[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
EXAMINING BARRIERS AND SOLUTIONS TO
ECONOMIC DEVELOPMENT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON REGULATORY REFORM
AND PAPERWORK REDUCTION
Of the
COMMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
WASHINGTON, DC, NOVEMBER 22, 1999
__________
Serial No. 106-72
__________
Printed for the use of the Committee on Small Business
U.S. GOVERNMENT PRINTING OFFICE
68-480 WASHINGTON : 2001
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
20402
COMMITTEE ON SMALL BUSINESS
JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado JUANITA MILLENDER-McDONALD,
DONALD A. MANZULLO, Illinois California
ROSCOE G. BARTLETT, Maryland DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey CAROLYN McCARTHY, New York
SUE W. KELLY, New York BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania DONNA M. CHRISTIAN-CHRISTENSEN,
DAVID M. McINTOSH, Indiana Virgin Islands
RICK HILL, Montana ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania TOM UDALL, New Mexico
JOHN E. SWEENEY, New York DENNIS MOORE, Kansas
PATRICK J. TOOMEY, Pennsylvania STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina CHARLES A. GONZALEZ, Texas
EDWARD PEASE, Indiana DAVID D. PHELPS, Illinois
JOHN THUNE, South Dakota GRACE F. NAPOLITANO, California
MARY BONO, California BRIAN BAIRD, Washington
MARK UDALL, Colorado
SHELLEY BERKLEY, Nevada
Harry Katrichis, Chief Counsel
Michael Day, Minority Staff Director
------
Subcommittee on Regulatory Reform and Paperwork Reduction
SUE W. KELLY, New York, Chairwoman
LARRY COMBEST, Texas BILL PASCRELL, New Jersey
DAVID M. McINTOSH, Indiana ROBERT A. BRADY, Pennsylvania
JOHN E. SWEENEY, New York DENNIS MOORE, Kansas
JOHN THUNE, South Dakota
Meredith Matty, Professional Staff Member
C O N T E N T S
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Page
Hearing held on November 22, 1999................................ 1
Witnesses
Marrero, Francisco A., District Director, New Jersey District
Office, U.S. Small Business Administration..................... 6
Pucinelli, Dennis, Acting Executive Secretary, Department of
Commerce FTZ Board............................................. 9
Hoffman, Deborah, Executive Director, Paterson Economic
Development Corporation........................................ 13
Miller, Charles, Associate Director, Greater Paterson Chamber of
Commerce....................................................... 14
Jara, Daniel, President/CEO, Statewide Hispanic Chamber of New
Jersey......................................................... 14
Gross, Ron, President, Vision 2020............................... 25
Russo, Philip, Time Zero/PPI Corporation......................... 27
Waitts, George, President, Crown Roll Leaf, Inc.................. 28
Dotoli, Deborah, President, Geneva Metal Products Company........ 30
EXAMINING BARRIERS AND SOLUTIONS TO ECONOMIC DEVELOPMENT
----------
MONDAY, NOVEMBER 22, 1999
House of Representatives,
Subcommittee on Regulatory Reform
and Paperwork Reduction,
Committee on Small Business,
Washington, DC.
The subcommittee met, pursuant to call, at 2:30 p.m., at
the Paterson Museum, 2 Market Street, Paterson, New Jersey,
Hon. Sue W. Kelly (chairwoman of the subcommittee) presiding.
Chairwoman Kelly. Good afternoon, ladies and gentlemen. My
name is Congressman Sue Kelly. I am the Vice Chairman of the
Subcommittee, the Small Business Subcommittee on Congress.
We are here today to discuss the barriers and solutions to
economic development here in Paterson, New Jersey and I look
forward to focusing on the HUBZone program and the foreign
trade zones.
Before I make an opening statement, I am going to defer to
Congressman Pascrell, he is ranking member of the subcommittee
and he will make his opening statement first.
Mr. Pascrell. Thank you, Chairman Kelly, and I welcome you
to the 8th Congressional District.
I want to present you with these flowers for coming all the
way down from the 19th District in New York. West Point is the
center of that district and you have done such a tremendous job
as the Subcommittee Chairman, Sue, and you work very hard to
deregulate and to take away the regulations that have hurt
business and are continuing to hurt business in our nation.
I want to present this to you, we are so thankful that you
took the time to bring the committee hearing down here.
Let's give Susan a nice applause.
Chairwoman Kelly. Thank you.
Mr. Pascrell. Chairwoman Kelly is currently in her third
term. From the 19th District of New York, as she pointed out,
she has been particularly involved and has accomplished
accomplishments to show for her work.
She has pushed legislation to Congress providing $11
million for restoration on the Hudson River. Her legislation to
guarantee reconstruction for women following mastectomy became
law in 1998 for all involved, each of us that are involved in
women's health issues in Congress.
She has campaigned for legislation relieving most
homeowners of capital gains taxation when they sell their
principal residence.
We will get to that soon. Eventually.
I am very proud----
Chairwoman Kelly. Actually, it's law.
Mr. Pascrell. It is law now, right. But we are not finished
now. We have a lot more to do.
Chairwoman Kelly. Yes.
Mr. Pascrell. So it is really a great honor to have a
Congressional hearing in our district and to have an official
hearing here in the great city of Paterson and in this museum.
We planned it that way. And the museum is reflective of an
old city, over 200 years of age, trying to fight its way back
in an area which has seen a tremendous loss of manufacturing
jobs, and as we move to service committees, are we replacing
each manufacturing job with a service job?
The answer is no, we are not. And so, this is quite timely.
Chairwoman Kelly has been deeply concerned about the issue
of economic development, and as we struggle with the issues on
the Small Business Committee and I serve with her, she is the
chairperson of a subcommittee on regulatory reform. I am the
ranking member on that committee. Her dedication to small
businesses and economic development is unquestionable. And it's
truly an honor for us to have you here today.
Chairwoman Kelly. Thank you.
Mr. Pascrell. I have sponsored numerous small business
forums in the past, but this is the first official small
business hearing that has ever taken place in this district.
I'm going to proceed in the manner that is consistent with
that format, so once Chairwoman Kelly gives her opening
statement, we will then hear the panel's testimony, panel one
to my left, panel two to my right.
I hope they can see over there. Okay. And after the panel
has finished, we will ask questions and then we will open it up
to the audience, which is unusual at a Congressional hearing,
but you know that is my forte. You know that.
This afternoon we are going to explore solutions and
understand the barriers to economic development in northern New
Jersey. At the outset, there are no easy answers for the
problems of economic development, attracting business,
retaining business, turning around distressed areas.
This field hearing represents a starting point for all of
us to find out what is working and what is not working; what
needs to be improved and what we as a community can do to force
the economic development.
We have assembled a panel of economic development
professionals. And if I say so myself, experts, I can consider
them experts, from across the state, from Washington, D.C., as
well.
In addition, and perhaps most importantly, we will hear
from the very people that we are attempting to help; the local
businesses that form the backbone of the Garden State's
economy.
Presently our nation is experiencing the seventh year of
economic growth. Actually, seven-and-a-half years. And if this
trend continues for another month or so into January, we will
have a new record for the longest running peacetime economic
expansion in our nation's history.
By all measures, the latest national unemployment rate is
4.1 percent. That is the lowest level in 30 years. New Jersey's
job employment reached a record high in October. Unemployment
has declined to 4.5 percent. Inflation, believe it or not, is
tamed. At this point, it does not represent a threat.
And what is so unique about this growth is that at the same
time that we have had this increase in the number of jobs and
decrease in the amount of jobless, at the same time our
interest rates are relatively low, but never low enough.
Greenspan should hear that, right?
At the same time, what is phenomenal about the last three
or four years particularly is that the rate of productivity has
hit a high over the last 30 years.
Our workers are working. In fact, what is very interesting
is that many companies now cannot find people, and even the
most part-time positions, which are seasonal, we have problems.
And they are good problems to have.
There are pockets of high unemployment in our state, and
nothing is good until everyone has equal opportunity and
everyone can rise with the waive of economic prosperity.
In many of our communities there are sectors that need to
be revitalized so that we can attract businesses and create
jobs. We know in our own district, in many of the suburban
communities as well, downtown areas have fallen because of
suburban malls, and if we simply want stores that are empty to
clutter our downtown areas, pretty soon there is no main
downtown. Pretty soon we all begin to live in malls and our
children grow up there.
I don't like that idea, by the way, but that is on the
horizon, or it has already happened. Many of the areas that
suffer from chronic unemployment were once centers of activity
and provided employment for thousands of people.
Could you believe that at one time there were 30,000 people
who worked just in these ten square blocks? Pretty amazing to
think about it.
Manufacturing employment in the United States fell 1,500 in
September to a seasonally adjusted level of 462,000 jobs in
October. This is no surprise. We have lost 400,000--would you
shut off your phones please--400,000 manufacturing jobs state-
wide during the past 25 years. 400,000.
That is incredible. Yet this state has no manufacturing and
industrial policy whatsoever. And today's location here at the
Paterson Museum, I think, is of even greater significance. This
is where the Industrial Revolution began in America, believe it
or not.
This city was the crucible of industrialization and
manufacturing for the continental United States. It all started
right here. Right here and outside, a stone's throw in every
direction.
This museum is very proud of its historic legacy. There is
so much to exhibit that we could exhibit five times what is
here. But there is no more room.
And when you are trying to paste things together and make
them operate, there are priorities. We cannot squander this
legacy, and as a nation we have no unified manufacturing
policy.
In the meantime we will have to come together and do it
ourselves, perhaps on an ad hoc basis.
