Officials mull duty-free trade zone for S. Central; zone could help importers and aid rebuilding efforts.

As part of an ambitious plan to turn South Central Los Angeles into a hub for international commerce, Councilwoman Joan Milke Flores' proposal for a general purpose foreign trade zone there is now in the application stage.

Consultants have been recently solicited who might help Los Angeles prepare an application to the Foreign Trade Zone Board in Washington, D.C.

Merchandise held in a foreign trade zone is free of custom duties and penalties. While in the zone, foreign and domestic goods may be stored, bought, sold and enhanced without being subjected to the laws of U.S. Customs. They are subject to duties only if they subsequently are shipped elsewhere in the U.S., but are free of levies if they go back overseas.

The proposed foreign trade zone would be located around the Alameda Corridor, the north-south thoroughfare now being eyed as a possible future rail link between the San Pedro port and downtown Los Angeles.

"If we can tie the foreign trade zone to enterprise zones and redevelopment areas, we can have a three-tiered approach to renovating the area," said Mike Stewart, deputy to Flores. "If California's going to be the capital of commerce, we should be gearing up for the world market."

Stewart said he has talked to Rep. Richard Gephardt, D-Mo., and other legislators about revitalizing the South Central area, and was told that it takes help from federal, state and local entities to turn a depressed area around.

Flores' proposal calls South Central an ideal place to establish a foreign trade zone because much of the area is already zoned for manufacturing, and it is located centrally between the harbors, the Los Angeles International Airport and downtown Los Angeles. The area is also near transportation projects, such as the Metro Rail Blue Line, the Century Freeway and the Alameda Corridor, which will increasingly be used to transport merchandise through the Port of Los Angeles.

"Why should all this commerce go by and South Central not get a piece of it?" posited Stewart.

Flores' office asserted that public officials and local business organizations could work together to recruit manufacturing opportunities for the area -- such as rapid-transit-vehicle manufacturing.

Nissan Corp. was offered as an example. It has an electric car under production, which it plans to market to Southern California by 1997. If assembly was done within the zone, there would be benefits to both Japan and Los Angeles.

Defining the exact benefits of a foreign trade zone to the area, however, is still speculative.

"It's like the free-trade agreement with Mexico," explained Judith Steele, a legislative analyst for the Los Angeles City Council, who researched the issue for Flores. "One-half of the economists say it's the greatest thing, the other half say it's the worst thing."

She said foreign trade zones don't make a lot of money, but they make ports more successful in luring business.

"It makes you a user-friendly port because you can accommodate importers," said Steele.

To truly capitalize on a foreign trade zone, it must be aggressively marketed, she said.

Long Beach has had a foreign trade zone since the 1970s, but it has come under criticism for not being marketed well.

That trade zone consists of a 116,000-square-foot warehouse in Rancho Dominguez (near Compton). That operation was taken over 18 months ago by Metro International Trade Services, a private company that runs 10 foreign trade zones in Detroit.

The zone serves about 60 to 70 companies. Many are alcoholic beverage companies that can save 30 percent tax and duty costs. Many are companies that ship consumer products to South and Central America without paying duty, said Sara Forbes, Metro's sales and marketing manager.

She said she doesn't see a need for another foreign trade zone in L.A. County.

But Tom Underhill, manager of bulk product for the Port of Los Angeles, said L.A.'s foreign trade zone could differ markedly from Long Beach's because it would be tied more directly to economic development of the city and it would be operated by the port, not by an outside company. He said the Port of L.A. could work with the city of L.A. on providing foreign-trade benefits to an area like South Central.

"We haven't discussed what activities will go on in our foreign trade zone yet. But we are reluctant to go to the Port of Long Beach because they haven't shown themselves to be aggressive in marketing," he said. He did say, however, that they are negotiating with the City of L.A. about tying economic benefits to South Central. Los Angeles is the only major port on the West Coast that does not have a foreign trade zone.

L.A. did operate a foreign trade zone between June 1949 and March 1956. But it was shut down after the federal government turned down the Los Angeles Harbor Department's proposal to expand and alter the area, said Steele. The zone was located in a warehouse on Pier 1, at the entrance of the main channel.