Santa Ana, Long Beach Reach Tentative Pact on Foreign Trade Zone

A tentative agreement has been reached between Santa Ana and Long Beach for Santa Ana’s proposed Foreign Trade Zone to become an extension of Long Beach’s existing zone area, which allows products and raw materials to be imported duty-free.

Businesses within the new Santa Ana zone, a 65-acre area near the Regional Transportation Center on Santa Ana Boulevard, would import goods and raw materials duty-free for storage, assembly or manufacture. Taxes on the goods would be levied only when they left the area.

The intent in having the zone, said one Santa Ana official, is not that it be a big source of revenue for the city but that it create as many as 1,500 jobs and spur industry. “It certainly will pay for its operations, but the intent is not to make windfall profits,” he said.

100 Zones in Nation

There are about 100 such zones operating in the United States, but Santa Ana’s, if approved by the City Council, would be Orange County’s first. City officials said the zone would help the city’s attempt to become a major trade center, as evidenced by the presence in Santa Ana of the World Trade Center Assn., as well as local branch offices of state and federal agencies, including the Department of Commerce.

The City Council will vote on the agreement Monday. The Long Beach Harbor Commission, which notified the Federal Trade Commission of the tentative agreement this week, will vote on it the following Monday. The application will then be forwarded to the U.S. Customs Service and the FTC’s Trade Zones Board for endorsement and approval.

Businesses can profit from trade zones in a number of ways, according to city officials. For example, a television manufacturer would normally have to pay taxes on each part imported for the product. However, if the parts are imported to the zone and the television is assembled there and then “exported” wholesale, the taxes would then be levied only on the finished product.

Benefits in Extension

Santa Ana had originally proposed setting up an independent zone, but city officials said they believe that there are benefits to becoming an extension of Long Beach’s area. The officials said the advantages include a speedier approval process from the federal government (the final go-ahead should take only “a few months”), the ability to utilize Long Beach’s experience, especially in dealings with the Customs Service, and the possibility of gaining clients through that city’s existing marketing program.

The trade zone concept is designed to allow one zone for each major port of entry in a region, said James Larsen, director of real estate for the Port of Long Beach. “(The agreement) will expedite approval of Santa Ana’s application so it’s in their best interest and ours,” he said.

Mike Metzler, executive director of the Santa Ana Chamber of Commerce, endorsed the concept and said the important thing is getting the zone, not deciding who will be the administrator. “It’s going to make little difference to us who the ‘parent’ is, whether it’s someone here or in Long Beach,” he said.

Three Other Zones

Larsen said Long Beach now administers three other zones in addition to the original 11-acre zone in North Long Beach. The others are a 1,350-acre expansion in Ontario within a newly opened industrial and business park near the Ontario airport, an 18.8-acre subzone in Long Beach operated by Toyota Motor Manufacturing for truck-bed assembly and a 72-acre subzone in San Diego operated by National Steel and Shipbuilding Co.

If the zone is approved, Santa Ana will secure an operator--who pays the city a fee based on the amount of business generated--and begin working on developments or redevelopments of businesses within the zone. “This is going to be privately owned property. We don’t plan on any eminent domain actions or condemnation,” said the official, adding that it is up to existing businesses whether they want to restructure so as to take advantage of the duty-free scheme.

The City Council would appoint members of a Santa Ana Foreign Trade Zone Advisory Commission, which would oversee any expansions or projects in the area.