This afternoon we are going to hear testimony on two very
promising programs. They are designed to spur economic growth:
HUBZones and foreign trade zones. ``HUB'' means historically
under-utilized business zones.
I don't know who invented those words, but they sound good.
I will use HUBZones. This was a reality beginning in 1997, it
was fortunate to be voted for, and it is now a reality.
It is an empowerment contract program to get folks who do
business in this area, in the HUBZones that exist in certain
enumeration districts, census districts, to give them a heads-
up on government procurement.
The other program is the foreign trade zone, which is not
new, which goes back to the thirties, which has been renovated
many, many times.
I have been a long-time supporter of the HUBZone program, I
voted for that legislation. I have a deep sense of personal
satisfaction in witnessing first-hand those actions that have
been taken to Washington. It has become a reality here at home.
You will hear some people who are part of the HUBZone
contracting. The program is relatively straightforward. Its
purpose is to stimulate economic growth by offering federal
contracting opportunities to small businesses which all of you
represent.
It is important to keep in mind also that the Federal
Government purchases approximately $200 billion worth of goods
and services each year. It's something we need to be aware of.
Clearly, if a portion of this market can be directed to
small businesses located in our HUBZone, there exists a
potential for significant economic growth.
Businesses have called my office indicating that they
cannot participate in it because they are across the street and
lie just outside the proper zip code. It's similar to the
problem of the urban enterprise zones that we had here in New
Jersey and I fought to help our suburban brothers and sisters
because it's absolutely insane to have an urban enterprise zone
in Paterson, New Jersey, and across the street in Clifton they
can't take advantage of it.
All that does is separate people and divide. And we cannot
allow that to happen with the HUBZone plan. So we are going to
examine that and that is what we are going to do.
The foreign trade zone designation, on the other hand, is
not a new program. As I said, it started in 1934. There are 230
foreign trade zones across the United States. There are five of
those zones in New Jersey.
I think the closest ones to us would be Newark and
Elizabeth. There is one in Morris County. They benefit
manufacturers by eliminating tariffs on items that are
resupported.
Foreign goods and domestic goods held for support are
exempt from state and local inventory taxes as well.
Presently 350,000 people across the nation are employed in
foreign trade zones. They have worked. A total value of the
goods supported from those zones is $17 billion a year. These
numbers clearly indicate that this is a success.
So where are we today? Well, we have the HUBZone program
running right here in the 8th District, but we don't have an
FTC designation, and I think personally we need one.
I would like to recognize who our first panel is. Our first
panel is--before I do that, I am going to turn it back to the
Chairlady who is going to say a few remarks and then we will
continue to hear from our panel.
Susan, thank you for being here.
Chairwoman Kelly. Thank you. I thank you and I thank all of
you for welcoming me to the district to take a look at the
barriers and solutions to economic development and to focus
particularly on the potential impact of the Small Business
Administration's HUBZone program and the Department of
Commerce's foreign trade zone program because these mean jobs.
As Phil pointed out, its jobs, its community prosperity. As
vice chairman of the Small Business Committee and chairman of
the Subcommittee on Regulatory Reform and Paperwork Reduction,
I just welcome the chance to drive a little south from my New
York district to learn more about the possibilities for growth
of the small businesses in this area that is so rich, as Phil
pointed out, so rich with industry.
It is my understanding that the history of this industry
has left the area with strong capabilities and really promising
potential for renewed growth. Along that line, the HUBZone
program seeks to have a most worthy purpose here; to provide
economic relief to areas of this nation and particularly this
area, which has historically suffered from the high rates of
unemployment and low income levels.
The program is designed to encourage the location of small
businesses in these economically distressed areas and to
provide stable employment for people who live in the areas. The
Federal Government can assist the small businesses in the
HUBZone by facilitating the contracting process.
Contracts that get awarded to small businesses in HUBZones
can mean thousands of job opportunities. HUBZones help
accomplish this important welfare reform objective as well. It
provides jobs to individuals who want to get off welfare and
back into the work--and work in the communities where they
previously have been getting public assistance.
I envision today's hearing in Paterson as somewhat of a
case study in this program. Although a few firms are certified
in this area, the community and its congressman are looking for
ways to expand and to improve the HUBZone program.
The second topic, the foreign trade zones also will spur
job growth in distressed areas, and it is important to have
trade zones today and economic development that I think we can
talk about just a few statistics.
Since 1970, the total number of trade zones has grown from
10 to 662, and employment in them has gone from 7,000 to
367,000 jobs. These zones provide a climate which encourages
domestic corporations to expand or retain operations in the
U.S. Likewise, the zones are an economic development tools used
by communities to maintain and attract business development and
investment. The favorable tariff and customs regulation
treatment related to zones contributes to the decision to
invest in the United States right here in Paterson, rather than
overseas.
I think that overall, the result of the business decisions
that are related to these zones really does mean a much more
favorable job enhancement program for everyone and that only
spills over into a larger and larger economic pie, as you all
know.
Both of these programs have very lofty goals, and if
properly administered and accurately focused and thoughtfully
planned, the programs are going to guarantee economic expansion
that delivers on the commitment that Congressman Pascrell and I
and many other members of Congress like us have made to try to
make sure that we have meaningful job creation and sustainable
community development.
Those are not hollow words. Those are things we are truly
committed to, and I really thank you again, Congressman
Pascrell, for allowing me to come down here and participate in
this hearing.
I look forward to the testimony of our witnesses today.
Would you like to introduce those witnesses?
Mr. Pascrell. Thank you, Chairman.
Today our first panel is--we are going to jump right into
it. They each have five minutes. We don't have what we have in
Washington. We don't have all the lights that go on and off,
but we will let you know when your time is up. We will hear
then from the Chairwoman, and I will ask questions of the
panelists, and we will go to the second panel, the same thing,
and then we will go to the audience. We have agreed that that
will be our format.
So our first panel would be Francisco Pancho Marrero, who I
have worked with extensively since coming to Congress. Pancho,
as we call him, is the director of the Small Business
Administration in Newark, New Jersey. He, himself, I consider
to be an expert in this area, and we are anxious to hear and
welcome Pancho.
Thank you for being here today. The SBA has done a great
job in this area.
STATEMENT OF FRANCISCO A. MARRERO, DISTRICT DIRECTOR, NEW
JERSEY DISTRICT OFFICE, U.S. SMALL BUSINESS ADMINISTRATION
Mr. Marrero. Thank you, Madam Chairwoman and Members of the
Subcommittee on Regulatory Reform and Paperwork Reduction. Good
afternoon. Thank you for the opportunity to testify before you
today.
I am Francisco Marrero, the District Director for the U.S.
Small Business Administration's New Jersey District office.
If I may take a second, I would like to introduce to you a
member of my staff and the HUBZone technical expert and liaison
for the state of New Jersey, his name is Richard Sill and he is
with us, infinitely more capable----
Mr. Pascrell. Where is Richard?
Mr. Marrero. Today I would like to discuss with the
Subcommittee the many economic development programs that SBA
has to offer and how these programs are helping small
businesses throughout New Jersey.
Madam Chairwoman, I request that my testimony be made part
of the record.
Chairwoman Kelly. It is so ordered.
Mr. Marrero. As you know, small businesses are the backbone
of the U.S. Economy. America's 23 million small businesses
employ more than 50 percent of the private work force, generate
more than half of the nation's gross domestic product, and are
the principal sources of new jobs in America's economy. These
numbers clearly reflect the importance of small businesses to
the economy of both the nation and the state of New Jersey.
In an effort to help keep the small business sector a
thriving part of America's economy, Administrator Alvarez has
delineated the following goals for the Agency:
Increase opportunities for small business success.
Transform SBA into a 21st Century leading edge financial
institution.
Help businesses and families recover from disasters.
Lead small business participation in welfare to work.
And serve as the voice for America's small businesses.
The New Jersey district office is determined to reach out
to small businesses in an unprecedented way, listen to their
needs, respond to these needs, report these needs back to the
Administrator and suggest appropriate initiatives that
effectively address those needs.
The goal of the New Jersey District Office is to remain a
leader in the economic development of the State, as well as
serving as a catalyst for the growth of small businesses.
We are focusing our efforts on maintaining high quality
customer service, improving small businesses' access to capital
through our lending programs, increasing the level of
participation of socially and economically disadvantaged firms
through our Minority Enterprise Development Program,
encouraging economic development in historically underutilized
business zones, hub zones, through the HUBZone Empowerment
Contracting Program, increasing the number of counseling and
training services we make available to small businesses and
increasing our aggressive marketing and outreach efforts to our
network of lenders and their customers.
At the start of my tenure as District Director, I made a
pledge to the Small Business Community in this state that the
SBA would work to become a recognized leader in stimulating
economic growth and development in New Jersey.
We have succeeded. During the last five fiscal years, the
SBA New Jersey District Office has approved 7,394 loans for a
total of $1.6 billion, more than were approved during the
previous 16 years combined.
In the recently completed fiscal year 1999, we approved a
record $395.5 million in SBA-backed loans to a record number of
1,572 small business owners.
One of our highest priorities has been serving the new
markets small business community, including African-Americans,
Hispanic-Americans and women.
Administer Alvarez has often said that economic recovery
can only succeed when there is total inclusion. We must ensure
that in a thriving economy everyone is provided with the same
opportunities. Providing entrepreneurs with access to capital
creates jobs, increases the tax base and supports a healthy
economy.
Our efforts to reach out to the new markets segment of the
population speaks for themselves.
From fiscal years '91 to '94, we made a total of 365 loans
to African-Americans, 78, Hispanic-Americans, 54, and women,
233.
