Export Achievement Award; the same year, Gostomelsky joined the board of the Indiana District Export Council (DEC), a volunteer group supported by Commerce. Through DEC, Gostomelsky speaks regularly to business groups about the advantages of exporting. He’s especially keen on promoting Export University, DEC’s full-day export fundamentals program targeting new-to-export businesses, held in conjunction with local chambers of commerce.

“Education is vital if we are going to export more,” Gostomelsky says. “Speaking other languages besides English is vital too. We really have to be global.”

DEC’s Indiana chairman, David Williams Russell, is firmly in Gostomelsky’s corner. “People like Oleg are key to exporting in Indiana,” says Russell, an international trade lawyer at Harrison Moberly. “Our approach is to encourage people who know how to export to mentor others. They volunteer to help people around the state. I’m delighted at the growing demand for DEC seminars across Indiana.”

David and Beth Johnson, owners of an Indianapolis vending company called Fish Face Photo Booths, attended Export University last year, where they met trade consultant and DEC volunteer Andrew Reinke. The Johnsons’ company provides retro-style photo booths for use at parties and events, and has been selling overseas since 2010. After the program, the owners continued working with Reinke and his consulting firm, Foreign Targets Inc., through funding provided by Indiana Small Business Development Center.

The Johnsons already exported to Egypt, Spain, Australia, Poland and Canada; they now eyeballed Mexico. Reinke undertook a market research project and determined the Johnsons could lower tariffs and reduce costs for customers. He also located a customs broker for Mexico.

“Andrew’s been an amazing help,” affirms David Johnson. “He’s made exporting so much less scary for us.”

CHUGGING ALONG Norfolk Southern and CSX Transportation combine to operate more than 4,200 miles of Class I railroad tracks in the state of Indiana.
Norfolk Southern and CSX Transportation combine to operate more than 4,200 miles of Class I railroad tracks in the state of Indiana.

Across the state, export promotion efforts are paying dividends. Indiana exports totaled $34.4 billion in 2012, the last full year for which data is available. The total set a record high for the state, growing at a faster rate than both the U.S. and other Midwestern states, according to Tanya Hall at the Indiana Business Research Center at Indiana University’s Kelley School of Business.

Hall attributes the state’s export growth to rising sales of industrial machinery and vehicles and parts, paced by global giants like Cummins, as well as small and midsized family-owned businesses like Hoosier Gasket. The state’s top two export categories are vehicles and parts and pharmaceuticals. Industrial machinery ranks third, followed by optical and medical instrumentation. Life Sciences exports are led by Eli Lilly, the Indiana pharmaceutical conglomerate, and newcomers like Roche Diagnostics, which opened a new plant in Indianapolis in 2012. Aircraft and aerospace parts, agricultural products, recreational and specialty vehicles, and musical instruments are also major export categories.

While Indiana’s top three long-time export markets are Canada, Mexico and Germany, recent growth has occurred in China, Brazil and Spain. Germany is the top market for the state’s pharmaceutical and medical equipment industries, and Spain now absorbs a growing percentage of Indiana goods. Canada, which accounted for more than half of Indiana’s export sales as recently as 1999, presently absorbs just over a third, reflecting the growing appetite of other trade partners.

“Relatively speaking, exports are more important to Indiana” than is the case in most other states, Hall says. While Indiana’s gross domestic product ranks 16th nationally, it ranks 11th in terms of export dependency, or the percentage of GDP represented by sales overseas.

Indiana’s motto—the Crossroads of America—is borne out by its logistics and transportation cluster, one of the largest in America. No fewer than 14 U.S. interstate highways intersect in greater Indianapolis. More than 4,200 railroad-track miles are operated by such Class I railroads as CSX Transportation and Norfolk Southern. Shippers have their choice of international airports in Indianapolis, Fort Wayne and Gary, as well as proximity in the northern part of the state to Chicago’s O’Hare International and in the south to Louisville International. Shippers capitalize on the state’s advantageous position on both the Ohio River to the south and Lake Michigan in the northwest, moving more than 70 million tons of cargo by water each year. Cargo goes through Lake Michigan into the Great Lakes/St. Lawrence Seaway and via the Ohio River into the Inland Waterway System.

Global is local in Indiana, as business owners, executives and entrepreneurs have abundant export mentors close at hand. “Hoosiers tend to be very giving and very helpful people,” remarks Reinke, the DEC consultant and former president of the Indianapolis World Trade Club. “It’s a Midwestern way of living. We are generally willing to take the time to answer questions. We don’t feel we’re above helping others. I think that’s one reason export programs have caught on so prolifically.”

Home On The Mountain Range


Kelly Adams answers the phone: “Wild Touch Taxidermy…” The caller, from the Idaho Department of Commerce, wants to know if Adams would meet a visiting delegation from Taiwan coming into town in a few days.

Adams agrees to meet the visitors in his shop in Meridian. The visitors troop in and discover the mounted bear, the six-point elk, the mountained peacocks, the stuffed moose—all preserved in action poses. The taxidermist is instantly besieged by questions:

“Is this real?”

“What animal is this?”

“Where did you get this?”

The mythology of the American West holds enormous sway in Asia, as many Americans discover in their travels. Adams’ Taiwanese guests were “fascinated by our Old West motifs,” the taxidermist observes. “They went bug-eyed. They were especially fascinated by antlers.”

The shopping expedition convinced Adams a market existed for his products in Asia. He booked a booth at a home décor expo in Taiwan a few months later, reaching an audience of more than 70,000. Among the exhibitors were quite a few businesses that, like his own, reflected an Old West motif, including log cabin model homes exporters. “I felt like I was in Jackson Hole, Wyoming,” says Adams. “They are fascinated with all things western.” The visit opened up a market for his craftsmanship, which in addition to mounted beasts includes his own line of fanciful furniture constructed from antlers, animal skins and other wildlife parts

“Peacocks,” he says. “They love peacocks.”

Adams wrote enough business to return to Idaho and fill a container. The new market continues to produce abundant export business. The downside, however, is the international shipping involves multiple layers of government, here and abroad—and all the attendant paperwork.

“I spent my morning with the feds, and I’ll spend my afternoon with the state,” Adams sighs, describing the time he allocates to handling the permits, registrations and shipping documentation required by his new export line. “You have to pay attention,” he says. “The penalties for getting it wrong are severe.”

Still, he’s glad for the new business. “The funny thing is, I almost didn’t get the call,” he says. “The Commerce guy told me later he was so glad I said yes to him, because he had approached all the other taxidermists in the area and they turned him down.”

Idaho exported about $7 billion in goods and services in 2012. Semiconductors and components led the trade parade ahead of oilseed and grain exports, aerospace products, metals and dairy. Top export services included travel/hospitality, industrial processes and port and freight services. The nation’s top exporter of potatoes, Idaho also leads in shipping hay, sugar beets, grains and animal pelts.

Export success is sweeping the Rocky Mountain region. Colorado exporters can take advantage of services offered by a number of federal, state and other agencies. Several new state trade promotion programs came online recently, including Export Aid, launched last December by Colorado’s Office of Economic Development and International Trade (OEDIT). Aimed at helping small and mid-sized companies market overseas, the program established a global consultant network that provides country-specific research, created an export training program, and provides matching grants up to $15,000.

A sister program called the Advanced Industries Export Accelerator Program targets seven industries associated with higher wages and greater export potential and helps new-to-export companies fund marketing efforts, obtain needed certifications and overcome other export hurdles. The industries are aerospace, advanced manufacturing, life sciences, information technology, electronics, energy and infrastructure engineering. This program also began in December.

“We know that when Colorado expands its exports, businesses increase their productivity and generate jobs,” says Ken Lund, executive director of OEDIT.

Largely an agricultural producer, Montana exported $2.5 billion in 2012. The leading export was bulk wheat, of which $915 billion worth was shipped primarily to Japan and other Asian markets. Other top export categories were fossil fuels, chemicals, industrial machinery and vehicle parts.

