Duty-free designation seen as lure to business, development.

NAFTA they're not, but commercial free trade zones, the specially designated areas that allow tenants to delay or forgo import and export duties, dot Southern California and more are on the way.

The latest entrant is a 500-acre zone in the City of Industry that would cover the 400-acre Grand Crossing industrial park and about half of the 190-acre Fairway Business Center. The application, filed more than a year ago, should be complete in one or two months.

"In 1970, there were about seven Foreign Trade Zones in the country; now, the numbers are 400 to 500," said David Harlow, president of International Trade Consultants LLC in Brea. Harlow's firm is shepherding the Grand Crossing/Fairway application on behalf of Majestic Realty Co., which manages the larger park and co-owns the smaller.

Under a law passed in 1934, the Commerce Department's Foreign Trade Zone Board can name port or airport authorities as FTZ grantees. The authorities, in turn, accept applications from commercial interests to become administrators of sub-zones covering an area as narrow as a single warehouse to one as large as an entire industrial park.

In the Los Angeles region, Foreign Trade Zone authorities have been established by the ports of Los Angeles and Long Beach, the city of Palmdale and the Southern California Logistics Airport Complex in Victorville. Applicants need not be in their immediate area; the Industry application is being handled through Victorville, in San Bernardino County.

The appeal of the FTZs is that no duties are paid on goods or raw materials brought into the country by a company with an FTZ until they enter U.S. commerce. If the goods are warehoused in an FTZ then exported to other countries, no duties are paid at all.

That provides a savings to companies operating within the zones and gives developers such as Majestic an added marketing tool.

Kent Valley, senior vice president at Majestic, said several companies were interested in relocating to Industry once the FTZ designation is secured, and some existing tenants were interested in registering to get the FTZ benefits for their spaces. "We think it will help us get the property leased that we have left in the complex, when we build it out in the future," he said.

A company seeking the benefits of operating within one of these free trade zones must apply to the U.S. Customs Service to have it activated, a process that became more complex since the service was folded into the Department of Homeland Security.

"We started this over a year ago and we thought everything would be cleared by now," said Joe Hollingsworth, general manager of Aldelano Packaging Corp., an Ontario company that packages and re-packages goods for companies that include Procter & Gamble Co.

Aldelano can't proceed until background checks on the staff are completed and its 20,000-square-foot warehouse, office and assembly space meet federal security requirements for ports of entry.

Operators of warehouses with FTZ designations have more responsibility than those of regular bonded warehouses because they can break container seals themselves. Customs requires they have higher bonding and higher liability coverage if anything goes wrong with regard to smuggling or other problems. Customs officials inspect the sites at least once a year, and can conduct spot inspections.

Those hurdles have not dampened the desire for designation at the proposed 500-acre Tejon Industrial Complex, a joint venture of Tejon Ranch Co. and Rockefeller Group Development Corp., a subsidiary of Rockefeller Group International Inc., just over the county line in Kern County. The application is being made to the FTZ operated by the Port of Long Beach.

"Last fall, with 70 to 90 ships stacked up at the ports, it became painfully obvious that companies had all their eggs in one basket," said Barry Hibbard, vice president of commercial industrial development for Tejon Ranch Co.

And the city of Palmdale which got an FTZ designation in the early 1990s but never had it activated, recently hired a consultancy to market the city, hoping the FTZ will attract new business and quality jobs.

"About a third of our workforce travels south through the L.A. Basin for work," said John Brooks, senior analyst for the City of Palmdale Economic Development Department. "We're doing everything we can to maximize the opportunity for businesses to come in and provide jobs in the Antelope Valley."