But fiscal years '95 through '99, we made a total of 1,926
loans to these same groups. During fiscal year 1999 alone, the
SBA New Jersey District Office approved a total 543 loans for
$105.7 million to these new markets small businesses.
To keep pace with the rapidly expanding economy, SBA
developed a number of new loan programs designed to increase
access to capital while simplifying the process.
These programs include:
The prequalification loan program which allows the SBA to
preapprove an application prepared by an SBA-designated, non-
profit intermediary, before the applicant finds a commercial
lender to make the loan.
The LowDoc loan program which features a one-page SBA
application and a 36-hour approval process.
The SBA express loan program which allows selective lenders
to use primarily their own application and documentation forms
and provides a response from SBA within 36 hours of receiving a
complete application.
The Y2K action loan program which enables small businesses
to become Y2K compliant through Y2K assessments, repairs and
upgrades both before and after January 1, 2000, and----
The preferred lenders program under which SBA delegates
loan approval, closing and most servicing and liquidation
authority to selected lenders. SBA loan approval is conducted
at an SBA PLP center and turnaround usually takes less than one
day.
These programs have reduced both the paperwork requirements
and the processing time for SBA loans, not only in New Jersey
but also across the country and have helped SBA maintain its
position as a leading source of long-term small business
financing in the nation.
In the area of minority enterprise development, we are
continuing our efforts to aggressively recruit businesses owned
by individuals that are socially and economically disadvantaged
into the 8(a) program.
During fiscal year 1999, the SBA New Jersey District Office
awarded 198 contracts, 20 contract options and 617 contract
modifications worth $173.2 million to firms in the 8(a)
program.
This past September, together with Congressman Pascrell, we
introduced the HUBZone empowerment contracting program to the
New Jersey small business community. This program is designed
to stimulate enterprise, expand employment and promote
community-based economic empowerment by offering federal
contracting opportunities for small business concerns located
in and hiring employees from HUBZones.
SBA is responsible for certifying eligible firms,
investigating eligibility challenges and reporting the results
to Congress.
Finally, management counseling and training plays an
important role in the mission of the SBA. Each year, thousands
of individuals, both established business owners as well as
potential entrepreneurs, seek advice and guidance from the SBA.
This advice and guidance is provided by our major counseling
resources, the Service Corps of Retired Executives (SCORE), the
New Jersey Small Business Development Center (SBDC) and the
SBA's Business Information Centers (BIC).
Through free management counseling and low cost training
programs, SCORE, SBDCs and BICs assist entrepreneurs in nearly
every aspect of starting and managing a successful business.
During fiscal year 1999, over 28,000 individuals received
counseling or attended training sponsored by SCORE, SBDCs and
BICs.
Madam Chairwoman and Members of the Subcommittee, these
programs are working for small business owners in every region
of New Jersey. Together with our resource partners, we will
continue to develop additional programs and activities and find
new ways to empower today's small businesses and tomorrow's
entrepreneurs.
This concludes my prepared remarks. I will gladly answer
any questions that Members of the Subcommittee may have.
Mr. Pascrell. I want to thank you, Pancho, and I am sure
that you and Rich Sill, who you introduced before, will be
available to answer specific questions about the HUBZones. They
are up and going.
We are talking about access to capital. We are talking
about small businesses across the board here, anybody with less
than 500 employees; is that correct, Pancho?
Mr. Marrero. Yes, depending.
Mr. Pascrell. And we are very elastic on that, Madam
Chairlady, but that is where our focus has been in Federal
contract opportunities, which is what the HUBZone is all about.
Your numbers are pretty startling. What you have done in
the past three, four years is truly great and truly wonderful
and we want that to continue and Sue's job and my job is to cut
down the bureaucracy which is out there.
I know your express application is going over very big, and
this is a program that I have seen it work, every one of those
programs I have seen work in our own communities.
Thank you, Pancho.
Our second panel is Dennis Puccinelli. He is Acting
Executive Director, United States Department of Commerce,
Federal Trade Zone board.
Dennis, thank you for being here today.
STATEMENT OF DENNIS PUCCINELLI, ACTING EXECUTIVE SECRETARY,
DEPARTMENT OF COMMERCE FTZ BOARD
Mr. Pucinelli. Thank you, Madam Chair, Congressman
Pascrell.
Thank you for the opportunity to appear before the
subcommittee today to discuss the Foreign Trade Zone program
and the role that it is playing in improving the international
competitiveness of U.S. Businesses and communities.
Foreign trade zones are sites at which special Customs
procedures can be used. These procedures allow domestic
activity involving foreign items to take place prior to payment
of Customs duties. Duty free treatment is accorded items that
are pre-support and duty payment is deferred on items that are
sold in the U.S. Market.
The overall purpose is to encourage domestic activity by
helping to offset Customs advantages available to overseas
plants which compete with facilities located in the United
States.
The zones program can also assist communities in their
economic development efforts that are related to international
trade.
Mr. Pascrell. Could you hold that microphone a little
closer? Thank you very much.
Mr. Pucinelli. Zone sites usually control zoned areas
within industrial parks designated by the board. The sites are
supervised by the U.S. Customs Service which controls all
merchandise entering and leaving zones. Zones site and activity
remain subject to all federal, state and local law.
The Foreign Trade Zones board, as you mentioned, was
established in 1934 to license and regulate foreign trade zones
in the United States. The board functions like an interagency
committee with the Secretary of Commerce as chair. The
Secretary of the Treasury is the other member.
The Commerce Department takes the lead on economic policy
and industry impact issues and the Treasury's main
responsibilities involve the enforcement of Customs laws and
the supervision of zone activity.
Customs port directors are responsible for the zones in
their jurisdiction. The Commissioner of Customs advises the
Secretary of the Treasury in all zone matters and plays an
important role in the interagency process.
Zones and zone activities are subject to regulations
published by the Trade Zone Board and to regulations published
by the Customs Service.
I want to mention that the board regulations were revised
in '91 following the hearing by the Trade Subcommittee on the
Ways and Means Committee. The results of these hearings were
revised regulations which clarify criteria and reduced our
application process.
Several domestic industries did express concern about
potential harmful effects that foreign trade rules can have on
plants outside the zones, but the revised regulations address
these concerns by codifying the review process and clarifying
approval criteria to include industry impact considerations.
Zone sites fall into two basic categories; general purpose
zones and sub zones.
General purpose zones are multi-user facilities designed to
serve businesses throughout a Customs' port of entry. They
usually involve cites at airports sea ports, industrial parks
and warehouse facilities that provide a range of trade related
services on a public utility basis.
Sub zones are special purpose zones usually at individual
manufacturing plants that serve as an adjunct to the existing
zones for larger facilities that cannot locate within the
general purpose zone. The primary benefit for users is based on
the fact that merchandise is not subject to the payment of
Customs duty while it remains in the zone.
Zones are similar to other Customs bonded procedures. This
procedure exempts a zone user from paying Customs duties if
merchandise is supported from the zone. On merchandise shipped
to U.S. Markets, a user is able to defer Customs' duties and
until the merchandise leaves the zone.
In situations involving the manufacturing of foreign
components, a user may choose to apply a lower duty rate if
that, in fact, is the case.
In addition to the Customs' duty benefits, there are
certain logistical benefits related to Customs' paperwork.
These involve the immediate release and delivery of merchandise
from a port to a zone site and also weekly entry procedures are
available.
Foreign merchandise may be exempt from local inventory tax.
I don't know if you have one in New Jersey; I don't believe so.
Now, there are some costs associated with running a zone
and these involve primarily dealing with Customs. You do have
to post a Customs' bond and you do have to come up with
Customs' security and an inventory control system that can be
audited.
U.S. Communities can benefit from zones also. Communities
often have to compete globally for the siting of plants and new
business activity. And in some cases, foreign locations that
are competing with a local community may offer a more favorable
Customs environment.
Availability of zone procedures can level the playing field
with respect to these Customs' codes and assist state and local
officials in their economic development efforts related to
attracting new activity from abroad.
Zone procedures can also assist companies and communities
in developing new support activity. A key factor in developing
a successful zone project for a community involves conducting a
feasibility study to determine whether there is sufficient need
and where that need might be focused, as well as selecting an
appropriate site and integrating zone services into an existing
zone project.
As you mentioned, there are two zones already in this area.
In this broader area, one is in Mount Olive, in Morris County
and one is at Port Newark, Elizabeth.
Communities such as Paterson which are located in a Customs
port of entry area can make zone procedures available to their
businesses in several ways.
First, a community can request that one of the existing
zones in the area can apply to expand their zone to a site in
this area. For example, upon a new agreement between Paterson
officials and Port Authority officials, the Port Authority
could sponsor an application for an expansion of this zone to
include a site in this area.
Alternatively, a Paterson area governmental or local
corporation could apply for a separate and new zone project in
this area.
However, there is a special provision in the Act that
states when you are establishing additional zones in the area,
that requires a demonstration that there is the need for that
additional zone.
However, I should mention that we do have these additional
zones in a number of the larger ports of entry around the
country already.
And finally, another way to immediately provide zone
services in the area is to form a relationship with one of the
existing zones in the area where they could sponsor sub zones
for individual companies that may need zone status.
This may be for the sub zone application. This--oh, I will
just briefly mention the application process. We will look at a
draft application for a community. Once we get a final
application, there is a public notice and sometimes a hearing,
if it is a new zone project.
We need comments from the local Customs' port director,
then we conduct our analysis and review. We prepare a report
which does go to the board members. We conduct the voting
process by mail because of the difficulty in getting board
members so we have a continual voting process.
I hope this brief overview gives you a better understanding
of the options available to area businesses for using zone
procedures and of the requirements and issues facing the board
in the review of applications.