After doubling exports every year since 2009, Utah’s run ended in 2013. Exports slipped about 12 percent, following an April landslide that shut down production at Rio Tinto Kennecott Utah Copper’s Bingham Canyon Mine, a major extractor of gold and other metals 20 miles outside Salt Lake City. Gold and other metals being the state’s top export category, this interruption kneecapped export productivity. Other major export categories increased, however, including medical devices, genetic medical treatments and information technology.

Utah has become a magnet for high-tech firms in recent years, as companies like eBay, Oracle, Twitter and Adobe have joined homegrown enterprises such as Novell and Fusion IO in a high-tech global economy. “Companies that used to relocate to the Silicon Valley as they grew are now making Utah their home,” said David Fiscus, director of the U.S. Commerce Department’s Export Assistance Center in Salt Lake City. While Utah lacks a seaport, a strong logistics industry compensates for that, he says. Union Pacific Rail maintains a multimodal facility in Ogden, and most major air carriers have a presence in the state.

Total Wyoming exports for 2012 were $1.4 billion, dominated by chemical export sales approaching $1 billion; other top categories were oil and gas, machinery and agricultural products. The Wyoming Business Council, the state’s economic development agency, operates an international trade development effort to link Wyoming firms with new global markets. One of its services, the Wyoming International Trade Assistance Program, is operated jointly with Manufacturing Works and, offering product development support and links to funding sources.

Having the smallest population of any state, Wyoming is also a powerhouse producer of coal, natural gas and petroleum, and the nation’s leading exporter of domestic energy. The state’s liquefied natural gas production plants have helped expand that industry in the U.S. and helped launch key transportation initiatives, including rail transport projects run by Burlington Northern Santa Fe and Alpha Resources.

Sitting atop the vast Bakken shale deposit, Wyoming’s natural resources attract an ongoing supply of international visitors. This traffic provides multiple benefits to small exporters from multiple industries, says Arnold Sherman, executive director of the Montana World Trade Center. “Thanks to Bakken shale,” says Sherman, “we’ve hosted trade missions from around the world.”

Such missions have proven successful, as evidenced recently by a craftsman who produces artisanal wood products from downed trees. He took advantage of a visiting contingent of industrial purchasers from China and Korea to sell them high-end décor fabricated from unique pieces of wood featuring colorful patterns caused by residual parasites.

“This small craftsman closes an export deal with the Chinese and Koreans who came for the Bakken shale,” muses Sherman. “It was great timing.”


Where in the world is Idaho Governor C.L. “Butch” Otter?

You might find him in the Boise statehouse. But maybe he’s overseas, escorting a delegation of Idaho companies on one of the trade missions that have become a hallmark of his administration.

Tapping three decades of experience in global business, the retired president of food and agribusiness company Simplot International brings an internationalist’s savvy to the task of opening doors overseas for local companies. Having led or co-lead 14 trade missions, the governor is an old hand at opening doors that might require official credentials, making friendly introductions across language and cultural barriers and addressing regulatory or diplomatic issues vexing Idaho exporters.

Last year, Gov. Otter led missions to Russia and Asia, including visits to South Korea, Taiwan and Vietnam. The prior year, he headed a mission to China, visiting Chengdu, Shanghai and Beijing. Russia is now one of Idaho’s top 10 export markets for agriculture products, including the state’s iconic potatoes.

Participating companies lay the groundwork for $2 million to $3 million in sales to Russia over the next three years, his press office declared after the 18 Idaho companies returned home. Dynamite Marketing, a pet food manufacturer, found new customers in Taiwan, and cheese-maker Glanbia Foods reported “excellent sales” to South Korea, according to the statehouse.

Of his 30 years with J.R. Simplot Co., Gov. Otter says: “I … worked my way up through the ranks to become head of several different divisions, including president of Simplot International. I traveled to more than 80 countries around the world, setting up potato processing plants and contracting with local growers throughout Europe, Asia and Latin America. I came to understand the importance of personal relationships in that process, and the importance of respecting and working with government officials and private business people, within the structure of local law, culture and tradition, to achieve our shared goals.”

He adds, “I learned how international trade works, and how important it can be not just to individual businesses but to entire economies.”

How Ohio Is Milking Exports


Earlier this year, Redex Industries, Inc.’s operations director, Linda Kuzior, received a phone call from a customer who had packed a tube of the company’s Udderly Smooth skin moisturizer on a recent expedition to Antarctica. The news was a big deal to Ms. Kuzior, who had publicly announced her goal was to bring Udderly Smooth to “all seven continents.” Now she could claim victory.

“I don’t believe the product was actually sold in Antarctica,” she said recently. “But I think it counts.”

Now selling in 14 countries around the world, Udderly Smooth started out in 1978 in the basement workshop of Bill Kennedy, then a retail pharmacist in Salem. Kennedy at that time had begun working for a dairy farm cooperative that specialized in veterinary pharmaceuticals. Responding to a customer’s request for a product that would smooth and moisturize cow udders, Kennedy developed a cream that also worked on human dry patches, as his family members discovered.

The entrepreneurial Kennedy snared an SBA loan and began commercializing his formula. Marketed with a Midwestern sense of humor, the skin-care line is packaged with graphics featuring bovine-style black spots on a white background, a logo that plays up the word “M-o-o,” and directions for both human and bovine applications. The brand mascot, a giant black-and-white spotted cow outfitted in a Viking helmet, tours the country, making regular appearances on the county-fair, parade and balloon-festival circuit.

To launch the product, Kennedy persuaded a few stores in Youngstown to stock the product. One was the locally headquartered Phar-Mor drugstore chain, which brought the product nationwide. Largely a family affair, Udderly Smooth’s low-budget marketing efforts caught a big break when it was featured on The Oprah Winfrey Show and then in The People’s Pharmacy, a nationally syndicated newspaper column.

Redex’s first export market was Canada. Seeking to expand sales overseas, Kennedy reached out to a local source of export training and advice, the Ohio Small Business Development Center’s International Trade Assistance Center at Youngstown State University. At the recommendation of Mousa Kassis, a trade adviser at the center, the family members began taking the center’s educational programs and signed up for state trade missions to Europe, Asia and South America. For research into overseas markets, Kassis steered Kennedy toward the Williamson College of Business Administration, whose MBA students provided customized market research at no cost to the company. Kassis also put the Kennedys in touch with Ohio’s overseas trade representatives, who operate in 10 cities around the world.

Kassis picks up the story.

“When they began exporting, they were not familiar with payment systems and custom compliance issues,” he says of the family business owners. “They were unsure how they would get paid. We helped them develop payment systems, get letters of credit and buy insurance through Ex-Im Bank.”

As overseas distributors signed on, the clan brainstormed over how to introduce this heartland product into foreign markets. The answer: with as few concessions as possible.

The company’s folksy branding style “works well in the Asian market,” says Kuzior, citing China, Japan, Korea, Singapore, Malaysia, Australia and New Zealand. “When we go to meet with distributors, I get the impression they think we are cowboys. I guess the cows suggest a frontier atmosphere.”

She adds, “They feel the visual is very appealing to their population.”

Europe, in contrast, required some tweaking, she says. “Europe is very different, one reason being memories of mad cow disease.” Packaging for the European Union refers to hand cream or body cream; the word ”udder” is dropped. Marketing strategies also take local lifestyle factors into account. In the U.K., for example, bicycling is big, and products are brought into channels reaching cyclists.

Brazil, potentially a huge market, also required a packaging overhaul. “The word ‘moo’ doesn’t really translate into Portuguese,” Kuzior observes.

Over time, other adjustments have been made to the company’s packaging and promotion efforts. “What we think is funny can be offensive in other cultures,” Kuzior says. “You have to tap dance around the fact that this product was developed for use by dairy cattle. That history may not appeal internationally.”

At Kassis’ suggestion, the company began working with a distributor in South Africa. Next, the company plans to find a distributor for Scandinavia.

“Overseas is a big market for us,” says Kuzior. “It’s getting bigger for us all the time.”

