The Export Phoenix of Arizona
HOW THE COPPER STATE HELPED ONE COMPANY RECLAIM ITS INTERNATIONAL SALES
Rowpar Pharmaceuticals of Scottsdale, Arizona, is back in the export business thanks to Arizona’s State Trade and Export Promotion program (AZ STEP). The company—maker of CloSYS toothpaste and oral products—once exported to Europe, but in 1997 sold its license to distributors.
“Now exports are again a significant part of our business,” says James L. Ratcliff, Rowpar chairman and CEO.
The Arizona Commerce Authority (ACA) runs AZ STEP, which assists Arizona small businesses to export and expand into new markets. AZ STEP has many success stories, with more than 235 Arizona companies having participated in the program to date.
The program is ranked No. 2 in the nation for enrollment.
Participating companies report export success to 79 countries and increases in exports of $44 million since the program’s inception. As for Rowpar, it has taken advantage of services such as translation for dual language packaging for the Canadian market and pre-arranged meetings with potential distributors in the Middle East.
AZ STEP facilitated Rowpar’s participation in an Arab American Business Association conference in New York. “We had a booth and garnered some good contacts,” Ratcliff recalls.
Through the Gold Key matching service program of the U.S. Commercial Service, Rowpar also arranged for meetings with potential clients at a Riyadh, Saudi Arabia, conference. “ACA paid the conference fee,” Ratcliff says, “we paid our hotel and air fare.”
The conference introduced the company to contacts interested in distributing its products. “It is a great way to do preliminary scouting and initial partner identification.”
Indirectly, Rowpar also benefits from its Scottsdale location because of a cluster of businesses the city and the Greater Phoenix Economic Council (GPEC) promote called the Scottsdale Cure Corridor.
“The objective is to build a large biomedical core for Arizona,” Ratcliff says about the cluster, which benefits small firms like his by populating the area with talent. “We contract with leading dentists or medical or labs for our scientific work.”
Azmira, a Tucson-based manufacturer of holistic pet food and supplements, has a different perspective on state and federal export promotion programs. The company exports a significant amount of its products, particularly to Japan, Hong Kong, Singapore, Malaysia, the Netherlands and Canada. “We are working on Mexico,” says Rob Carr, the company’s COO. “We have a distributor and are in the early stages,” but the challenge in Mexico, he says, is obtaining permits and paperwork.
“In Japan, it’s different interpretations such as what is considered an herb,” Carr says, noting that herbs are an ingredient in Azmira’s pet food.
He says state agencies go to great lengths to connect companies with overseas partners; though countries that cannot import lamb-based products such as those made by Azmira—Australia, for instance—are excluded. “The agencies try to do due diligence and hopefully find a good fit,” Carr says, “but we have never gone to one of their trade shows or paid money for lists.” The reason: There’s usually not a good fit.
Azmira contracts its manufacturing to companies elsewhere in Arizona and the Midwest. “We consolidate products at our distribution center in Tucson and, for the most part, ship out of the Port of Long Beach,” Carr says.
Free trade agreements such as NAFTA are instrumental in attracting companies to Arizona and encouraging exports.
NAFTA has helped Medi-Temp increase its exports considerably.
“That’s one reason we moved to Peoria—to be close to Mexico,” says Medi-Temp president and CEO Randy Evans. “In the United States there’s a lot of competition, and copycats from China try to underbid. In Mexico there’s a 30 percent tariff on Chinese made products.”
Medi-Temp, which originally hailed from Vancouver, Canada, moved to Peoria, Arizona, because more than 90 percent of its customers are in the U.S. The company exports 20 percent of its hot and cold body therapy products, though Evans says the company hopes to grow exports to 50 percent.
With help from AZ STEP, Medi-Temp executives attended trade shows, such as one in Mexico. “The state paid for half and also translation services for our brochures and packaging,” Evans recalls.
“They also helped find us a distributor in Mexico.”
According to Evans, Mexico is a difficult place to locate a good distributor. “It takes longer than normal,” he says. Then there’s government registration and enormous red tape for some products such as drug testing cups and infectious disease testers.
“We had to go through the FDA equivalent in Mexico to get a registration number,” he says. “We worked with the U.S. Embassy in Mexico City. It was a big learning curve.”
Today the company exports to Mexico via Laredo, Texas, or Nogales, Arizona. “Our customers take possession of the shipments at the border,” Evans explains. “They do their own clearing and pay taxes.”
One customer in Mexico, Walmart, has its own clearinghouse at the border and a trucking firm that takes over the shipments. Medi-Temp still does business with Canada; not directly but through a distributor in Montreal. “We send everything to them and they distribute the goods to customers.”
This year the company began expanding its exports to Panama and is now looking into Colombia. The reason, Evans says, is the free trade agreements the United States has with those countries.
Maxwell Technologies, Inc., headquartered in San Diego, California, manufactures energy-storage and power-delivery products in Peoria, Arizona. The company expanded its operations there in 2012, assisted by a $1.5 million incentive from the city based on job creation.
From Peoria the company exports electrodes used for ultra-capacitors. “We have a proprietary manufacturing process for our electrode, so it is only produced in the United States,” explains Earl Wiggins, vice president of Maxwell’s Ultracapacitor Operations.
The company ships its electrode to contract manufacturers in China, Taiwan and Germany and other manufacturers of ultra-capacitors.
Today, Maxwell’s total annual revenue comes predominately from exports. “We do 65 percent of our business in China, 25 percent in Europe and the rest in North America,” Wiggins reveals. The company has been exporting for more than six years.
Helping escalate the business are trade shows, primarily those for wind power and hybrid vehicles. “Our product is an energy storage device that is used in many applications that require high power,” he explains. “Since many of the countries that are leading the way in alternative energy are outside of the U.S., we take advantage of meeting with people in those countries.”
To manage transportation expenses, the company utilizes freight routes that minimize costs and third-party logistics providers that ensure smooth clearances through customs. A primary benefit from its location in Peoria is that city’s foreign trade zone (FTZ) allows Maxwell to reduce duties and helps facilitate its Customs-Trade Partnership Against Terrorism (C-TPAT), a voluntary supply-chain security program led by U.S. Customs and Border Protection.
Scott Whyte, Peoria Economic Development Services director, acknowledges that the FTZ is one of the most important projects the City of Peoria has done for companies like Maxwell Technologies. “It helps make them competitive in the export market,” he says.
FTZs are considered outside the U.S. Customs territory, so goods received into FTZs are generally not subject to duties, tariffs or quotas until, and if, they leave the zone.
Arizona is the only state in the nation with the ability to lower real and personal property tax rates up to 75 percent for companies that are FTZ-qualified. “Gaining an FTZ classification allows manufacturers to assess their real and personal property at a rate of 5 percent, rather than a standard manufacturer’s rate of 25 percent,” Whyte explains.
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