I also want to mention that the Commerce Department has a
support assistance center in Newark that can assist companies
that want to expand their business through supporting.
Mr. Harvey Lubenstein is here and he would be happy to
answer any questions relating to supporting.
Mr. Pascrell. Can you give us your web site?
Mr. Pucinelli. Yes. My web site, I have on my additional
information page, I have our web site and our phone number.
Mr. Pascrell. Would you give it?
Mr. Pucinelli. The web site is ita.doc.gov/import--admin/
records.
Chairwoman Kelly. Would you do that again more slowly so
that people who want to copy it down have the ability to do
that, please, sir.
Mr. Pucinelli. Yes. It is on my card.
Chairwoman Kelly. I recognize that, but not everyone in
this room has it. That is why we want to give them that
availability.
Mr. Pucinelli. Thank you. The web site for the Foreign
Trade Zones board is www.ita.doc.gov/import--admin/records.
Mr. Pascrell. Thank you, Dennis. Thank you very much.
Mr. Pucinelli. Yes.
Mr. Pascrell. And you are going to be available to us to
answer questions after?
Mr. Pucinelli. Yes.
Mr. Pascrell. We do have on the second panel, Dennis, Ron
Gross, who is part of the Vision 20/20, which is Passaic
County's moving together to try to get some economic
development. And that is a county. I don't know if counties can
apply also as a local form.
Mr. Pucinelli. I believe I met Ron.
Mr. Pascrell. Dennis, did you have anything in conclusion?
Mr. Pucinelli. No.
Mr. Pascrell. Thank you very much.
Mr. Pucinelli. Thank you.
Mr. Pascrell. All right. Our third panel is Deborah
Hoffman, who is Executive Director of the Paterson Economic
Development Corporation, a corporation which we help found in
1993, '94. And Deborah has basically worked very, very hard in
economic development.
Deborah, what are your comments for today?
STATEMENT OF DEBORAH HOFFMAN, EXECUTIVE DIRECTOR, PATERSON
ECONOMIC DEVELOPMENT CORPORATION
Ms. Hoffman. Thank you very much for the opportunity to
address you today, Madam Chair and Congressman Pascrell.
As the Congressman mentioned, as Mayor of the City of
Paterson you led the way to forward our corporation to assist
companies in relocating into the City of Paterson and expanding
here. Since January of '93, we have assisted over 80 companies
in relocating into the city and expanding here with financings
of over $70 million.
Through our sponsorship of the greater Passaic County bond
program alone we have closed $30 million in bond financing
through industrial revenue bonds, and prior to that we closed
another $10 million to the City of Paterson bond program.
The corporation has taken a very aggressive stance in
relocating companies, trying to identify those incentives that
make Paterson the place to be for the business community.
Understand that even though the State of New Jersey has
witnessed a tremendous economic revival, as has the City to
some extent, we still have a 9 percent unemployment rate, very
different than the State's 6 percent.
In addition to what the County has instituted, it has
suggested that it will be the slowest growing county in the
next five years in employment opportunities. We really need to
maintain our aggressive stance in identifying incentives to
relocating companies into the City of Paterson, into the county
of Passaic.
I believe strongly that the HUBZone and the Foreign Trade
Zone used correctly can be a way to lead us down that path.
Obviously, we have tried to take our own aggressive stance
locally in forming special improvement districts.
We helped to form two of those in the City of Paterson in
sponsoring procurement programs for the City in the development
of Brownfield's program, working with the City government,
working with the county government, but I want to underscore,
we have provided a few companies here today from the Paterson
business community. We look forward to hearing from them. We
need new tools to create jobs in this business community. It is
a vibrant community. It needs to grow to remain so.
Thank you.
Mr. Pascrell. Thank you, Deborah. If you have not submitted
written testimony, I know it is tough for the field hearings,
make sure you submit written testimony. If you have it, we will
run it off in the back room now. Give it to Chris and we will
give it to Steve or somebody else so that the committee has it
on record.
Ms. Hoffman. Thank you.
Mr. Pascrell. Our next speaker is Charles Miller. Charles
is replacing Jim Leonard, who is the vice president of the New
Jersey Chamber of Commerce who called us this morning. He had
an emergency.
We thank you, Charles, from the Paterson Chamber of
Commerce for being here, and we hope you will be submitting
some written testimony to the committee which is very necessary
and very important.
Charles.
STATEMENT OF CHARLES MILLER, ASSOCIATE DIRECTOR, GREATER
PATERSON CHAMBER OF COMMERCE
Mr. Miller. Madam Chairwoman and Congressman Pascrell,
thank you for inviting me here today. I have always been taught
in business to be brief, and I will be so.
The Greater Paterson Chamber of Commerce, which represents
over 100 businesses in the Paterson area, fully supports
efforts to provide access to federal contracting opportunities
for small businesses in underutilized business zones, and such
efforts spur private investment and a creation of growth of
jobs in those areas.
The areas impacted are generally those with low income and
high unemployment, and certainly we want a piece of that $200
billion in the federally contracted business.
HUBZones represent a very positive economic stimulus to
areas that have not yet shared in the economic prosperity of
recent years, and such an effort earns the support of the
business community.
And if I may, I would now like to make some remarks
concerning the foreign trade zones.
As we have heard before, foreign trade zones are really
areas in this country that the government pretends are outside
the U.S. Customs' territory and Customs' procedures in those
zones permit duty-free imports of items that will be
resupported and a deferral of duty payments on imports to be
sold in the United States.
Therefore, federal foreign trade zones have very
significant advantages. First, they even the playing field for
U.S.-based businesses that must compete with foreign
competitors who enjoy customs advantages. And foreign trade
zones will offset those advantages.
Two, they enable companies to lower costs and raise
profits.
Three, they are incentives for the development and growth
of international trade and they facilitate and expedite such
trade.
And four, they spur state and local economic development,
and very importantly, they create jobs. And certainly we need
jobs.
In conclusion, foreign trade zones are a win/win situation
for business and for the growth of the economy.
Thank you.
Mr. Pascrell. Thank you very much, Charles. I know you will
be available for some questions.
Our final speaker on the first panel is Daniel Jara, who I
have known for many years. He is president and CEO of the
Statewide Hispanic Chamber of New Jersey.
Madam Chairlady, he will be submitting written testimony as
well.
Daniel has been very, very involved in the entire State of
New Jersey with the Hispanic community, with the business
community and, beyond that, the total community. So Daniel,
thank you for being here today.
STATEMENT OF DANIEL JARA, PRESIDENT/CEO, STATEWIDE HISPANIC
CHAMBER OF NEW JERSEY
Mr. Jara. Thank you, Madam Chairwoman and Congressman
Pascrell. I am really honored and privileged to be here before
you.
The Statewide Hispanic Chamber of Commerce of New Jersey
has been for many years trying to be the most efficient Chamber
of Commerce. Even though we are a Hispanic chamber, 35 percent
of our membership is made up of known Hispanic companies, in
that we have a lot of mainstream businesses, African-American
businesses and Asian-American businesses.
The Statewide Hispanic Chamber of Commerce has taken the
task of being in the forefront, in promoting the State of New
Jersey, not only throughout the country but in the
international scene.
As you know, there's been a magnificent growth of Hispanic
businesses that has grown by 86 percent in the last five years.
It's estimated that right now in the Garden State there are
30,000 Hispanic businesses that generate $7.5 billion in sales
and supports over 128,000 jobs.
We, as any other small business, face the same hurdles, one
of them being lack of capital. And I need to recognize the
labor of my dear friend Pancho because under his leadership the
Small Business Administration has set records in terms of loans
given to Latino businesses.
We feel that international trade is a major aspect in
economic development. As you know, the market today for capital
commodities and labor is truly an international market.
Therefore, we need to position ourselves for a global
economy. Mexico has become New Jersey's second largest trade
partner. We have supported trade missions from New Jersey to
Latin America. Latin America presents as a viable market for
New Jersey's products and services, a market that is loyal to
these services and a market that will open opportunity for New
Jersey companies with their 600 million consumers.
The Latino market, as you know, has been a very attractive
market. It is a $340 billion market in the United States.
As we see historically, specifically in this history, or in
the late sixties, most of the big companies were fleeing the
urban areas. There were Hispanic entrepreneurs that came in and
took the challenge and had a vision. And they flourished
without using any of the resources that were really available
to any other small business.
While little Hispanic businesses have not been very active
in procurement as a matter of fact, there are fewer Latino
companies involved in procurement activities with the Federal
Government than there are from other minority groups.
There are many reasons for that: Number one, Latino
businesses feel they have been part of the process. So
therefore, they don't feel attracted by it.
I think the new changes that this administration at the
federal level is taking will insure a more attractive market
for Latino business. It's really important to develop economic
development in the urban centers. We feel that economic
development is and should be everyone's business.
So therefore, we will support any efforts that are made out
to help these programs become viable and important for us.
I thank you.
Mr. Pascrell. Thank you very much, Dan.
Madam Chairlady, it's time for us to ask some questions of
panel number one.
Would you like to lead us off? I will re-emphasize again
that written testimony be given to the committee. That is
something we must insist upon.
Chairwoman Kelly. It's helpful for us because if you give
us some written testimony then we can insert it in the record
as a part of the record, even though we do have a stenographer
here taking a record for us. You may want to add things as well
that you have not included in your verbal testimony. So we
would encourage you to do that, please.
I would like to, first of all, ask a question of Mr.
Marrero.
The HUBZones, I am wondering if you expect to see an
increase in HUBZone certified firms in this area. Do you think
there is going to be an increase in the number of them? Is
there a way we could help that happen?