As a successful exporter, Redex has plenty of local company. The value of products shipped out of the Youngstown metropolitan area led the nation in export growth between 2009 and 2012, according to “Export Nation 2013,” a study by the Brookings Institution released in September. Led by resurgent steel mills like V&M Star, metropolitan Youngstown has the sixth-most “export intensive” economy in the nation, according to Brookings; the value of regional exports increased 22 percent over the past three years, reaching a value of $4.7 billion.

EXPORT ENGINE Through the Development Services Agency’s export-oriented internship program, Lynn Lun (above) helped Zephyr Solutions increase exports, educated its staff on government programs and landed it three new international distributors in less than three months.
EXPORT ENGINE Through the Development Services Agency’s export-oriented internship program, Lynn Lun (above) helped Zephyr Solutions increase exports, educated its staff on government programs and landed it three new international distributors in less than three months.

The Toledo area, whose chief exports are coal, petroleum, car parts and glass products, grew exports 12 percent over the past three years, the ninth-highest growth rate in the country, according to the study. Akron and Cincinnati both experienced 10 percent growth during this period, led by airplane products and various refined industrial products, including resins and synthetic rubber. Greater Cleveland, which grew exports 8 percent during this time, remains Ohio’s top metro area by export value, shipping $14.5 billion of chemicals, machinery and motor vehicle parts among other products.

“Exports have been a critical driver of the post-recession recovery in the U.S. and its metro areas,” according to Brad McDearman, co-author of the Brookings’ report. “Metro leaders that make boosting exports and economic development a priority are better positioning their regions for success in the more globally connected 21st century economy.”

Overall, Ohio exported just more than $50 billion worth of products and services in 2013, representing just over 3 percent of the national total. Aviation, automotive and automotive-parts manufacturers paced the export parade, followed by soybean producers. Exporters tend to stay on the continent: Canada and Mexico combined absorb a little over half Ohio’s exports, followed by China, France, Brazil and Japan.

The Buckeye State’s export value increased 3 percent in 2013 over the previous year, says Wesley Aubihl, export assistance manager at Ohio Development Services Agency, which operates economic-development programs across the state. Ohio plans to create two new International Trade Assistance Centers in January, expanding the total to eight from six. The centers, including the one that helped Redex, are state-funded free consultation services offering international market research, international business planning, foreign market certification and export-regulation assistance. The agency also maintains commercial offices in eight foreign countries, which help local distributors and customers for Ohio manufacturers.

The state also organizes a couple of trade missions every year, either independently or in conjunction with the Council of Great Lakes Governors, Aubihl says. On the federal level, the government offers a variety of programs through the U.S. Commercial Service and the Small Business Administration, including the SBA’s E200 Emerging Leaders programs, a certificate course taught at area universities. The Development Services Agency and the SBA jointly fund the IMAGE program with the state, a grant program that reimburses exporters for certain market-entry costs. In 2012, 112 Ohio companies were reimbursed for $850,000 of export expenditures. In 2013, 117 companies were reimbursed approximately $1.2 million.

Last year, more than 32 college students participated in Development Services Agency’s export-oriented internship program. Kathi Leiden, president of Avon-based Zephyr Solutions, a provider of helium to retailers and others, took on Lynn Lun, a junior at Fisher College of Business. The intern “increased our export sales, educated our staff on government programs and funding available to us, and gained us three new international distributors in less than three months.”

She adds, “Her knowledge and abilities far exceeded our expectations.”



Replex Plastics in Mount Vernon supplies optical domes, mirrors and custom-molded plastic parts to industrial customers around the world. At Replex, export sales have grown to help defend the company’s domestic business, as well as open new markets.

Exporting reached about 20 percent of sales “without any sort of strategy,” acknowledges Mark Schuetz, Replex president. As manufacturing has become more global in sourcing and logistics, so has Replex­—primarily to thwart off-shore price competition. “When our customers move their plants to China, they typically source locally—and we lose,” Schuetz says. He blames China’s lower cost structure for the defections. “If we are not globally competitive, it’s just a matter of time until someone starts exporting into the U.S. and takes our market.”

In recent years, the company boosted exports by 50 percent, largely by participating in trade missions organized by Ohio and the Council of Great Lakes Governors, adding several South American distributors. “We’re making a major push this year and next,” adds Schuetz. His near-term goal: drive export sales above domestic revenues.

He adds: “I see no reason why we can’t do that.”

The Cleveland Vibrator Co., based where its name indicates, has been building material-flow and component-separation industrial products since 1923. Exporting has always been part of the business plan. “We’ve had an international presence for many years, including Japan for over 30 years,” says Craig Macklin, vice president of Strategic Development.

When Macklin came on board three years ago, exports accounted for about 15 percent of sales. Today, it’s 20 percent. Advantageous foreign-currency rates favored a strategic emphasis on foreign markets. “We applied for an IMAGE grant and got it,” he says, referring to Ohio’s export marketing-expense reimbursement program. He signed up for a series of trade missions, translated promotional materials into several languages, and tapped Commerce Department’s Gold Key program which produced several overseas meetings with key end users.

This year, having secured a second IMAGE grant, he continues to explore new marketing approaches, including investing in Google Ad Words overseas. On a recent trade mission to Australia, he revived a sagging relationship with a long-time distributor. “Reestablishing relationships and renewing commitments seems smart,” says Macklin.

Today, the company’s key export markets of Japan and Mexico are rounded out by new business in Australia, Spain, India and Chile. “I see the future as overseas,” says Macklin succinctly. “That’s our direction.”

– Warren Strugatch



Twenty years ago, Alabama’s vehicle production output was minimal. Extremely minimal—not one car or truck was built. This year, Alabama vehicle makers will produce close to a million cars and light-trucks, exporting more than $6 billion worth of them—enough to establish the state as this country’s fourth-ranked vehicle exporter. The driver, so to speak, has been the billions of dollars of foreign direct investment by a quartet of automotive giants: Mercedes-Benz, Hyundai, Honda and Toyota. Their U.S. subsidiaries now pace Alabama’s export rally.

In the early ‘90s, looking far ahead, Daimler AG selected Alabama to build its first passenger vehicle plant outside Germany. The company built a $400 million plant in Tuscaloosa County and in 1997 began production of a single model: the M-Class SUV. Seven years later, the company doubled its plant’s size with another $600 million investment and now uses it to produce three models with a fourth, the C-Class, slated to begin production in 2014. Over the past decade, the company has invested an additional $2.3 billion in manufacturing capacity, expanding production by more than 40,000 units a year.

“Tuscaloosa was the first production location of Mercedes-Benz cars ever outside of Germany, and today it is among our best,” says Dieter Zetsche, the mustachioed, as-seen-on-TV Daimler AG chairman. “As our pioneering plant, it is also the blueprint for our new operations in emerging markets.” (You read correctly; the chairman just lumped the U.S. in with emerging markets.)

Daimler’s site-selection choice did not go unnoticed by its global rivals—nor the state’s economic-development team. In 1999, Honda’s U.S. subsidiary, the American Honda Motor Co., chose Lincoln for its new automotive and engine factory. In 2001, Hyundai Motor America broke ground on a $1.7 billion facility near Montgomery while Toyota Motor Manufacturing Alabama opened a $700 million engine-assembly plant in Huntsville. All four plants have enjoyed consistent growth and expanded staffing.

Together, they’ve made Alabama an auto-manufacturing hub of global scale. Shipments of cars, light-trucks, engines and other auto parts accounted for nearly $3 out of every $10 spent by foreign customers last year as Alabama set a personal-best export record of $19.5 billion in 2012.

“Since Mercedes began exporting the M-Class vehicle, Alabama’s top export has been transportation equipment,” says Hilda Lockhart, director of the state’s International Trade division in Montgomery. “I’ve been here almost 15 years so I’ve seen us jump 134 percent. It is exciting to travel around the world and see Alabama-made products.”

LEARNING TO FLY Gov. Rick Bentley (left of center) with Commerical Jet president David Sandri. Alabama’s business climate and incentives lured Airbus to Mobile, where it benefits from recent upgrades to the city’s port.
LEARNING TO FLY Gov. Rick Bentley (left of center) with Commerical Jet president David Sandri. Alabama’s business climate and incentives lured Airbus to Mobile, where it benefits from recent upgrades to the city’s port.

