By Kevin Lavery, WKAR News
http://stream.publicbroadcasting.net/production/mp3/wkar/local-wkar-934036.mp3
Lansing, MI –
View a PHOTO ESSAY: Lansing Business & Global Trade
Say the words "international commerce" and "Midwest hub" and you might envision the huge freight yards of Chicago or Detroit. Sandwiched as it is between these two great American cities, you may not think of Lansing as an international port. But a conference today at Michigan State University aims to change that perception, and persuade local companies who do business internationally to make Lansing their home base. As part of our ongoing series, "reWorking Michigan," we profile one business trying to capitalize on the capital city.
AUDIO:
Craig Webb is standing on a noisy production floor in a busy industrial park in west Lansing. He's holding two metal discs bound together by a band of thick rubber. If you're one of those low-rider muscle car enthusiasts, or an EMT who depends on a smooth, safe ambulance ride to the hospital, this is a piece of hardware you can't live without.
Air Lift makes compressed air suspension kits that keeps cars and trucks balanced. The rubber bladder is one of the few parts the Air Lift Company does not make on site. They used to make rubber mounted air springs in house. But now, they import the rubber bladders from China and assemble them with other parts made in Lansing.
"And we do this because the quality is good and because the price is significantly lower than what we can do here," says chief financial officer Craig Webb.
A lower materials cost turns into a lower retail cost for Air Lift's customers. Supply chain manager Larry Finney says there's a strategy behind the decision to import.
"Importing takes a lot of heat today," Finney notes. "You know, it seems almost unpatriotic to some people, but the bottom line is, it gives us a strategic advantage here and helps us grow jobs in the Lansing area. And we're having record sales months right now because we're competitive."
Air Lift credits much of its advantage to Port Lansing. The service started in June 2008 to develop international commerce through mid-Michigan. A central part of the service is its foreign trade zone. It's a holding point where imported goods can clear customs. And it's also a cost-saving tool.
U.S. companies pay a duty, or tariff, on all imported products. In many cases, it's an up-front fee that must be paid when the parts arrive in the U.S.
"If you have a container that's coming in on the East Coast or West Coast, if you're not part of a foreign trade zone, you're paying that duty right then and there," says Lansing foreign trade zone director Brent Case.
Case says the FTZ allows companies to defer that payment until after they've put their own touch on the materials they plan to export.
"So if you process it, do some value-add and send out your finished product, and that point when you ship it outside of your location, that's when you would pay the duty on it," Case says. "And it's going to be a fraction of the total duty cost."
And there's potentially an even greater benefit. Air Lift pays a three percent duty. Case says they're exploring the use of an "inverted tariff." That means when Air Lift takes the imported part, combines it with its own and ships it domestically, it eliminates that three percent duty altogether. The duty would also be eliminated when Air Lift exports its kits overseas from the foreign trade zone.
Air Lift imports roughly $1 million worth of product each year. A three percent savings translates into $30,000 in their pocket. That could help Air Lift pay for new hires, improve its infrastructure or lower prices for its customers.
Another key benefit of Port Lansing is proximity. Air Lift uses Chicago as its main port of entry. Supply chain manager Larry Finney says sometimes imports get stuck in the freight yards.
"We've seen delays of two to three weeks down there." (Lavery: "What's that mean for your bottom line when that happens?") "We've had stock-outs in the past, just related to not being able to get our hands on the product; missing orders. Very unhappy customers."
Finney says Air Lift is starting to make more use of Port Lansing's local services...and reaping rewards.
"We find that Air Lift is constantly praised by our customer base for order fill rates, on time delivery," Finney explains. "And anything that we can do to turn product around quicker, get it in and out quicker gives us a competitive advantage over our biggest competition."
Air Lift and two other area companies are part of a pilot program to test Port Lansing's import and export capabilities. But the port's operators want more customers...a lot of them. That could soon come to pass. On Tuesday, federal officials approved Port Lansing's request to expand its service area beyond the tri-county Lansing metro region. The port will soon serve companies in Gratiot, Isabella, Jackson, Livingston and Shiawassee counties.