Mr. Marrero. Chairwoman, I think in the long run the answer
is yes, but I think part of the issue with the HUBZone is that
although it is a job creating program, the--often the HUBZones
by definition are located in areas of high unemployment and
usually populated by African-Americans, Hispanics and
individuals and groups who have not shared, if you will, in
this economic recovery.
So that the types of businesses that would be in a position
to greatly benefit from the HUBZone and by virtue of the fact
that they have the ability to contract with the federal
government often are not there. A thriving--seems to me that
one of the key things that we have to do in and what our agency
is focusing on is in the area of new markets, in bridging the
gap that exists with African-Americans, women and Hispanic-
Americans, bridging that gap of percentage of business
ownership vis-a-vis the percentage of the population because
ultimately, we have to create businesses in these communities
to provide a long-term benefit to the community, that
ultimately being benefit from the HUBZones.
I don't think the HUBZones--I don't think--I would not say
we are going to see dramatic increases in firms signing up for
HUBZones. I think we are going to undertake, for example, in
September a very aggressive campaign.
We have been issuing letters to every elected official,
every mayor in every city located in the HUBZone to
aggressively pursue it. But it happens that most of these types
of businesses that deal with the federal government are not
located there.
Chairwoman Kelly. Do you have a backlog currently?
Mr. Marrero. We have approved nine HUBZones in the State of
New Jersey, and I think nationwide there are 439 firms
certified nationally.
I would like to say it's relatively new, but still, it is
not--I think it is a valuable program if you are there, if the
firms are there, but not every HUBZone has the type of
business, mostly in the communities, in our communities that by
definition are at the margin of this recovery, the type of
business that you are going to find.
There is the type of business that provides services for
citizens of the community, the bodega in the Hispanic bario,
the laundry, the type of businesses that are not in a position,
if you will, to deal, you know.
So it seems to me that the ultimate success of the HUBZone
relies on our ability to promote entrepreneurship in those
communities and ultimately understanding that it's small
businesses that truly provide a long-term economic basis for
recovery.
Chairwoman Kelly. You spoke in your testimony about having
resource partners to help build these businesses so they could
be a part of the procurement process.
Mr. Marrero. Correct.
Chairwoman Kelly. Who are your resource partners?
Mr. Marrero. Our Business Corp. Of Retired Executives.
Small business development. We have 20 branches. We have an
understanding with the Chamber of Commerce. We work with
economic development folks in the various communities. I mean,
we try and establish and bring--one of the things that we have
been able to do is bring our programs to the communities rather
than the old mindset, the culture of our agency which used to
be that over here if you can find us, great. If not, well, you
know.
You have got to take it out and work in establishing a
partnership, and we have been very active in that, establishing
new partnerships with economic development organizations,
chambers, I mean, you name it, we are out there searching.
Chairwoman Kelly. Are you working currently to help people
get certified so they can become procurement partners?
Mr. Marrero. Sure, constantly. I mean, we have been holding
seminars.
Chairwoman Kelly. Have you held seminars?
Mr. Marrero. Sure, we have held them here in fact with the
Congressman, we are heading down Vineland in southern Jersey to
hold one.
We extend an invitation to every mayor in every city in
every HUBZone to offer our services and go out there, speak
about what we are doing and just offer our services.
Chairwoman Kelly. Do you work with SBA and SBICs?
Mr. Marrero. Yes.
Chairwoman Kelly. You do.
Is there any particular kind of feedback that you would
like us to take back with regard to this program? We need to be
able to give you as much help as we can, so anything that you
can give us to take back to Washington is going to be helpful.
Mr. Marrero. Well, if I heard the news correctly, I think
we are off to a great start since I believe our new markets
initiatives have been funded in the new budget and that--the
small business investment companies traditionally have not been
a centerpiece of what we do.
Administrator Alvarez has now, you know--has now brought
them into focus and rightfully so. Again, it's your tool to
provide the capital side rather than the debt side for business
creation and we are involved right now in promoting our small
business investment companies that I admit to you until
recently has been a well-kept secret.
Chairwoman Kelly. It has been a well-kept secret exactly.
That is one of the problems.
Mr. Marrero. But it is also----
Chairwoman Kelly. Maybe we just need to get the secret out.
Mr. Marrero. Understand, Madam Chairwoman, that it is a
program that has undergone dramatic changes in the last years
from the way it used to be and in the President's new market
initiatives and the funding--we are waiting for the funding.
Now we will aggressively move to promote the programs.
Chairwoman Kelly. Well, holding this hearing is one way
that Congressman Pascrell is getting the word out and it does
not really cost a whole lot. We don't need a lot of money from
the federal government. We need people to get out and let
people in the community know that it's possible, I think.
And I am just trying to find out from you what more we can
do that does not really cost a whole lot of tax dollars out of
people's pockets who are already overtaxed and don't have more
money to give the government for a new initiative, just let
them know what is out there.
Let them utilize what's there, that is why I ask you about
your resource partners.
Mr. Marrero. Again, I think we are working well with our
resource partner. The money is for the specialized small
business investment companies. I meant it to be used that way
because I think that will go a long way toward providing
specialized companies to develop new markets.
That is what I meant, but in terms of partners, I believe
our small business development centers' funding is--they
receive what they ask for and I think we are working well with
partners, and I appreciate obviously every forum that I have to
get the word out and I appreciate the opportunity.
Chairwoman Kelly. Thank you very much. I am just simply
saying that I wouldn't wait around for new markets, I would
simply get going on what we've got and I think you have done an
admirable job so far, and I want to make sure we can help you
to continue to do the job you are doing to get the word out
because we need to encourage that job growth, we need to
encourage our small businesses and we need to make sure that in
these HUBZones these people are able to get government
procurement contracts.
I know for a fact that the women and minorities portions
are just simply--we are not meeting our goals. Women who own
businesses, there is a mandate that women who exist many years,
from the government, saying to the federal government, which is
actually the procurer of goods and services to the tune of
about 50 percent of everything that is bought in the nation, we
said: You have got to have at least 5 percent going to women-
owned businesses and the women aren't getting even 5 percent of
the context. That is the kind of thing that we have to enhance
and we have to grow, where we have to go for jobs.
Mr. Pascrell. May I add something?
Chairwoman Kelly. Sure.
Mr. Pascrell. Pancho, I want to tell you how serious this
is. We ask in the general committee for numbers, and that is
the reason why.
We had to downturn such applications in '97, '98 and then
there was a review on whether this was being promulgated,
communicated and do people really know about the programs to
begin with. And that is part of the problem.
And I am almost giving the same speech as I gave in front
of the veterans two weeks ago. Most of our veterans do not know
what their benefits are.
Most small businesses do not understand what all of these
programs are and how they can sink their teeth into them, and
that is something that we need to do to communicate to the
small businesses because, first of all, small business loans
are not simply HUBZoned, oriented or focused.
That is for everybody in any town regardless of what the
town looks like economically.
Is that correct?
Mr. Marrero. Correct.
Mr. Pascrell. We focused on the HUBZone, but we are
basically talking generally here about all the programs that
exist in SBA, and when you focus on HUBZone, it's the least
amount of knowledge about those sub zones in those enumeration
districts that are very, very eligible.
Chairwoman Kelly. I would like to switch now and go to----
Mr. Marrero. If I may just make one comment, our web site,
www.sba.gov. That is it.
Chairwoman Kelly. Repeat that.
Mr. Marrero. It's www.sba.gov.
Mr. Pascrell. And if you want to deal just with the
HUBZone, put ``/hubzone'' at the end of that. It will come up
on the screen.
Mr. Marrero. Absolutely.
Mr. Pascrell. Very good.
Chairwoman Kelly. However, we want to make sure that people
who don't have a computer, don't know how to operate a
computer, don't even have access to a computer, know what is
there and available to them from the SBA.
We want them to know that it's available to them in a
HUBZone and in a Foreign Trade Zone. We want them to know that
these things are out there. That it's possible, because that is
the only way we are going to grow the largest engine of the
U.S. Economy, which is our small businesses.
Now I want to talk about the foreign trade zones a little
bit.
Dennis, like the Foreign Trade Zone program, the import
support bank program was created in 1934. I want you to kind of
discuss, if you will, the relationship, if there is any,
between the importance of these international trade efforts. I
want you to talk about what kind of relationship there is
between these two.
Mr. Puccinelli. The Foreign Trade Zone program and the
import support bank, they were created at the same time with an
ideal and I want you to talk about that, if you will.
Well, I'm sorry, I can't answer that question. I don't know
much about that other program.
Chairwoman Kelly. The import support bank?
Mr. Puccinelli. Yes, I'm not an expert on that program.
Chairwoman Kelly. Well, perhaps you could answer that
question in writing to us, because I am going to hold this
hearing open then to give you an opportunity, write that
question down and give me an answer to that in writing, please.
You may want to go back and check with your agency.
Mr. Pascrell. I would think that would be a very critical
question if we are talking about accessibility to capital. I
think we need to know what the relationship is, as the
Congresswoman has asked, and I would like to know that
response, so perhaps by the middle of next week you can get
back to us, we can keep the record open, and respond to that,
because we are going to be looking into this further on with
total committee.
Chairwoman Kelly. Dennis, I would also like to ask you
about the way the foreign trade zones in New Jersey are
working.
Are there mostly import zones right now? Are there actually
supports getting out of those zones?
Mr. Puccinelli. There are $17 billion in supports, but
zones are primarily focused on the U.S. Market. That is where
most of the business is these days.
Chairwoman Kelly. By that, let's be clear about this. What
do you mean by that?