Alabama spends upwards of $277 million per year on incentive programs, much of it subsidizing new plants and expansions of manufacturing exporters, according to the incentives database compiled by the New York Times. Last year the state’s biggest single grants recipient, European aviation giant EADS, received $158 million in cash grants and tax credits to build a $600 million Airbus plant at Brookley Aeroplex on Port of Mobile. Positioning itself to compete with Boeing in its arch-rival’s own market, EADS formed Airbus America Inc. and installed Texas’ Legend Airlines founder Allan McArtor as chairman.

For logistics-obsessed Airbus, securing the aeroplex site on the deep-water port was paramount: Airbus will at least initially import nearly all components, assemble them and then ship finished jets overseas. (The sourcing and assembly arrangement may be an efficiency expert’s nightmare, but passes the all-important Country of Origin test.) Meanwhile, Airbus stands to benefit from more than $700 million in recent and planned federal and state infrastructure upgrades of the port and in the channel feeding into the Gulf of Mexico.

Airbus is the most recent of the international investments to stoke Mobile’s economic engine. When the plant opens sometime in 2015, it will join a global business community whose economic activity is valued at nearly $19 billion by the Alabama State Port Authority. Some 28 foreign-owned companies from 17 countries are major Mobile Bay employers, including high-tech manufacturers, shipbuilders, healthcare companies, chemical suppliers, information technology brands and lumber-product exporters. In addition there are businesses making steel, gas, oil, seafood—and, coming soon, jet planes.

At the center of the action is the Port of Mobile. In 2012, the Port Authority’s containerized, steel and export coal volumes all posted significant growth as more than 25 million tons of cargo passed through. The biggest gainer was containerized freight—up 22 percent over 2011—while steel grew 8 percent and export coal 5 percent. Growth is expected to continue, spurred by planned government spending on intermodal rail, warehousing and terminal upgrades. The lead project is the Intermodal Container Transfer Facility that will provide an intermodal rail option serving north Alabama and Tennessee shippers beginning in late 2015.

Substantial export activity takes place up north as well. John Hamilton, chief operating officer of Taos Industries in Madison and a director of the North Alabama International Trade Association, cites advantages exporters enjoy closer to the Tennessee border, including the services of both the International Intermodal Center and Free Trade Zone No. 83 at the Huntsville International Airport, which offers regular cargo flights to Mexico and Europe. “We have over 40 foreign-owned corporations doing business in Research Park, a highly educated and diverse workforce [and] many foreign born who promote trade with their homeland,” he says. “The Tennessee River provides us with low-cost access to the Gulf and East Coast via the Mississippi and Port of Mobile.”

The Huntsville area, traditionally characterized by the presence of military bases and government-driven enterprises and programs, increasingly reflects entrepreneurial vigor. “There are so many small business owners who have done work for the Defense Department” and other military customers “and now are commercializing their products,” says attorney Alan Enslen, head of Maynard Cooper & Gale’s International Trade Group in Huntsville. “The aerospace, missile-defense and biotech communities spawn quite a bit of exporting.”

Case in point: the evolution of AZ Technology in Huntsville under chief Lynn Leeper . Her father started the company as an R&D contractor, developing heat-deflective coatings for NASA; she refocused on manufacturing and exporting, with 60 percent of sales now generated from Russia, China and other overseas locales. “We sell to aerospace customers, but much of our business now comes from environmental control uses over the Internet,” she says. “There seems to be more interest in that use overseas than in this country.”

Consider the similar contractor-to-exporter evolution of Kappler Inc. George Kappler, chief of the Guntersville protective-gear manufacturer bearing his family name, had but recently launched a new brand of full-body protective suits aimed at the private sector in 1986 when he attended an export workshop. “The Commerce guy who did the program said he could help us identify potential customers around the world. I thought, ‘We should check this out.’” He first contacted a U.S. commercial attaché in England, where he knew potential customers would speak his language. The attaché set up a series of face-to-face meetings and trade show appointments; their first taker was not English but Swedish, followed by a U.K. rep. Subsequent meetings produced distributors in China, Germany and Trinidad.

While technical requirements and engineering standards differ country to country, compliance is generally not difficult, says Kappler. Mastering selling styles and not running afoul of local regulations can be trickier. “In the U.S. we are big on features and benefits and like to do comparative presentations. In some places in Europe that’s frowned on and could be illegal,” says Kappler. “Europe is a stickler for following local regulations.”

Today, export sales run about $7 million a year, nearly a third of the company’s overall revenues. “The lesson I’ve learned about exporting is: Do it yourself,” Kappler reflects. “I mean, the CEO has to drive the sales and be the spark plug. If you delegate it, somehow it doesn’t get done.”

Hilda Lockhart of Montgomery’s International Trade division is happy to say that exporting is now recognized as a leading economic engine, thanks in large part to the state’s top executive and lead “spark plug.”

“When Governor (Robert) Bentley came into office he asked this agency to facilitate a five-year strategy entitled Accelerate Alabama,” Lockhart says. “The key to this strategy was to look at the state’s leading industry sectors and identify the economic drivers. Exporting is part of that five-year plan to create jobs through international trade.”



Back in 2001, Lafarge Concrete opened its first plant, a joint venture cement-grinding facility in Ho Chi Minh City—formerly Saigon—barely a year after the U.S. and Vietnam signed their bilateral trade agreement. Like many companies, the building-materials giant saw Vietnam’s potential as an echo boom reflecting the massive construction surge occurring just across the border with China.

Lafarge soon opened a second facility, a concrete manufacturing plant, not far away. But the real action was happening up north in the capital. Hanoi was tripling in population, housing a tidal wave of new private companies whose mere existence would have alarmed the government just a few years earlier, before legal and market reform policies began transforming the country into a hybrid capitalistic-socialist state. Industrial production skyrocketed, exceeding 20 percent during the early ‘90s. PricewaterhouseCoopers, the global accounting and auditing firm, ranked Hanoi the world’s fastest-expanding city by GDP growth and Vietnam the world’s fastest-growing Emerging Market.

Lafarge, which produced and sold concrete, cement and other building products in 64 countries around the world, naturally looked north, eying expansion into the epicenter of the boom. Michael J. Duffy, a consultant and outside counsel to the company from mid-2009 through 2012, recalls routine delays at the ports, unexpected tariffs and resistance from the firm’s potential customers—general contracting firms that for the most part were state-owned or government-connected.

“What I found most striking were the market barriers that existed and grew the farther north you went,” says Duffy, a Philadelphia lawyer who spent years in Vietnam working on various long-term projects and even married a local. In Duffy’s telling, Lafarge flourished in the former Saigon, which the lawyer calls business-friendly, but struggled farther north in Danang. In Hanoi, Duffy says, the company’s expansion plan effectively stalled out and the company discontinued its efforts by mid-2010.

Why the stony reception? Duffy cites several factors. One was business climate: the country’s northern half being a government-dominated region where state-owned enterprises proliferate. Another was cultural, reflecting widespread preference for government-approved companies—those officially recognized as well as those simply known to be in favor. A foreign company hoping to do business in the north, Duffy contends, better arrive brandishing government connections or face the consequences.

“Personal relationships and benefits were often vital to allowing a business to succeed,” says Duffy. “Other companies would not do business with a non-connected outsider.”

A country no larger than New Mexico populated by 90 million, Vietnam has long been both paradox and priority for the United States. The two nations have engaged in a drawn-out and oftentimes acrimonious relationship, characterized by epic cultural misunderstandings and enduring political disputes. After spending the 1960s locked in a bloody conflict known as the “Vietnam War” in America and the “American War” in Vietnam, both sides signed a peace treaty in 1972; the U.S.’s disengagement was followed by the North’s military victory three years later, resulting in unification under communist rule. Fifteen years later, the countries reestablished diplomatic relations after a lengthy U.S.-led trade embargo; three decades later, officials from both governments reassembled to sign the trade agreement credited—at least in the U.S.—with triggering the country’s rapid industrialization and access to middle-class goods and services.

