All the world’s a market

December 6th, 2013

News Coverage:

All the world’s a market

Fort Wayne MSA exports increased to $1.35B in 2012

Posted: Friday, December 6, 2013 12:00 am | Updated: 8:16 am, Fri Dec 6, 2013.

By Doug LeDuc

The marketing of northeast Indiana does not stop at our nation’s borders, and the most recent data available for the Fort Wayne metropolitan statistical area shows three years of successive exporting gains.

The latest data available from the International Trade Administration showed merchandise shipments to foreign destinations from Fort Wayne’s MSA fell 19.8 percent to $916.8 million for 2009, from the previous year, but then rose 48 percent during the next three years to $1.35 billion in 2012.

The MSA includes Allen, Wells and Whitley counties. Fort Wayne ranked sixth among Indiana metro areas for exports. The Fort Wayne area’s merchandise shipments to foreign destinations increased 5 percent in 2012 from $1.28 billion the previous year.

“Even though Indiana ranks first in the nation for manufacturing employment as a proportion of total jobs, it ranks 13th in exports,” said Ellen Cutter, director of Indiana University-Purdue University Fort Wayne’s Community Research Institute.

“Thirteenth is a strong position to be in; it just means a good proportion of our manufacturing base serves the domestic market,” she said.

The country’s top five exporting states are Texas, California, New York, Florida and Washington.

The top exporting sectors of the Fort Wayne area are tied to manufacturing — specifically transportation equipment and machinery manufacturing — and to primary metals and to electrical equipment.

Examples of Fort Wayne-area exporters in those categories include: General Motors Co. and Dana Corp. for transportation equipment; Parker Hannifin Corp. and Deister Machine Co. for machinery manufacturing; Steel Dynamics Inc. for primary metals; and BAE Systems, Caliente, Exelis and Ultra Electronics-USSI for electrical equipment.

Caliente received a small business exporter of the year award at a Fort Wayne International Trade Conference in 2008.

At the time, 25 percent of the company’s sales were overseas to the United Kingdom, Sweden, Italy, Israel, Canada, Mexico, Hong Kong, China and Singapore. From 2006 to 2007, it increased its export sales by 35 percent.

“Today, export sales have continued to grow along with our domestic business, even with the changing labor, energy and currency concerns,” said Amanda Walsh, marketing administrator.

“We made it a critical point from our startup that we would support international customers, so exporting is part of our DNA. It has helped broaden our horizons in terms of benchmarking best practices among our customers, vendors and competitors. Simply put, exporting has made us a better all-around manufacturer.”

Cutter said an area’s economic growth benefits from exporting in the same way that it benefits any time something it produces is sold beyond its borders.

“In economic development we classify sectors as basic and non-basic,” she said. “Growing jobs and business opportunities in basic sectors helps grow a region’s overall economy because instead of just circulating dollars within a community, as is the case with non-basic sectors, basic sectors are pulling money in from the outside.”

A step taken in 2011 that could contribute to a more favorable environment for some types of exporting operations and international trade in general was the expansion of Foreign-Trade Zone No. 182, which grew from about 485 acres in Allen and Huntington counties to a much larger footprint including all of Allen, Adams, DeKalb, Huntington, Noble, Wabash, Wells and Whitley counties.

The foreign-trade zone is administered by the city of Fort Wayne. Elissa McGauley, who is in the city’s international trade office, said she is working with economic-development groups in northeast Indiana to promote it.

Companies that have their operations approved — or “activated” — within a foreign-trade zone are divided into two different categories: those located within a “general-purpose zone” and those within a “subzone.” Determining which category the business falls into is based on its operations.

Receiving general-purpose zone activation used to take a year to 18 months. A general-purpose zone can be used for repackaging, labeling or just storage, and as long as imported merchandise is there, the owner doesn’t have to pay import duty on it.

If the merchandise isn’t sold in the United States, but is instead re-exported, a duty payment isn’t required.