Mr. Puccinelli. Well, first of all, it's neutral in terms
of imports or exports. The program is designed to encourage and
expedite foreign trade, and our government is concerned about
other governments that promote supports over imports.
Our government regards foreign trade zones with other
countries that are just for support as a subsidy that may not
be living up to WTO rules. So our program is neutral in terms
of imports and supports.
Mr. Pascrell. Well, if I may, Sue----
Mr. Puccinelli. I say the biggest benefit is on supports
because it does give you total forgiveness of duties.
Mr. Pascrell. I think the committee will want to know what
the stats are on this because if we continue to support
American jobs with our own programs, this only exacerbates the
program I talked about concerning the loss of manufacturing
jobs in this program, and I was going to ask you this question,
if I may, Madam Chairwoman.
Chairwoman Kelly. Yes.
Mr. Pascrell. It would seem lately in looking at, in
reading what I have seen, companies have focused more on
diminishing the inverted tariffs on components, and rather than
supporting the finished product, importing it with a lower
tariff, and what we don't want this program to be, this is a
huge program, is simply another way for folks to take
manufacturing off land and sent to another country.
Now, I would like to know, my question is this: Could you
explain the significance of what I am talking about so that
everybody here will understand what are the nuances?
Mr. Puccinelli. Well, I fully agree with you. We don't want
this program to be used to negatively affect domestic industry.
In fact, that is why we have fairly strict criteria to be
able to take advantage of this inverted tariff, the lower duty
rate.
In order to take advantage of this benefit, we have to
review each case on a case-by-case basis. We want to see that
this will encourage activity that might otherwise be done
abroad.
In other words, we are looking for situations where the
U.S. Companies are competing with foreign companies and that
the Foreign Trade Zone will help it encourage activity to be
conducted here that might otherwise be done abroad.
If the activities were going to displace another domestic
company or displace a domestic supplier, we would not approve
that type of case.
Mr. Pascrell. Say that again.
Mr. Puccinelli. If we found that the use of the Foreign
Trade Zone was to reduce the tariff that would in turn
encourage foreign supply over domestic supply, we would not
approve that. That would not meet our net economic effect
criteria.
Mr. Pascrell. Is that one of the criteria to make sure that
in terms of balance of payments, for instance, which is a long-
range effect, that in terms of balance of payments, that we
make sure that this program and the bank which you are going to
get back to us about what they are doing, contributes to the
precipitation of manufacturing jobs in the United States and is
not basically, whether intentional or not, contributing to the
increase in manufacturing jobs in Honduras, for instance.
I mean, can you review the numbers and tell us whether it
is or it isn't? What would you say?
Mr. Puccinelli. We would say because in every case that we
approve, we are looking for evidence that the competence faced
by the domestic company that is applying to use this benefit is
primarily abroad, and it is not competing with a domestic
company, so therefore--and we are also looking at what does it
import and what is it going to get the lower tariff duty on. We
want to see some good reason why it is importing the product.
If I can give you an example----
Mr. Pascrell. I am going to give you an example; you give
me yours first.
Mr. Puccinelli. We have some pharmaceutical companies with
firm status in New Jersey and they are global companies, they
are on a couple of their components. They are saying these are
made by our foreign plants abroad, the ingredients, all the
duties on pharmaceutical products and most ingredients have
gone to zero, but they are saying that a couple of components
still have a duty rate.
We make them abroad. In order to make this product in the
U.S., we need to have the lower duty rate on the component or
else we will make it abroad.
That is the kind of scenario we are looking to improve.
Mr. Pascrell. Go ahead, Sue.
Chairwoman Kelly. No, finish your line.
Mr. Pascrell. Let me have that example now. It is pretty
close to your example.
Let's say--let's pick a company that may be in the HUBZone,
I don't think it is. Let's say Liz Claiborne. That is a nice
company. 90 percent of their goods are made offshore, patterned
here.
Let's say they existed in a HUBZone. Let's say they existed
in a HUBZone. They pattern it here, they send it to planet X.
They finish the product on planet X offshore and then they
bring it back here, okay.
Would their duty be free because their company exists in
that HUBZone, in a Foreign Trade Zone rather? Would that be
duty free, that product?
Mr. Puccinelli. If the board gave them authority to do
that.
Mr. Pascrell. You mean the board can do that?
Mr. Puccinelli. They could--somebody could make an
application to bring in foreign textiles and cut it and send it
abroad and bring it back in here and yes, they could end up
getting duty free, but----
Mr. Pascrell. Then your wife and my wife go to Macy's and
buy that dress for $125. These are all intricately connected
with trade and what we pay $125 for, even though, of course,
it's $4.50 to make in planet X. They could give them that duty
free?
Mr. Puccinelli. Right, but that is why we have our criteria
to demonstrate this is going to have a net positive effect on
the U.S. Economy.
Mr. Pascrell. What do you mean by ``net positive''? Do you
mean we are creating more jobs within that particular industry
or do you mean simply that business is making a lot more money?
Mr. Puccinelli. It's the former. We want to see that there
are more jobs here as a result of giving them the zone. We want
to see that the--I'm sorry?
Mr. Pascrell. Go ahead.
Mr. Puccinelli. We want to see that this is encouraging
activity in the U.S. That might otherwise be done abroad.
Mr. Pascrell. This is very important to me and it's very
important to this district and very important to Essex County
and Passaic County. We have lost so many of these manufacturing
jobs, whether you are talking about pharmaceutical, footwear,
textile. We are talking about a lot of things here.
Mr. Puccinelli. Yes.
Mr. Pascrell. It's critical that we stop this hemorrhaging
in that we, in the programs that we have at our disposal,
effectuate a change. In some manner, shape or form, it is not
going to be dramatic, but we need to stop the hemorrhaging of
those jobs, and that is why these folks sitting in this room
want work and the people who work for them want work but the
only way we are going to do that is if we are all on the same
page.
Right?
Mr. Puccinelli. Yes.
Mr. Pascrell. Okay.
Mr. Puccinelli. I should add that another important
criteria is that we would not approve any tariff rate change
which was inconsistent with our government's policy.
Mr. Pascrell. You don't want to go into that. Does he want
to go into that, Sue?
Chairwoman Kelly. No.
Mr. Pascrell. Right.
Mr. Puccinelli. But we have never approved a situation in
the textile or a particle industry like you are talking about
for the reasons that you are talking about.
Mr. Pascrell. But the import tariffs in this country are
exceedingly low compared to the countries that are making the
products that are coming back to the United States, that your
wife and my wife continue to buy and that is the problem.
And that is why--since you brought it up, that is why there
are many questions about the WTO and how it affects the very
business people in this community and in this area.
You know, we live in a global economy. Sue is just as much
a globalist as I am, but we don't like giving away the store.
And the proof of the pudding is that the support gap increases,
the import gap increases, and the balance of payments gets
worse.
Something is wrong with that. And that something is
depriving people in my city that I grew up in and still live in
and in this entire area the ability to work, and their bosses
the ability to stay in business, and that is why we have lost
manufacturing jobs in this area.
I don't know how much clearer to put it to you and I am not
going to get off this case, and I'm sorry if I am taking too
long and we want to get to the second panel, but this has to be
a concern and that is why I wanted you to enter into the record
and give to us the answers to the Chairlady's question, which I
think is crucial to what we want to do to help the northeast,
particularly our area.
Mr. Puccinelli. Could I make one further comment? In our
public review process, we do publish how long some industries
might be affected.
For example, within the textile and apparel area, we go to
the Commerce's Office of Textile and Apparel and they----
Mr. Pascrell. You go where?
Mr. Puccinelli. The Commerce Department Office of Textile
and Apparel.
Mr. Pascrell. What did they tell you?
Mr. Puccinelli. They usually tell us that we can't do it.
Mr. Pascrell. That is why we have these crazy trade
agreements which are not reciprocal by any stretch of the
imagination, and put folks in this room, regardless of what
their industry is or their service is, really at a
disadvantage, we need to understand that this is all
interconnected.
It is fine to talk about HUBZones, and it's fine to talk
about all the other programs available to small business, and
it's fine to talk about the foreign trade zones, there's no two
ways about it, but if the sum total of all this is a negative
in terms of jobs that continue to hemorrhage, we are doing
something wrong and we are facilitating those industries who
are probably not represented here today.
That is what I am concerned about. Sue can speak for
herself, but that is what I am concerned about.
Thank you.
Chairwoman Kelly. I just want to make one follow up on
this.
I totally agree with Congressman Pascrell, but I want to
know what you actually do, what does your office actually do to
provide assistance to the Foreign Trade Zone grantees once you
got a Foreign Trade Zone; what are you doing out there to help
those people?
Mr. Puccinelli. Well, we do--there is an association, a
private association of these grantees, the National Association
of Foreign Trade Zones.
Chairwoman Kelly. Wait a minute. That is them helping
themselves. Excuse me, sir, but I am asking you what you are
doing----
Mr. Puccinelli. We partnership with them. We hold
conferences that they attend and we put on educational seminars
with them to train people on how to use the zone.
Chairwoman Kelly. And that is the limit of it?
Mr. Puccinelli. Yes.
Chairwoman Kelly. You participate with them at their----
Mr. Puccinelli. We participate with them. They are the ones
who set up the conferences, we are the ones who provide
training.
Chairwoman Kelly. Who pays for the conferences, just out of
curiosity?
Mr. Puccinelli. They do.
Chairwoman Kelly. Okay. I think there are more questions
that you as panelists will be getting from us, but at this
point I believe it is time for us to move on to the other
panel, and I will do that right now.
