Smith Corona to the House Subcommittee on Trade on the foreign trade zone program

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The Honorable Sam M. Gibbons, Chairman
Subcommittee on Trade

Committee on Ways and Means, Room 1102
Longworth House Office Building
Washington, DC 20515

Dear Mr. Chairman,

This letter is submitted in response to your request for
written comments on the operation of the US foreign trade
zone (FTZ) program. We respectfully request that this
letter be included in the printed record of the hearing.
Smith Corona Corporation strongly supports the continuation
of the Foreign-Trade Zone Program as it exists today. It
considers its designation as Foreign Trade Subzone 930A a
significant factor in the extraordinary turnaround it has
achieved since July, 1985. Since that time Smith Corona has
increased production sixfold, more than doubled employment
and has initiated a highly successful export program. Smith
Corona believes that the continuation of the Foreign-Trade
Zone Program is instrumental to its efforts to maintain its
position as the leading manufacturer of portable electronic
typewriters and personal word processors in the globai

market.

Smith Corona Corporation is the world's largest manufacturer |

of portable electronic typewriters and one of the largest
manufacturers of personal word processors. The company also
markets electronic reference products and office supplies.

History

During the early 1980's, due to an influx of low priced
foreign typewriters, Smith Corona, a leader in the field

for decades, saw a substantial decline in marketshare. Asa
result of this loss of sales, Smith Corona incurred two
successive 2 multi-million dollar losses.

naneeer uring and distribution
from seven buildings into one. meeeyeltar production was
cut in half to only 1500 units a day. The effect of this
massive workforce reduction was devastating to a locai
economy already weakened by the departure of several sizable
industries in the late 1970s. By March 1984, local
unemployment stood at 12.5%.

RBA ORSINI TS -oys
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Smith Corona, at

Instead, Smith Corona made a commitment to remain in
Cortland, New York.

First in Smith Corona's recovery plan was the redesign and
manufacture of a high quality, cost competitive typewriter.
In order to obtain the high quality components required to
achieve this goal, some of the components had to be foreign
sourced since they were not available in the domestic
market. Once the necessity to foreign source was

identified, Smith Corona discovered that, while it, an
American company trying to retain U.S. jobs had to pay

4 - 10 & duty on imported components, its foreign
competitors imported their fully assembled typewriters,
containing many of the same components (but no US labor
content) duty free. To rectify this situation and to enable
Smith Corona to purchase key components on a cost
competitive basis, Smith Corona applied for and was granted
(in a record four months) the privilege of cperating as 2
Foreign Trade Subzone. If Smith Corona's application had
not been handled so expeditiously, it is conceivable that
the grant might have been issued too late for it to help
Smith Corona maintain its operations in the United States.

Foreign-Trade Zone Impact

The introduction of an innovative product line, with
consistently high quality, produced at a cost competitive
price led to the achievement of one of the most remarkable
turnarounds in the history of American business. Since July
1, 1985, employment levels have climbed steadily to over
2000, the local payroll has doubled, and production of
typewriters and word processors has increased ato Ld to
over 2714 miilion units annually. 5m i: =

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ons Jation. A second warehouse has been established on)
the West Coast. A third building was reopened for the National
Service Stores organization. Smith Corona has recently moved
into a fourth building to allow for additional parts warehousing,
production and office space.

Domestic Impact

This return to profitability by one of the largest empioyers
in Cortland County has resulted in a drop in unemployment to
3.7%. It has had a dramatic positive ripple effect not only
on the local economy but throughout the US. Since only a
small percentage of the typewriters' components are foreign
sourced, the phenomenal increase in annual sales and
production has resulted in significantly higher orders for
our domestic suppliers. The benefits of the Foreign Trade
Zone Program were clearly evident in a series of letters
received from several of our domestic suppliers in November,
1987. sae

BORG WARNER CHEMICALS:
"Smith Corona's Foreign Trade Zone Subzone status has
contributed to their successful turn-around which, in
turn, has allowed ] Warn ‘als#to increase our
business in the US. This increase support our
reinvestment in plants and equipment, and provides
additional jobs for Americans."

CABLE MANUFACTURING & ASSEMBLY CO. INC.:
"Because Smith Corona has chosen us, ... we have
managed to keep equipment running that would otherwise
have remained idle, add employees to our assembly area
and help to offset partially, some of our lost
business."

GIBRALTAR STEEL CORPORATION:

"Smith Corona is a very important part of our total
Sales effort, and your valued business provides dozens
of jobs at our steel plant in Buffalo."

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GRAPHICS PLUS PRINTING, INC.:

",.. We've achieved an 80% increase in sales in 1986
Over 1985 and an 82% increase in 1987 over 1986 .«..
expanded the full time staff from 7 to 18 people,
purchased almost $250,000.00 worth of equipment and
relocated the business. ... In addition to increased
direct sales with Smith Corona, we've seen an
impressive growth in sales from many other businesses
that directly or indirectly benefit from Smith Corcona's
revitalized condition."

Taptite Products, Camcar Division of TEXTRON:
"In 1984, we sold approximately $50,000.00 of fasteners
to your Cortland, NY manufacturing fac Ley C27. *eEL P= be
supplying over $490,000.00 in 1987. ... sales groath
has allowed us to add 5 ~ 6 employees ..-. Our recent
addition of 29,000 sq. ft. ... was in part a result
of Smith Corona's ability to increase sales."

It is ironic that some of the very industries and companies

that are publicly opposed to the Foreign-Trade Zone Program

have in fact, been the direct beneficiaries of the program

in terms of increased sales, increased employment, and

improved facilities. Using just 10 of the letters of support
received from domestic suppliers at the time of the ITC report,
202 domestic jobs were identified as added due to Smith Corona's
return to competitiveness. Over $2,000,000.00 in capital
improvements were tied to Smith Corona's increased orders.

In the two years since these letters were received, Smith

Corona has again doubled its annual production. There can

be no doubt that all of Smith Corona's domestic suppliers

have benefited substantially from Smith Corona's ability to
compete, which is due in part to its designation as ¢

Foreign Trade Zone. Surely, this is in the “public
interest"!

Exports

With the solidification

of its position in the domestic
market, Smith Corona is

now aggressively pursuing

international markets. Smith Corona Surrentily Claims 55% of

all portable electronic typewriter sales in Canada. It has
re-established a company owned distribution warehouse in the
United Kingdom. It has a contract to Supply typewriters to

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Conclusion

In summary,

y, Smith Corona Corporation was an American company
on the brink

: of extinction due to a large influx of
low-priced foreign competition.

Using the Foreign-Trade Zone
Program as a tool to reduce material costs on high quality

imported components unavailable in the United States, Smith
Corona began producing an innovative, competitive product.

First, Smith Corona regained its leadership position in the
United States and Canadian markets. With its return to

profitability and ever increasing sales, production demands
increased, employment increased, and orders for domestic material
increased thus further spreading the benefits of the Foreign
Trade Zone Program. With its position in the domestic

market firmly re-established, Smith Corona has now turned to

the international marketplace and is actively seeking
opportunities to export. Smith Corona's new goal, made

attainable in part through the Foreign Trade Zone program,
is to be the leader in the manufacture and sales of
typewriters and word processors in the world.

er us “the Un
‘Foreign Trade Zones are truly

to the global market. Smith Corona
believes that the United States Congress must continue to
support this valuable and important program.

America's gateways

Respectfully Submitted,

Pei chihene

Karen L. Sager
Customs Administrator

cc: Robert J. Leonard

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