A manufacturer interested in assembling products in a foreign trade zone to defer or avoid paying duty on imported components must apply to the U.S. Foreign-Trade Zones Board for a subzone. The board officially consists of the U.S. commerce secretary and treasury secretary, who typically oversee specialists who handle its responsibilities.

There is an application fee for a subzone, and the process of obtaining approval for it is longer than for a general-purpose zone, but the cost and time to activate a subzone would be lower and shorter than it’s been in the past.

“We try to keep up our website about the foreign trade zone, which Fort Wayne is the grantee for,” McGauley said.

When she receives calls inquiring about resources to assist with export development, she refers them to the Small Business Administration center in Fort Wayne and to the U.S. Department of Commerce Export Assistance Center in Carmel directed by Mark Cooper.

An example of a northeast Indiana company outside of the Fort Wayne metro area that has seen success exporting to China is Whiteshire Hamroc in Albion.

The company has been exporting its genetic material for high-value hogs for 15 to 20 years, and “it is always a market that runs hot and cold with a lot of barriers outside of our control in terms of trade policies,” said Rebecca Schroeder, president.

Whiteshire’s chief executive officer, Mike Lemmon, is a doctor of veterinary medicine who made a lot of contacts within the industry doing quarterly inspections of pork production operations for a pathogen-free certification program.

Lemmon became involved in educational programs organized by soybean promoters and the U.S. Department of Agriculture to take management technology and management practices to Asian producers.

Panelists at the educational seminars met Asian pork producers interested in what they were teaching, “and that led to folks becoming interested in our genetics and building systems, and our (Airworks) patented building and ventilation system designed for swine farms,” Schroeder said.

That led to the start of a joint venture with the Chinese pork producer, Tang Ren Shen group, then to its direct foreign investment in Whiteshire’s U.S. operations.

“We provided them with an investment in the genetics and they put up Airworks buildings, and we provided them with production services such as our genetic improvement procedures our production procedures and helped them manage those farms like our genetic farms here in the U.S.,” Schroeder said.

“They put up their second joint-venture farm that was populated in October and are the partner here in the expansion in the U.S. We’re going to be building a 1,200-sow genetic technology center. We have 1,500 head in production right now, and this will almost double that.”

Whiteshire has not finalized site selection for the project but would like to do it in Indiana sometime next year.

An example of recent direct foreign investment in the Fort Wayne area could be BAE Systems. The British-based company learned in mid-November it could expect economic-development incentive commitments of at least $4.5 million for a project that would relocate its local operations to a new plant near the Fort Wayne International Airport.

The project would involve a $39-million investment to buy land at the northwest corner of Ardmore Avenue and Airport Expressway and build a 355,000-square-foot facility, as well as $3.2 million to equip the plant.

Construction on the project would start early next year, and BAE could expect to see it completed in mid-2015. The company is working to close a deal with the Indianapolis office of Scannell Properties to develop the new manufacturing facility.

With a work force of about 1,100 at 2000 Taylor St. — including fewer than 100 contract workers — BAE is among Fort Wayne’s largest employers. BAE’s Fort Wayne work force has seen gradual expansion since the relocation of 200 production positions from Irving, Texas, bumped its employment up close to 1,000.

Creating the kind of business climate and skilled work force that could support that kind of job growth and long-term commitment “has been our strategic objective since we started down the path of the Talent Initiative and the Big Goal,” John Sampson, president and CEO of Northeast Indiana Regional Partnership, said of its work-force development initiatives.

“We represent an important part of doing work in the global marketplace, and some companies are going to want to be located in the midst of that climate and work-force capability,” he said.

When officials with the partnership promote northeast Indiana on trips overseas as a good place for direct foreign investment, they keep their eyes out for foreign companies looking for opportunities to import from the region, Sampson said.

“When it comes to economic development, it doesn’t matter whether we’re bringing a new company here or expanding the export capabilities of a company located here.”