Now, after decades of military battle, economic boycotts, rhetorical saber-rattling and diplomatic maneuvering, mutual pursuit of trade opportunities is bringing the two countries closer than they’ve ever been. Which is not to say that the road ahead is smoothly paved.

“The Vietnam market represents the next great opportunity for all types of American companies,” declares an exporter’s advisory posted on the Department of Commerce’s website. After extolling the country, the document abruptly alarms: “Corruption is a fact of life at many levels of Vietnamese governmental bodies and business. You must learn in advance how to deal with it and how to avoid getting caught in the crossfire of competing demands.” It concludes with the warning, “Persons convicted of corruption are now being sentenced to death or to long prison terms.”

THE AMERICAN WAR It took more than two decades following the Vietnam War— or “American War” to Vietnamese— for the two nations to reestablish economic ties.
THE AMERICAN WAR It took more than two decades following the Vietnam War—or “American War” to Vietnamese—for the two nations to reestablish economic ties.

The country’s economic boom, solid infrastructure, friendly people and relatively easy access to other Asian economies fan interest in Vietnam among trade-minded business owners and executives around the world; its unreliable transparency, government unpredictability, and stultifying, corrupt bureaucracy pace international concerns. U.S. exporters and multinationals—the new kids on the block—realize soon enough that while opportunities abound, the playing field is hardly level; those who don’t get that do not last long. Competition from well-entrenched and government-favored companies from China, Japan, Indonesia, Korea and Singapore is intense. And concern about counterfeiters operating with impunity is high.

“Companies have invested a great deal in marketing products to the Vietnamese marketplace, only to have that investment undermined by local production of counterfeit goods,” says lawyer Duffy. “Just as often, a company will invest in developing their brand, only to have a local company produce goods that, while not identical, have a name and style similar enough to confuse consumers into mistakenly purchasing them.”

Still, the influx continues. Vietnam is the U.S.’s 23rd-largest trading partner, shipping $20.3 billion in goods to this country in 2012, a 19 percent rise over the previous year. Vietnam absorbed about $4.6 billion of U.S. products last year, representing a 38 percent increase over the prior year—but still generating a $15.7 billion imbalance. The long-running deficit is often attributed to what’s known as “soft protectionism”—a hard-to-trace blend of official sluggishness, bureaucratic inertia and signaling government preferences to intimidated business owners. Trade advocates expect the situation to change; the office of the U.S. Trade Representative has placed Vietnam on the Special 301 Watch List. Privately, officials say Vietnamese leaders understand that the barriers—informal or otherwise—must come down for the country to fully participate in the global economy.

Leading sectors for U.S. export and investment include power generation, transmission and distribution; agriculture; telecommunications equipment and services; oil and gas machinery and services; computer hardware and software; airport equipment; environmental products; and medical equipment.

As for foreign direct investment (FDI) opportunities, American interests are clamoring for position amid tough competition in a tightly controlled market. Vietnam has attracted more than $210.5 billion from foreign companies and investors over the past decade, funding primarily new factories and processing plants, much of it in the power-generation sector. Real estate deals come in a distant second.

Last year’s FDI rose 4.7 percent to $16.3 billion, according to Vietnam’s Foreign Investment Agency. Nearly 1,300 new foreign-invested projects were granted licenses with total registered capital of $8.6 billion.

Despite surging commercial interest in Vietnam, U.S. entities were cleared to invest less than $1 billion last year. The amount pales in comparison with the $13 billion spent by Japan. Right behind Japan came Taiwan, Singapore and South Korea. The United States came in behind—you better sit down—Samoa and the British Virgin Islands.

As costs of doing business in China continue to rise, multinational executives scan the horizon for what’s known in managerial shorthand as “the next China,” meaning a country able to meet demanding international manufacturing, sourcing and distribution standards, assure safety and reliability, and deliver all of the above on a fee scale well under what Chinese workers now command.

“For companies that focus on logistics, Vietnam may be the next China,” says Page Siplon, executive director of the Georgia Center of Innovation for Logistics. Siplon cites as partial evidence recent container traffic volume: Vietnam’s is up, China’s is flat.

“The environment is changing fast,” he says. “The days when you needed a man with a gun guarding the door are over.”

The country’s many advantageous attributes and appealing features have turned people like Jim Angleton into unabashed Vietnam cheerleaders. Angleton, president of Miami-based AEGIS FinServ Corp., a business debit card provider, scuttled around Southeast Asia three years ago scouting locations for an Asian base before settling on Vietnam. Says Angleton: “After exhaustive travels and in-depth research, we decided to establish offices for our debit card division in Saigon,” referring to the city renamed for Ho Chi Minh after the war and which many Westerners and some Vietnamese still call Saigon. During his searches Angleton ruled out Hong Kong, he says, citing “seriously high levels of corporate espionage and lack of respect for trademark rights” and intellectual property in general. As for Singapore, he relished the archipelago’s culture and natural beauty but cringed at the cost.

So, it was off to Vietnam.

“We concentrated our relocation of existing staff to Vietnam and were pleasantly surprised to learn that many ex-pats live there,” he says. “We have been fortunate enough to hire from their highly experienced workforce.”

When he speaks with fellow C-suiters, Angleton is not shy about extolling the country that has welcomed him. “I’ve told about 40 other executives: Don’t go to Hong Kong. Don’t go to Indonesia. Come to Vietnam.”

Flocking to Florida

With its first-class infrastructure, job-creation incentives and enticing relocation packages, Florida has America’s manufacturers thinking, “It’s time for a tan!”

Five days into March, Florida Gov. Rick Scott approached the podium of the Tallahassee statehouse for his third state of the state address, prepared—as he invariably is—with numerical evidence of job creation. After name-checking several local guests he paused to single out Wes Bush, chairman of Northrop Grumman in California. The defense contracting chief had hours before signed off on plans to upgrade the Northrop Grumman facilities in Melbourne and St. Augustine, with expansion slated to bring nearly 1,000 jobs to Florida.

The announcement was big news even in a state that has made job creation its top priority, highlighting Florida’s successful and ongoing transition from beacon for heat-seeking retirees and vacationing sun-worshippers to magnet for cost-squeezing employers and growth-hungry entrepreneurs. Acting as the state’s top corporate ambassador, Gov. Scott has relentlessly talked up Florida’s sunny climate and business advantages to business owners, senior executives and corporate investors around the nation. Cold-calling one chieftain after another, the governor ticks off the Florida advantages: Well-educated labor force, check. Multimodal access to Latin American markets, check. Sunny climate and leisure lifestyle, check. And—last but hardly least—tax incentives. Check.

Make that “checks.” Lots of them.

Florida deployed nearly $4 billion in tax cuts, write-offs, obligation deferrals, financial incentives and other financial benefits to companies that agreed to relocate or stay in the state last year, according to a New York Times database. Florida says its efforts have paid off to the tune of 100,000 new jobs a year for the past two years, and counting.

“No other governor has cut as many checks to corporations or used this program as vigorously as Scott,” declares the Florida Center for Investigative Reporting. Gregory Burkart, managing director of relocation advisor in Duff & Phelps’ Detroit office and long-time member of its Business Incentives Advisory practice, concurs. “Governor Scott,” he says, “has really put Florida on the map for manufacturers.”

TIME FOR SOME REEL FUN With its natural beauty and wealth of leisure options, Florida has great appeal for attracting manufacturers who value quality of life.
TIME FOR SOME REEL FUN With its natural beauty and wealth of leisure options, Florida has great appeal for attracting manufacturers who value quality of life.

That most of these manufacturers are export-minded comes as no surprise in a state that’s been promoting its enviable geographic advantages among its various attributes. Preceding Northrop Grumman, itself a ranking exporter, in this winter’s relocation parade was Total Quality Logistics (TQL); the Cincinnati-based freight brokerage giant announced plans in Florida to open an Orange County office. Enterprise Florida, the public-private economic-development partnership that’s been spreading the governor’s message around the country, coordinated governmental responses between Tallahassee, the Orange County government and the Metro Orlando Economic Development Commission for a $225,000 tax refund under the state’s Qualified Target Industry program, based on attaining job-creation goals.

