Q: We manufacturer and sell high-quality, durable sports uniforms to non-professional teams world-wide. We pay high prices for the fabrics we buy from the East Coast and would like to save on costs. These fabrics originate in Japan. Do you have any suggestions?

A: One possible solution is to manufacture your product in one of the foreign trade zones established in Southern California.

The Port of Los Angeles has been designated as a foreign trade zone by the U.S. government, a status which allows the port to set up foreign trade sites both on and off port property. So far, the port is sponsoring eight sites in the Los Angeles area.

In a foreign trade zone, manufacturers do not have to pay U.S. Customs duties on imported merchandise provided that merchandise will be used to make goods for export.

For example, if you buy fabric from Japan to use to make dresses, and then sell those dresses in Mexico, you would not have to pay any import duties on the fabric.

There are other advantages of foreign trade zone status:

– U.S. Customs duties are deferred on import merchandise until it is transferred from the Zone to a U.S. Customs territory for consumption.

– The U.S. Customs duty rate may be reduced by applying the duty rate either to the component parts or to the finished product, whichever is more advantageous.

– U.S. Customs duties are not paid on labor, overhead or profit related to production operations.

– U.S. Customs duties may be waived or reduced on defective, damaged or obsolete merchandise.

In some industries this can mean big savings. Auto manufacturers pay as much as 4 percent to 6 percent of the cost for imported car parts in duty fees. Finished autos have a duty charge of 2.5 percent. If they can defer duty fees until thousands of cars manufactured in the Zone are sold, savings can be significant.

For more information on free trade zones, call Karen Tozer, marketing manager with the Port of Los Angeles, (310) 732-3840.

More help is available through the State of California’s Trade and Commerce Agency, which has an Export Finance Office in La Palma to encourage and support export activity. The finance office offers working capital loan guarantee programs that finance export transactions that would otherwise strain your company’s cash flow. The maximum guarantee amount is $750,000, but the total loan from the bank may be higher.

The Export Finance Office evaluates your ability to access this credit program and helps you find a lender in about four weeks. There are more than 100 financial institutions participating in the program and your own bank may be one. For more information about this program, contact the office’s acting director, Caroline Brown, at (714) 562-5519.