Eight years ago Scott Magardichian joined the exodus of American manufacturers setting up shop in low-cost China.

This year, he’s at the unlikely vanguard of business owners returning to U.S. shores.

Magardichian, chief executive of polyethylene bag manufacturer American Poly Bag Inc., is adding employees and increasing production at the company’s Azusa headquarters at the same time he’s cutting back at his Shanghai factory.

It’s an action he never figured he would take. But with the rising costs of Chinese labor and trans-Pacific shipping which is linked to oil prices the once overwhelming cost advantage of manufacturing overseas has dissipated.

“When we first went over to China in 2000, we were saving at least 30 percent,” Magardichian said. “Those savings are all but gone now. I hate to use the ‘Perfect Storm’ clich & #233;, but that’s what we have.”

Magardichian is hardly among a stampede of manufacturers returning to the U.S. from China and other Asian countries. But there have been some other notable companies that have done so recently, with the weak dollar another clear factor.

Emerson Electric Co., based in St. Louis, shifted some production of its motors for home appliances from Asia back to the United States. And Taylorsville, N.C.-based Craftmaster Furniture, which was bought in 2006 by a Chinese company with the intention of shifting most of its manufacturing overseas, has all but halted those plans. The company has said rising transportation and labor costs have prompted it to reevaluate the move.

Locally, Exxel Outdoors Inc., a maker of low-cost sleeping bags located just down the street from American Poly Bag, also is bringing manufacturing back to the United States.

It’s a movement that has been given a boost by the quality control issues companies have experienced making goods in China, especially the well publicized problems with lead paint that plagued Mattel Inc. and other toy manufactures last year.

“We’re on the cusp of seeing this become a trend,” said Doug Goudie, director of international trade policy for the National Association of Manufacturers. “We’re hearing, both anecdotal and in practice, that companies are actually doing this and we hope it becomes a real trend.”

Pacific flight

American Poly Bag sells some $15 million worth of plastic bags, including anti-static bags for electronic equipment, law enforcement evidence bags and pouches for heads of lettuce.

The company was founded in 1994 by Magardichian, who had worked in the food packaging business, and his father, Harry, who previously owned a company that made garment bags.

The pair started out with five employees at its Azusa site and experienced steady growth, but by the late 1990s the company found itself at a cost disadvantage to other plastic bag manufacturers since it did all manufacturing locally.

So in 2000 Magardichian went into partnership with a Chinese company and bought machinery to operate a 50,000-square-foot factory in Shanghai, where he moved most production, slashing his domestic workforce nearly in half.

The combination of low-wage Chinese labor, low shipping rates and lower prices for resin, the base for plastic, cut production costs to a fraction of what they were in the United States. Work exploded and the Chinese plant employed up to 80 workers. Locally, Magardichian kept a small crew to fill “just-in-time” orders as well as a few orders for customers who refused to have their bags made overseas.

However, last year, with sharply rising shipping and Chinese labor costs, he realized his cost advantage had slipped to less than 10 percent and below 5 percent on some items. Also, resin costs were rising, making it no cheaper overseas.

The company pays more than $2,300 in freight charges alone to ship a container of bags. It imports some 15 to 20 containers a month. That costs up to $46,000 triple what the company paid in 2000 when it opened its China factory, he said.

Because of a labor shortage in China, wages there have increased as much as 15 percent according to the country’s central bank.

“We never thought, as cheap as things were over there just a few years back, that we’d move production back here but it happened,” Magardichian said. “It just isn’t worth the headaches anymore, and it’s not profitable.”

The company has since slashed its Chinese workforce in half and doubled the number of employees in Azusa. Magardichian won’t reveal exactly how many full-time employees he has for competitive reasons, but said his head count is now more than 50 in Azusa and plans to add 20 percent before the end of the year as he winds Chinese production down to zero.

The decision to return home will cost the company. Magardichian is walking away from a $500,000 investment in its Shanghai factory.

However, that decision was made easier by the travails suffered last year by Mattel and other toy companies that manufactured their products in China. Unable to closely track their overseas supply chains, the companies were found to be producing toys tainted with lead paint.

Quality control

El Segundo-based Mattel alone last year recalled more than 21 million Chinese-made toys, which cost the company some $42 million in the fourth quarter alone.

The public health and public relations fiasco suddenly gave some traction to the long effort by domestic manufacturers to promote their products as American made even for a commodity such as plastic bags.

“It surprised me a lot. Some of my customers are now willing to pay a little more, if they have to, just to know that the products are made here,” Magardichian said. “It’s been one of the many advantages I didn’t expect to see.”

That advantage has been more clear cut for Exxel, which was profiled in June in the Business Journal. The company, founded in 1991, has been able to buck the tide of overseas manufacturing since buying an Alabama factory on the cheap eight years ago from a company getting out of the business.

Last year, Exxel closed its operation in Mexico because the cost advantages had disappeared.

“We recently decided to fill a big order from Wal-Mart by moving production from our China facility to our Alabama plant. And now that we’ve done that, we’re seeing more interest from potential customers because now our products are ‘American Made,'” said Harry Kazazian, the chief executive of Exxcel.

Jack Kyser, chief economist for the Los Angeles Economic Development Corp., said that while he had heard rumblings of companies moving jobs back to the U.S. he only knew of Exxel Outdoors prior to American Poly Bag.

“The fact that two companies here in L.A. County have done it makes quite a statement,” Kyser said. “California is the costliest state in the nation to do business in and the fact that these manufacturers have actually moved production from China to here really says something about the changing economic climate.”

Indeed, the entire manufacturing sector has gotten a boost, with most experts citing the weak dollar as the chief source. The Port of Los Angeles, for example, has seen a 12 percent decrease in imports this year, while exports are up 11 percent.

However, for Magardichian, he’s found that perhaps the greatest advantage in moving production onshore is that there is less worry.

“When we tell our customers that it is cheaper to make the bags here, that’s almost secondary to the comfort they get knowing that if there is a problem, I can go right in the factory and find out what is going on,” he said.

“There was always a nervous moment when we opened up a container, because there was a chance that something went wrong with the labels or the packaging. If there was a mistake, we’d have to wait up to two months to get it fixed.”