“TQL is aggressively expanding nationwide and we have strategically chosen Metro Orlando as our next location,” says Kerry Byrne, executive vice president of the brokerage, the country’s second-largest. “This is a region where our people have told us they will enjoy the quality of life and amenities. It is also an area where we can attract motivated individuals from surrounding colleges and universities to a challenging and rewarding sales career with our company.”

Location, climate, incentives and lifestyle—add to the package a highly competitive labor market and what’s generally ranked as a strong pro-business environment, and it adds up to one of the more compelling relocation packages in the country. “Most executives won’t say this publicly, but they’re all aware Florida is a right-to-work state,” adds Burkart. In addition to its less unionized work force, he adds, such labor-pool qualities as size, skill set and attitude make Florida’s hourly workers, as well as management trainees, a singularly attractive workforce in the Southeast.

“I would rank Florida number one in terms of labor pipeline,” says Burkart in reference to the computer skills needed by line workers staffing today’s highly automated factories. That’s high praise coming from a relocation specialist. “There is enormous excess capacity in the manufacturing workforce, and this constricts labor costs.”

Of course, another big factor in Florida’s appeal is its advantageous geophysical location. About 40 percent of all U.S. exports to Latin and South America pass through the state. Florida’s single biggest trade partner is Switzerland, an anomaly attributed to a tightly controlled market in precious metal exports. After Switzerland, the state’s trading partners take on a more Latinate complexion: Venezuela, Brazil, Colombia, Chile and Mexico. Other top foreign customers include Canada and the United Arab Emirates.

The state’s largest merchandise export category is computer and electronic products, accounting for $14.5 billion of merchandise exports in 2012. Other leading categories include transportation equipment, primary metal manufactures, chemicals and machinery. Agriculture is also an important export, especially value-added food products, says Jerry Hingle, executive director of the Southern United States Trade Association.

“Florida exporters enjoy access to one of the best, if not the best, infrastructures in the nation,” says Eric Silagy, president of Florida Power and Light and a board member of Enterprise Florida.

FIRM GRIP ON THE ECONOMY Gov. Rick Scott (right) greets Wesley G. Bush (center), chairman, chief executive officer and president of Northrop Grumman Corp.
FIRM GRIP ON THE ECONOMY Gov. Rick Scott (right) greets Wesley G. Bush (center), chairman, chief executive officer and president of Northrop Grumman Corp.

The state’s multimodal transportation system continues to modernize and expand, even as federal projects and reimbursement policies in other regions wane. Its planned $180 million dredging of Port Miami earns big points from the local business community, which anticipates increased business with Latin America and Asia—and global markets beyond that—with the planned Panama Canal widening and the onset of trade agreements with Colombia. Other logistical advantages include ready access to 13 international airports, 15 deep-water ports, three spaceports, and two federal roads connecting north and south of the panhandle-shaped peninsula.

“Manufacturers who export are especially attracted to Florida,” says Burkart, who’s recommended many Sunshine State locations since joining the relocation advisory firm in 2007. “South Florida is the gateway to Latin America, despite competition from Texas. This is a peninsula state. If you’re shipping, you’re never far from the ports. And the infrastructure is the best in the Southeast in terms of roads, rail and air channels serving the ports. This is a boon for logistics, in terms of quality, capacity and cost controls.”

Multimodal rail plays a major role. “Florida—in particular South Florida—is noted as the primary gateway between Latin America and South America, and lots of U.S. exports flow south,” says James R. Hertwig, president and chief executive of Florida East Coast Railway, whose 77 percent intermodal cargo volume purportedly tops U.S. railways. “The trade future is bigger ships able to carry larger quantities of cargo from South Florida through the Panama Canal and on to Asia,” Hertwig says.

In January, the railway company and officials from Port Everglades in Broward County jointly broke ground on a new 42.5-acre, $73 million intermodal container transfer facility. Relocated two miles nearer the port, the new facility looks to become the region’s next major freight hub—internationally and domestically. Officials predict reduced traffic congestion, faster transfers and, ultimately, lower shipping costs. A second project, a $50 million on-dock rail service at Port Miami, is also moving forward. Already completed are a rail line leading to the port and a rehabilitation project for Bascule Bridge. Both projects are scheduled for year-end completion.

Utility costs are a major concern to exporters. Florida Power and Light, which serves over half the state, seeks to offset electric costs by offering users commercial discounts of upwards of 20 percent, plus additional rebates to those who move into manufacturing facilities that had been vacant six months or more, Silagy says.

After several years of aggressively courting manufacturers, Florida has bolstered its export footprint, ranking fifth last year (tied with Washington state) for manufactured exports, shipping $52.7 billion. Foreign investment in Florida, much of it centered in greater Miami, also contributes to export-related jobs. Companies headquartered in the U.K., Canada, Germany and Japan controlled companies that employed more than 220,000 Florida workers in 2010, employing nearly 4 percent of the state’s private-sector workforce, according to the U.S. Census Bureau.

Gray Swoope, who heads Enterprise Florida, attributes much of the Sunshine State’s recent job-creation success to its export positioning, including its connections—intrinsic and strategic—to the burgeoning markets in Latin America and the Caribbean. “What’s interesting about Florida’s economy,” Swoope muses, “is that there are 55,000 businesses that export. That’s the second-largest number outside California. Of that 55,000, 95 percent are small and medium-sized enterprises—under 500 employees. One of the things we do to help them is subsidizing the cost of Gold Key,” the federal program that connects smaller exporters with distributors and buyers in overseas markets. A network of 14 offices overseas, staffed in conjunction with local marketing professionals and export promoters, serves Florida’s next-generation exporters. Enterprise Florida offers state companies grants and travel discounts to offset the cost of traveling overseas to attend trade shows or meet local buyers and distributors.

One company benefiting from both federal and state programs is Concept II Cosmetics, a Miami-based manufacturer of skincare products and regular trade mission attendee whose exports now account for 15 percent of total revenues. “State export promotions officials have directed us to work with other institutions to secure trade grants, nominated us for industry awards and provided insight as to what trade activities and services” are available, says Maxim Weitzman, managing director. “They have validated our credentials as a trusted U.S. manufacturer, which goes a long way in the cosmetics industry as more and more users search for U.S.-made products.”

State grants have also helped Armstrong Nautical Products, which sells marine navigation equipment to the boating industry. “We’ve attended a number of international trade shows through these grants,” says Rusty Sedlack, co-founder of the Stuart-based manufacturer. “Our business is one where it is of primary importance that we show our products face to face. Enterprise Florida has helped us to do that and that’s guided our entry into the export market.”

Monica Richardson-Morley, vice president for international business development at the Palladio Beauty Group in Hollywood, Florida, attributes the company’s growing international marketing success in large part to support and encouragement from Enterprise Florida. “They’ve opened our eyes to how business is done in other markets, which may not be how we do business here at all,” she says. Citing advice from the agency’s staff, as well as lessons learned during trade missions, Richardson-Morley has scrutinized regulations governing acceptable ingredients and other import requirements that can restrict product sales or leave companies open to harsh regulatory action. At the same time, she said, she’s learned to spot cultural cues that can impact sales, such as using the domestic language on packaging and featuring hues in display materials which might appeal to U.S. customers but alienate those in Latin American markets.

“They take the time to listen to us and understand what we’re trying to do as exporters, and they’ve opened markets for us,” she says of the state’s export promotion staff. Palladio now exports about $5.5 million a year to markets in Mexico, Colombia, Peru, Chile, Trinidad and Brazil; these sales constitute about one-third of the company’s total sales. “This year,” she says, “we’re aiming at $7.5 million in international sales. And I think we can do it.”

Lone Star Shippers

Texas Maintains Export Dominance

Ruben J. Diaz Sr. incorporated the El Paso Water Industrial Services in January 2000, starting the new millennium with a new company. The family-owned startup benefited from the founder’s years of experience in the industry, offering water filtration and waste-water treatment products and services for hospitals, restaurants and smaller manufacturers in both the United States and Mexico. Like many ventures in Texas, Diaz’s new business started out export-oriented, making the most of his personal, family and business connections on both sides of the border.

