IMPORT/ EXPORT, LOCATION DECISIONS, GLOBAL MANUFACTURING
PROFITING FROM A FOREIGN
Case prepared by Charles A. Rarick
Located in Southwest Missouri, Ozark Electronics is a manufacturer of small electrical appliances, such as toasters, toaster ovens, can openers, mixers, and blenders. Ozark assembles these products in its Springfield, Missouri facility using a number of foreign suppliers for component parts. Virtually all products are assembled from parts from Japan, Taiwan, Korea, and China.
All of Ozark’s production occurs in the Springfield facility and the company employs over 400 people. Although labor costs might be lower in Mexico or Asia, Ozark has never considered moving its production operations out of the country. Wages and benefit costs are moderate and the work force is productive. Ozark exports approximately 25% of its production output to Latin America, Europe, and Asia. The company hopes to increase its export potential with some product design changes and increased international marketing eff orts.
Jim Harrison, vice president of logistics for Ozark, has been communicating with an old college friend who recently took a job at the Toyota production facility in Kentucky. Jim’s friend told him that Toyota utilizes a foreign trade zone (FTZ) and that Ozark could benefit from one as well. After further discussions on the telephone, Jim decided to fly to Kentucky to see the Toyota facility and learn more about the FTZ concept.
Jim learned that Toyota imports from Japan component parts for its automobile manufacturing and that by utilizing a FTZ, the company avoids paying any customs
duties on the component parts until the cars leave the FTZ. If the autos are exported out of the United States, then Toyota pays no tax on the component parts at all. It was explained to Jim that an FTZ is an area in the United States, that is considered to be international territory, and, therefore, U.S. customs duties do not apply....