Study Sought for Duty-Free Trade Zone at Port

Los Angeles officials hope to pump new economic life into the Port of Los Angeles and South-Central neighborhoods by creating a foreign trade zone--a haven where goods from overseas could be imported, stored and manufactured into final products free of import duties.

As a first step toward such a zone, harbor area Councilwoman Joan Milke Flores is pushing for a task force to study the idea. The request is pending before the City Council.

“The zone enhances a port’s competitiveness by making it more accommodating to business,” Flores said. She added that South-Central Los Angeles is in a “strategic location . . . to make it a natural beneficiary of foreign trade zone operations.”

Los Angeles is the only major port on the West Coast without a foreign trade zone.

But the creation of tariff-free areas in the city may be complicated by a foreign trade zone in the adjacent Port of Long Beach.

Long Beach officials have not staked out a position on the Los Angeles proposal. But the last time a Southern California city applied for special trade status, Long Beach successfully opposed it.

Federal officials who grant such special trade designations typically look more critically on applications from areas already served by a special trading zone.

“It must be shown that is necessary to serve the convenience of commerce,” said John La Ponte, the principal staff member for the federal Foreign Trade Zones Board in Washington. “We ask: ‘Would the additional services better serve the public in terms of services for international trade?’ ”

La Ponte said it is premature to judge Los Angeles’s proposal. But he said creation of a special trade zone in Los Angeles is within reason, despite the proximity it would have to Long Beach, because the two ports handle such a large volume of imports.

Los Angeles is the No. 1 port in the country in importing and exporting container cargo. The Port of Long Beach is third.

Foreign trade zones are special areas where imports may enter the United States without paying duties. The imports can be stored, exported back out of the country or processed into final products within the zones. A tariff is not imposed until the goods are shipped out of the zone into unprotected regions of the United States.

Some companies benefit from the zones because they warehouse large quantities of imported goods and defer duty payments until they move the goods to market. Other companies gain an advantage because they pay a lower tariff on finished products released from the trade zone than they would have paid on component parts imported to this country.

Establishment of a foreign trade zone that began at the Port of Los Angeles and extended to Watts and other communities in South-Central Los Angeles “could encourage new business development and job creation activities that would benefit the economically distressed community,” Flores said. These areas are ripe for development because of their central location between the port and downtown and because of recent transportation improvements, she added.

Flores suggested that the Convention Center downtown also could be included to promote foreign product exhibitions.

The Port of Long Beach has its own duty free zone in north Long Beach, where products ranging from electronics to cigarettes and liquor are stored without tariffs before shipment throughout the country.

In the mid-1980s, Long Beach officials opposed attempts by Santa Ana to have itself designated a foreign trade zone. They said it would be redundant to have two cities so close with the same designation.

The dispute was settled by a compromise that incorporated a part of Santa Ana into the existing Long Beach Foreign Trade Zone. In the four years since its creation, however, Santa Ana has not been able to attract companies to take advantage of the special designation.

La Ponte suggested that Los Angeles and Long Beach officials might try to cooperatively extend the existing trade zone into Los Angeles. That could be the quickest way to bring the benefits of trade zones to Los Angeles, La Ponte said.

Gerald Haugan, manager of leasing for the Long Beach port, said Long Beach officials are ready to cooperate. “We try to service any request that comes in,” Haugan said.

Los Angeles port officials said it is too soon for them to tell whether they can accomplish their goals by linking up with Long Beach, rather than opening their own trade zone.