“We saw a tremendous need for industrial consumers in Mexico,” Diaz says. “There are some 400 manufacturing facilities in Chihuahua State alone, for example. But without credit we were limited.”

After a decade of small-but-steady organic growth, Diaz approached the Small Business Development Center of the El Paso Community College, a Small Business Administration resource partner. An advisor helped draw up a financial forecast which Diaz submitted along with his loan request to United Bank of El Paso del Norte.

The Small Business Association (SBA) signed off on a loan guarantee, and with that United Bank did the loan. Diaz’s company also received credit via the North American Development Bank and the Community Adjustment and Investment Program (CAIP). The CAIP loan program was designed to stimulate job creation in areas with high trade-related job losses associated with the passage of the North American Free Trade Agreement (NAFTA).

The new funding has helped the company staff up to 33 people and improve cash flow. “It’s a lot easier for a small business to get financing if it has the backing of the Small Business Administration,” Diaz says. “The banks will respond faster and more positively when you approach them with a guarantee. It’s that simple.”

Coal power plant Petroleum and coal products lead the export parade, totaling nearly $62 billion in 2011.
Coal power plant Petroleum and coal products lead the export parade, totaling nearly $62 billion in 2011.

The Small Business Administration points to the company as a model, and named it Small Business Exporter of the Year for El Paso in 2010. “The company has overcome adversity and has maintained their growth due to their innovativeness and their visionary management, strategic planning and customer services,” the SBA states. “Key attributes include their ability to control costs, quality assurance, and their strategy for recruiting, training and retraining qualified employees and diversification of their product lines, services and markets.”

Thanks to the cross-border instincts of more than 30,000 companies like El Paso Water Industrial Services, including many far larger, Texas is firmly entrenched as America’s leading export state. The Long Star State outpaces both California and New York, grossing more than $265 billion in 2012, according to Census data. Alone at the top for 11 consecutive years, Texas dominates the nation’s export activity. The state’s torrid pace exceeded 21 percent in 2011, before cooling to nearly 6 percent last year.

International business champions attribute the state’s export prominence to a combination of felicitous geography, infrastructure construction and maintenance and desirable demographics. “Texas has the best business environment for growth and expansion,” declares Eleanor Eaton, an independent trade consultant based in the Dallas-Forth Worth area. “There is an excellent infrastructure including two major seaports, Houston and Galveston, as well as the recently activated inland port of Dallas. The region has strong historic ties with Mexico continuously supported by an influx of Mexican-born immigration of high education and upward mobility. Texas is home to more than 35 percent of all middle- and upper-class Latin immigrants. And, the tax structure and a low level of bureaucratic involvement prove conducive to startups.”

“Texas’ central geographic location, well-fortified rail, road, air and sea infrastructure and its nation-leading 28 ports of entry have helped make the state a nexus point for regional and global trade,” says Lucy Nashed, a spokeswoman for the office of Gov. Rick Perry. “Our well-developed coastline and ports, inter-coastal waterway and road and rail connectivity with Mexico also boost our export profile. The Port of Houston is the largest U.S. port in terms of tonnage and the Port of Laredo is the largest U.S. inland port.”

Petroleum and coal products lead the export parade, totaling nearly $52 billion in 2012. Chemicals were second at $47 billion, then computer and electronic products at $42 billion. Other major export categories were machinery ($29 billion) and transportation equipment ($25 billion).

Texas’ largest export markets are NAFTA partners Canada and Mexico. These neighbors represented $122.5 billion, nearly 46 percent of total state exports in 2012. Mexico remains Texas’ top export destination, receiving $95 billion in cross-border exports. Canada spent $23 billion on Lone Star products. China, Brazil and Netherlands follow, at $10 billion, $10 billion and $9 billion, respectively.

Tugboat in Galveston A tugboat in Galveston honors its first voyage out of the harbor.
Tugboat in Galveston A tugboat in Galveston honors its first voyage out of the harbor.

Texas exporters look to a broad range of government programs and services for advice, training and connections to potential overseas partners. The state works with the United States Commercial Services, the United States Export-Import Bank and the SBA’s local development centers to help local businesses penetrate global markets, according to Nashed. Access to federal export services is enhanced by space-sharing arrangements; Commercial Services representatives operate from within state offices, promoting such programs as Gold Key, the Export Express loan program and various Ex-Im Bank services.

Gold Key has been the main export path for Polyguard Products, an architectural waterproofing supplier based in Dallas-Forth Worth. “Our exports are niche and specialized,” says Nathan Muncaster, global business development director. “Except for Canada, we were doing near-zero in global markets. We began building overseas sales in earnest in 2005. Gold Key finds out what’s worked for you in the past, learns what your objectives are, and they go to work for you” finding local partners.

Seeking sales in Turkey, Latin America and India, Muncaster met with Gold Key representatives in April 2006. “Over two days they set me up with six or seven Turkish companies and we clicked very well,” he recalls. “Then they did Singapore and produced 26 meetings in three days.” Relationships built from those meetings continue to produce sales.

Today, Muncaster operates out of Turkey, handling inquiries from places such as Brazil, India, Algeria and Estonia. “Maybe 90 percent of our overseas sales are done through Gold Key [connections],” he adds appreciatively. “They really have got it together.”

Texas is a major agricultural producer as well. The Texas Department of Agriculture has also received federal State Trade and Export Promotion (STEP) grants, funding trade missions to targeted overseas markets for agricultural products and companies, according to Nashed of the governor’s office.

Economic development in Texas occurs on the local level first and foremost, she continues. “The state encourages firms to engage local small- and medium-sized businesses into their larger expansion and community goals, particularly in supply-chain activities. Oftentimes, the local chamber, city or Economic Development Council serve as lead sourcing agent for foreign firms looking for suppliers, materials or personnel,”
 notes Nashed, adding Texas consistently ranks as a top choice for multinational companies seeking U.S. footholds.

According to a database developed by The New York Times, Texas awards more economic incentives at various levels to employers and potential employers—over $19 billion a year—than any other state in efforts to attain and maintain their presence. State programs that benefit exporters and non exporters alike include Skills for Small Business, which helps finance tuition and fees for community and technical college courses for small-business employees; the Skills Development Fund, which funds customized job-training programs; and Skills for Veterans, providing training for post-9/11 veterans returning to Texas.

Key programs involving research, training and general export support come from educational resources such as the state university network. At the University of Texas at San Antonio, the nonprofit Institute for Economic Development focuses largely on export-oriented entrepreneurs and business owners along the Mexican border. Companies like GreenStar, a San Antonio-based high-tech startup, approached the institute’s International Trade Center for help selling their LED commercial lighting products into Latin America.

Alberto Rodriguez-Baez Sr., a consultant at the center, provided GreenStar with a list of potential distributors in the company’s target markets, while making suggestions for product promotion and strategic planning. As a result, the company expanded its footprint in Mexico and Brazil, while entering new countries like Columbia, Peru, Chile and Argentina. A second consulting and research project was undertaken, resulting in relationships with new distributors in Panama, Costa Rica, Venezuela and Uruguay.
 “We are looking forward to continue growing our international distributor network and we are excited to have a strategic ally in the International Trade Center, whose services are invaluable for our global expansion plans,” says Gabriel Senior, the company’s chief financial officer.

Last year, the center’s clients reported $210 million in sales in 140 foreign markets which they attributed to consulting, market research and training they received.

“The culture of international business is ingrained in the state’s business ethos,” says Rodriguez-Baez. “Factors like our closeness to some of the busiest international trade ports in the world, easy access to organizations that help companies [export]” and the impact of free trade agreements like those with South Korea and Columbia “will immediately impact the exports landscape for companies in Texas.”


The ABCs of FTZs

America’s Bustling Foreign Trade Zones

In 2010, the Stanley Works company closed on a $4.5 billion merger with the Black & Decker Corporation, spawning an international tool industry giant with annual churn of nearly $8.5 billion. Stanley Black & Decker inherited more than a century of business practices, including a South American export market with double-digit annual growth, Asian sourcing, U.S. manufacturing and Panamanian distribution.