Thank you very much, panel number one. We appreciate your
cooperation. We appreciate your good testimony. I think we have
all learned something from you, so we appreciate you being
here.
Mr. Pascrell. Anybody who thinks that this is a staged
hearing, anything but in Small Business, you never know what to
expect from us and we have some fun in Washington, and we are
going to have some fun here today.
Now we are going to get down to the nitty-gritty. I hope
you are taking notes. We are going to have a short break so we
can change--all of this has to be taken down, so if you just
bear with us.
Chairwoman Kelly. Let's make it a five-minute break.
[Whereupon, a recess was taken.]
Mr. Pascrell. If everyone would please take their seats, we
will move on here.
Chairwoman Kelly. By the way, I want to introduce Harry
Katrichis. And--Harry is general counsel of the Small Business
Committee in Congress. This is my staff member, Meredith Matty,
who has come up from Washington so she can be a part of this
hearing today, because this is a real hearing. This is the way
it is done in Washington. We have--actually Congressman
Pascrell has brought Washington to you. You don't have to go to
Washington, D.C., to see a hearing.
We have a stenographer taking notes, the witnesses and the
written testimony, all of that is in order so what you are
witnessing here is really something many people never get a
chance to see.
You get a chance to see this because of Congressman
Pascrell.
Mr. Pascrell. Thank you.
I would like to introduce my staff. This is Chris Blanda.
He is here from Washington. Chris works on all small business
matters. He also has worked on the census, and what else,
Chris?
Mr. Blanda. Trade, foreign policy.
Mr. Pascrell. I thought of Abbott and Costello when I heard
trade, like Niagara Falls. And Stephen Schwartz from our
office. Our chief of staff is also here, Eddie Forner. A lot of
people know Eddie.
So before you strangle me, strangle that person, but thank
you for being here, everybody, today, thank you for your
patience.
I would like to start, if I may, Madam Chairlady, with Ron
Gross from Vision 20/20.
Thank you.
STATEMENT OF RON GROSS, VISION 20/20 PRESIDENT
Mr. Gross. Madam Chairwoman, Congressman Pascrell, it is a
privilege and an honor to share with you the Passaic County
Vision Trade Zone Task Force.
In a time of robust national and state economies, Passaic
County suffers from stagnation. While surrounding counties
enjoy low unemployment rates and a spurt in their economic
growth, our county lags far behind.
Long range plans to revitalize our moribund economy ought
to be devised and implemented for all residents and for future
generations.
A cursory view of the present literature and of the best
ideas of economic experts and planners make clear that economic
growth and its concomitant benefits often result from the
planned confluence of:
1. Historic preservation.
2. Environmental protection.
3. Economic redevelopment.
The interplay of these approaches works especially well in
densely populated and environmentally stressed areas.
The synergisms of these three elements have been
successfully demonstrated in many places throughout the
country.
1. San Antonio, Texas, Riverwalk.
2. Baltimore, Maryland, Harbor Redevelopment.
3. Boston, Massachusetts, Rebirth.
What are Passaic County's assets? Passaic County is rich in
history and American lore, even predating the American
Revolution. The county has been amply blessed with many unique
natural and man-made historical, educational and recreational
sites including:
1. The Great Notch in Little Falls and West Paterson, the
location of General Washington's rifle camp during the period
of Washington's encampment at the Dey Mansion in Wayne.
2. The Great Falls in Paterson, the second largest
waterfalls in the eastern United States and the birthplace of
the American Industrial Revolution.
3. Garret Mountain with its stone observation tower and
refurbished Lambert Castle which houses the Passaic County
Museum.
4. The majestic Watchung Ridges which bisect the county
from the Great Notch through Ringwood and acted as a fortress
wall protecting the nation's lifeline during the Revolutionary
War.
5. Our wonderful county park system aligned along the First
Watchung Ridge and then to Goffle Brook Park in Hawthorne, site
of General Lafayette's headquarters.
6. The Passaic River and its tributaries that wend their
ways through many Passaic County towns and cities.
7. The convenient network of highways and railroads which
give ready access to the area from all directions.
A Foreign Trade Zone, I will give the classic definition
for that--the Foreign Trade Zone is a site within the United
States, in or near a U.S. Customs port of entry, where foreign
and domestic merchandise is generally considered to be in
international commerce. Foreign or domestic merchandise may
enter this enclave without a formal Customs entry or payment of
Customs duties or government excise taxes.
Merchandise entering a zone may be: Stored, manufactured,
manipulated, repackaged, displayed, repaired, salvaged,
relabeled, assembled, sampled, destroyed, processed, tested,
mixed and cleaned.
There are two types of foreign trade zones. A general
purpose zone is established for multiple activity by multiple
users. A general purpose zone must be operated as a public
utility and must be located within 60 statute miles or 90
minutes driving time from the outer limits of a U.S. Customs
port of entry, Passaic County is situated within the applicable
limits, FTZ projects may consist of one or multiple sites,
e.g., a single building, an industrial park, a deep water port,
or an international airport.
While activities including storage, inspection and
distribution are permitted at all FTZs, other activities
including processing or manufacturing require special
permission from the Foreign Trade Zones Board.
In instances where a firm wants foreign trade zone status
for its own plant or facility, or when the existing general
purpose zone cannot accommodate the firm's proposed activity,
the designation of subzone may be granted. There is no real
difference in the types of activity that may be undertaken in
the general purpose zones or subzones.
Typically, subzones are designated for an individual
company's manufacturing operations. Subzones can be located
anywhere within a state, so long as a sponsoring Foreign Trade
Zone licensed grantee of a general purpose zone exists in the
state and the U.S. Customs Service can fulfill its proper
oversight functions at the proposed location of the subzone.
1. All fifty states as well as Puerto Rico have established
Foreign Trade Zones. Here in New Jersey we have five: Port
Newark/Elizabeth, Camden, Mercer County, Lakewood and Morris
County.
Mr. Pascrell. Ron, you have another minute.
Mr. Gross. Okay. Also important is the county's proximity
to a world class sports complex, New York City and major
international airports all positive attractions for visitors
and businesses and Passaic County, which brings us to the
discussion of the need for a foreign trade zone in Passaic
County.
We envision a foreign trade zone as a prime economic
vehicle that will spur our economy by providing many jobs and
revenue and will afford occupants with certain federal tax and
tariff benefits.
Thank you for allowing the Passaic County Vision 20/20 to
submit this testimony for your consideration.
Mr. Pascrell. Thank you, Ron. We appreciate that.
And now Time Zero/PPI Corporation, Philip Russo.
Philip, thank you for being here today.
STATEMENT OF PHILIP RUSSO, TIME ZERO/PPI CORPORATION
Mr. Russo. Well, thank you for inviting me. And Congressman
Pascrell, fortunately mine is short and right to the point, and
I am going to really address how HUBZones affect us as an
economy.
Mr. Pascrell. Good.
Mr. Russo. Basically, ours is a high-tech company that
moved to Paterson around 12 years ago. We were welcomed and it
has been a good experience ever since.
Thank you, Deborah, and everyone connected with the city.
It has been a good experience for us.
What has happened in the past years, we have tried
unsuccessfully to vote on government contracts, and henceforth
have stopped putting any effort in that area.
The reasons primarily for not being successful were: (1)
pricing; (2) unclear or overburden some documentation.
Competing against large government contractors who have had
more resources than us to either be able to purchase components
at lower prices or perhaps just have some more powerful
connections as far as being able to generate some of the quotes
that we could not, which could be understandable.
We were never turned down for our technical ability. We
always had the technical ability to be able to do these kinds
of contracts.
It is my understanding that HUBZones will create certain
areas that will enable us to be more competitive with
economically similar type companies which I think is very
important in this whole HUBZone program.
We have been identified by several of our existing
government contractors. We deal with GECs and IWMs and the
firms like Allied Signal and we have been identified as being a
HUBZone, and they have been wanting to give us more
consideration on contracts that might make us win more
contracts.
Because of the fact that we are in a HUBZone, unfortunately
we find that we are two blocks away from the nearest HUBZone.
According to what Mr. Marrero mentioned earlier, we do have
the company, the resources and the people around us, but we
can't get at them. So if we could get some help there, that
would be really great. You just have to stretch it two blocks.
I think the entire program is very beneficial to all areas
including Paterson, and I would like to recall the greatness
Paterson once had as an industrial city. The high tech
manufacturing industry in which we are has no boundaries nor
does it require any special services.
I hope Paterson once again can attain this greatness. As
industries flocked to Silicon Valley 30 years ago, let's get
them to flock to Paterson for manufacturing services. I think
we can do it.
But there is one last thing I would like to mention, which
has been true to my heart for all the years I have been in
manufacturing, and I won't say what I think about big business,
what they have done to the United States as far as supporting
jobs, I can only speak for myself. But you give me a Foreign
Trade Zone that means something, and you give me $10 million
and I will start to make T.V. sets in Paterson and I will start
shipping them and selling them to the Japs.
Mr. Pascrell. Japanese.
Mr. Russo. Japanese, very sorry. I am not politically
correct, very sorry.
Thank you very much for inviting me here, and I hope my
testimony means something.
Mr. Pascrell. Thank you very much, Phil.
I am just reminded that maybe the census will move you two
blocks the other way. Don't forget all of this is dependent,
HUBZones, that is, in terms of the census, on your track, your
census tracks, and that could change very easily and move very
easily up.
Aside from that, though, Pancho, here is another example
of, again, what I used as a parallel example with your ban
enterprise zones. It seems absolutely irrational that
businesses close to Paterson will not have the same benefits,
do not have the same opportunity to those benefits anyway,
simply because they are not in that particular enumeration
district.