With small markets proliferating and shipping bogging down at the source, logistics needed quick attention. On the heels of the merger’s closing, the tool company relocated its southbound shipping—worth at least $300 million a year—out of Panama and into 160,000 square feet of leased warehouse space in South Florida’s Port Everglades. The Broward County warehouse featured intermodal transit connections and Foreign Trade Zone certification, a combination whose potential for increased efficiency and cost savings appealed greatly.

The move paid off immediately. One benefit came from deferring duties until shipping the finished product. If the product ships overseas, the company pays zero duties. Duty-free/duty-deferred is the Free Trade Zone’s chief selling point.

Advantages cited include less paperwork, greater transparency and expanded intermodal options. The company can pack a container and be in transit the next day. Shipping to Panama usually required a week’s wait.

At FTZ No. 25, the neighbors include TransMontaigne Product Services, Motiva Enterprises, South Florida Materials Corporation and Parbel of Florida. And because numerous cruise ship operators such as the Carnival Corporation call Port Everglades home, the zone hosts a bevy of liquor distributors, duty-free wholesalers and other suppliers who enjoy export status under federal guidelines. The value of assembled goods moving through Port Everglades’ general purpose Foreign Trade Zone exceeded $685 million in fiscal year 2011; multinationals shipped about 10 times that volume, much of it in petroleum and automobiles. Collectively, Sunshine State shippers helped boost FTZ No. 25’s exports to $3.7 billion in 2011, the most recent year for which data is available. The zone’s remarkable year produced a heady annual growth rate of 40 percent.

With all the activity, FTZ No. 25 glided into first place nationally last year in the FTZ category for distributors and light assemblers.

“We’ve been busier than a one-armed paper hanger around here,” jokes Robert Jacob, the zone’s long-time operations manager. The zone’s efforts were recognized by the National Association of Foreign Trade Zones, which deemed Broward County “one of the most export-intensive zones in the country.”

Warehousing in Free Trade Zones Duty-free/Duty-deferred is a top selling point for America’s FTZs, leading many shippers to keep on-site warehouses.
Warehousing in Free Trade Zones Duty-free/Duty-deferred is a top selling point for America’s FTZs, leading many shippers to keep on-site warehouses.

Broward’s traditional rival, neighboring Miami-Dade, has—this should come as no surprise—also been positioning itself for growth. Across South Florida, the Panama Canal expansion and the planned dredging of Miami Harbor have buffed local interest. Last summer, when the Department of Commerce named PortMiami to operate FTZ No. 281—the newest Foreign Trade Zone in the country—it was front-page news. FTZs, against the odds, became a water cooler topic across the state.

As in Broward and most of the newer programs, the new zone administrators will set up numerous satellite zones around Miami, encompassing dozens of existing warehousing and distribution facilities, rather than trying to recruit companies into fenced-in, third-party commercial lots.

In other words, you won’t have to go to the zone; the zone will come to you. On Aug. 10, the day after PortMiami got its designation, local warehouseman Ralph Gazitua applied for subzone status—and achieved it just before Christmas. Gazitua, president and chief executive of WTDC, a Miami customs-bonded warehouse and container freight station, says with his space inventory leased out, he has expanded into consulting to help clients obtain their own zone status. He’s also selling zone-focused software.

His conversation starter: “Become a Foreign Trade Zone.”

“I’ll target anyone who does five to 10 entries per week,” declares Gazitua. “Everyone is saving a quarter of a million dollars.”

Realistic expectations or marketing hype? Answers vary as to how much companies can actually save from FTZ status; certainly, each business must examine the issue for itself. “It’s a complicated question,” says Daniel Griswold, president of the National Association of Foreign-Trade Zones in Washington, representing administrators, companies and professional advisors. Savings, perhaps surprisingly, have never been tallied.

Perhaps now they will be. Rooted in New Deal politics and Depression-era economics, Foreign Trade Zones are suddenly more relevant than at any time in history. Recent changes in Washington over how the zones are accredited and administered have encouraged local governments and economic-development boosters to push for expansion and restructuring of existing programs—and to go out touting the benefits of participation to exporters small, large and all sizes in between.

Check out the numbers. Zone-based exporting has tripled in volume from 2000, reaching $54 billion in 2011. Texas still leads the nation in overall zone exporting, based on dollar value; Florida is fifth and surging. Other states whose zones rank among top-five FTZ activity in various categories include Louisiana, California, South Carolina, Illinois, Mississippi, Pennsylvania, Maryland and Alabama. Capital improvement projects driven by zone administrators, participating companies and service providers proliferate.

There are more than 170 FTZs active in the United States, with at least 269 manufacturing and production operations; thousands of distributors participate as well. Shipments into the zones totaled over $640 billion in 2011, up from $534 billion the previous year. Warehouse and distribution operations received nearly $106 billion in merchandise while manufacturing and production operations handled $535 billion. The zones move much of the nation’s exports in petroleum, automotive, electronics, pharmaceuticals, machinery and equipment, most of it through special purpose—read “private”—zones serving multinational clients.

Zone-based exporting has grown steadily throughout the young millennium, interrupted only in the recessionary year of 2009; since then it has doubled. Zone specialists and export advocates cite such growth factors as the president’s emphasis on exporting, expanding use of zones by multinationals, and vibrant overseas markets as contributing to the zone boom.

Another answer might be the loosening of bureaucratic oversight. Due to policy revisions at the Department of Commerce, many zone-related processes have been streamlined or simplified, resulting in a more business-friendly profile. Fenced-in physical campuses remain the norm. But more and more zones take the Florida approach, designating warehouses and assembly facilities miles from the nearest port—not to mention one another—as comprising zones or subzones. Bureaucratic delays and paper-centric rigmarole have given way to flexibility and—better sit down—speedy handling. Zone participation seems to make more sense now for more companies.

“People are surprised at how flexible the FTZs really are, and how streamlined the processes have become,” says Amie Ahanchian, a vice president with KPMG’s International Corporate Services division in Washington. “The old daunting image is out of date.” Sometimes, she adds, “You can recoup your investment in six months.”

Zone administration has also changed, shedding old images of political favoritism and bureaucratic inertia that dogged the program for decades. The new generation of zone administrators, coming from such backgrounds as logistics, urban planning and economic development, structure their programs to maximize cost-saving benefits while offsetting globalization’s less desired effects.

“Zones are very much tied to the global economy and can be set up in many different ways to produce various benefits,” says Jose Quinonez, manager of Foreign Trade Zone No. 68 at El Paso International Airport, the largest zone operating along the Mexican border—and, after Broward, the country’s second-largest zone. “FTZs act as buffers to decrease the logistical costs of bringing goods into the U.S.”

Opened in 1981 by a nonprofit organization, administration of zone No. 68 was taken over by the city the following year and assigned to the airport. Dozens of businesses flocked in, taking advantage of ways to save money on Mexican trade. The pace quieted down with the signing and implementation of the North American Free Trade Agreement, which seemed to reduce the value of the zone in the eyes of some businesses.

In the early ’90s, zone No. 68 needed to reinvent itself, and did, turning its focus to nurturing small businesses, providing access to transportation specializations and trade experts, and promoting itself aggressively in the region. The original site grew from 500 acres to more than 3,500 acres spread over five sites across the metropolitan region. By 2010, the zone led the nation in overall export activity, handling $1.7 billion in shipments.

Today, China has replaced Mexico as the largest trading partner of zone-based companies in the aggregate. Trade with Canada has surged and Bangladesh now ranks as a major import source. Over the years, Quinonez and his team have sought to learn the lessons of the past and apply them to the present and future, emphasizing ways to keep up with trade patterns, streamline procedures, help importers maintain compliance, make introductions to experts and specialists, and nurture local Mom and Pops seeking their first cross-border sale.

“We’re here and we’re going to be around a long time,” Quinonez promises. “The public sees the value of the zone.”