But I like what you said also about the trade zones. I
think this is very, very important, very critical that we
understand and then we pursue and get more knowledge on those.
So, thank you. I just want to go quickly through all of
those departments that when we talk about federal procurements
and when we talk about what is available, we are talking about
the Department of Agriculture, Defense, Energy, Health and
Human Resources, Housing and Urban Development, Transportation,
Veterans Affairs, Environmental Protection Agency, General
Services Administration and the National Aeronautics and Space
Administration.
We want to get our business and our HUBZones to be able to
get in and they can do that if we provide them the credits that
they deserve.
So thank you very much, Philip.
Mr. Pascrell. And now the president of Crown Roll Leaf, a
very large company in Paterson.
George, thank you for being here today.
STATEMENT OF GEORGE WAITTS, PRESIDENT, CROWN ROLL LEAF, INC.
Mr. Waitts. Madam Chairwoman and Congressman Pascrell,
thank you very much for inviting me. I will try to be short and
not sound like we are blowing our own horn here, but Crown Leaf
started--Crown Roll Leaf started back in the early '70s, '71,
located here in Paterson, mainly because of the reason that it
was available to the New York metropolitan markets.
It had good road infrastructure. It had good--a city with
an ample employee force to draw upon, and we figured it would
be a good spot to settle in so that we could advance and grow.
Over the years, we have grown from 4,400 square feet to
150,000 square feet here in the city. We also got integrated
into some of the higher tech products that are out there. Most
of our products started out with--we manufactured coating
polyester films to decorate greeting cards, books, just about
anything that can be decorated, can be hot stamped.
From there we branched that into holography, making two-
dimensional, three-dimensional images. We are the only
commercial rolling company in the United States which can
integrate the whole system from start to finish and it's done
here in Paterson.
We also determined several years back that it was truly
going to be a global market, that a lot of the business had to
be taken overseas. And rather than start a plant in Mexico or
open up shop in the UK, even though we did look into all those
aspects, we decided to stay right here in the United States,
right here in Paterson and deal with our competition here.
Mainly by utilizing the work force, being more innovative
product-wise, listening to our customers and what they needed
and also supplying it and getting it out to them.
Nowadays, for the most part, the trade zone becomes a very
important aspect of this, the reason being, that with this,
just in time and needing product, nobody wants to keep stock,
they have to pay taxes on their inventory.
We found that between the freight duty and taxes, that
17\1/2\ percent of the almost $13 million in business we do
internationally goes towards those taxes and duty fees.
We also find that when we use--by normal means, by
container or by sea, the overall expense to that is 6\1/2\ to
7\1/2\ percent in duties and taxes.
On a customer basis, looking to getting it there quickly by
air, by today's standards, et cetera, it's a little difficult
dealing with that because we have to pass on those costs in our
products and in our pricing.
It is not a level playing field. Things we have looked to,
even sometimes, absorb some of that in order to maintain a
better customer base and a happier customer for the reordering.
We projected that ongoing we would like to be more of a
global market. At this point, we deal with about 48 different
countries around the world. We are looking to open it up as
much as possible. We employ about 300 people here in Paterson.
Most of the Paterson base fluctuates between 35 to 40
percent of the actual residents working at our firm. We also
opened up an office warehouse in Chicago, California, Georgia;
we opened one in Canada, Germany and we are looking to open one
in Brazil.
All the manufacturing stays here in the United States. This
is to help try to be more competitive and get the product out
there and have the customer base be able to draw from it at
those locations rather than have it all come directly from
here.
Trade zones, in effect, would be very helpful in a sense,
dealing outside, as well for the county, as well as for other
customers. And other businesses looking to either grow or
expand or jump into a global market, this could be one of the
ways, one of the vehicles that they could use to do that
because it would give them more of a level playing field in
which to get into these markets.
I think that more of it has looked at the point of
importing and I think it has gone more so to buy the present
things that are out there. It has worked out, it's very easy to
get around and get it imported into the United States but
getting it out into the global market isn't as easy or as cost
efficient for the most part.
Thank you very much and I appreciate the opportunity to
speak to you.
Thank you.
Mr. Pascrell. George, thank you very, very much. I know the
great work that you have done at your establishment, and I have
spoken to the Chairlady about that.
I want to send her a sample so we understand what we are
talking about. I can't really describe it. It's really
fantastic work, and since you are the only one in the United
States, we would like to see it.
Chairwoman Kelly. George, he is a big booster.
Mr. Pascrell. Thank you very much.
And now, Deborah Dotoli. Thank you very much for being part
of the HUBZone program. You will talk to us about that today.
Deborah is president of Geneva Medical Metal Products in
Passaic, New Jersey.
STATEMENT OF DEBORAH DOTOLI, PRESIDENT, GENEVA METAL PRODUCTS
COMPANY
Ms. Dotoli. Thank you. I would like to thank you for
representing my company today. It is a small business, a woman-
owned business and HUBZone company.
Good afternoon. My name is Deborah Dotoli and I am the
president of Geneva Metal Products Company. I have held that
position since 1988.
Geneva Metal is a precision sheet metal fabrication
facility established in 1954 by Ludine F. Dotoli. Mr. Dotoli is
a salesman who with no knowledge of sheet metal fabrication saw
a need to be diverse from his plating business which then
existed and offered a sideline of metal products to standing
customers.
Up until the 1980s Geneva metal products had decent
revenues for a small company. But when Mr. Dotoli passed away,
our one man sales force became non-existent. Sales dropped
drastically and our manufacturing facility decreased from 10 to
3 employees. I was faced with making a very important decision,
was I going to close shop or do the best I could not only to
survive personally but bring back a company that had been an
excellent comrade and supporter throughout the years.
In my search for a new customer base, I was faced with a
question that kept arising. ``What does your company have that
is different from other sheet metal facilities?''.
Consequently I felt the need to search out and find out
what do I have or what can I change to make my company stand
out from the many sheet metal companies in our area.
One of the answers that came about was certifications in
areas that would make Geneva Metal more desirable to larger
companies. The first step was to achieve certification by the
State of New Jersey as a woman owned business. In March of 1997
this was completed.
From there my company became involved in a consortium run
by the State of New Jersey to become ISO 9002 certified,
spending 1\1/2\ years learning, teaching and implementing
quality procedures into my manufacturing system.
During this time another certification was brought to my
attention. Something called HUBZone. This program encourages
economic development in historically underutilized business
zones through the establishment of preferences. It is a very
simple process to go through and can be done over the Internet.
Basically a small business must be located in a classified
zone, owned by a U.S. Citizen and have at least 35 percent of
its employees residing in the HUBZone area.
Company information was completed within a day, submitted,
and within 30 days Geneva Metal was certified as a HUBZone
company. To date the most receptive of all certifications in
acquiring bids from various government related agencies has
been the HUBZone.
Since 1988 with the combination of various certifications,
perseverance and exposure through different government
programs, I have increased sales, workforce and added over
200,000 of new production equipment.
If small business has any chance of survival today people
must be aware of different programs available to them such as
HUBZone. These programs make small business stand out and be
recognized, allowing companies such as mine to have that one
different thing that allows us to be considered for and
hopefully acquire contracts. By growing we can contribute
further education and growth in urban enterprise and welfare
communities.
Mr. Pascrell. Thank you, Deborah. Thank you for your
testimony.
Madam Chairlady, any questions?
Chairwoman Kelly. I just simply want to thank all of you.
Mr. Gross, I do have a question for you. What roadblock do
you see for your communities in setting up or in getting
through the Foreign Trade Zone public process?
Mr. Gross. The fact that there are already two----
Mr. Pascrell. Could you use the microphone, please? Thank
you.
Mr. Gross. The fact that there are already two foreign
trade zones in this area, and to have another trade zone in
this area, you would have to justify a reason for that as we
are now in the process of getting the information that would
justify the need for another Foreign Trade Zone in Passaic
County.
Chairwoman Kelly. That is the only roadblock you believe
that is out there, that you see?
Mr. Gross. Yes, at this particular time.
Chairwoman Kelly. Okay, great, that is good.
Mr. Pascrell. Physically, they are not that far, but
demographically, it is like years apart?
Mr. Hoffman. Yes.
Mr. Pascrell. I hope that is taken into consideration in
reviewing the plans. And the more people you have trying to be
helpful in applying for a trade zone, I would think that that
would indicate the interest as well as the eligibility, of
course, that has to be met in a qualification.
This helps everybody in the zone, be it a salesman of
automobiles, be it a widget maker, whatever. So this would be
critical.
And you have heard today, Dennis, very critical to the
growth of the economy in our area, which as someone said
before, the prognosis is not very, very bright for Passaic and
Essex Counties in terms of job growth.
Both counties have held their own in terms of economic
growth but that is about it. We have not moved to the next
level. And again, I hope this is seen as a tool to do that. And
that application needs to be strong and I am sure you will make
it strong.
Mr. Gross. Yes, sir.
Chairwoman Kelly. I will let you pick up questions here.
The only thing I would say, Mr. Gross, I assume that you are
working with the Chamber of Commerce and with the Department of
Commerce and with the SBA and all of the other agencies to try
to make sure that this becomes realty.
Mr. Pascrell. You have to speak up.
Mr. Gross. Yes.
As I pointed out, we have worked with those agencies, we
recognize how vital that is to our application process.
Mr. Pascrell. Okay. I just have some very quick questions
so we can turn it over to our audience.
I want to reemphasize what the Chairwoman just said, and
that is the more inclusive the application becomes in terms of
reaching out to the very manufacturing and service areas, I
think the more we increase our possibility for being granted
this kind of zone.
If I go back to Dennis a second, I don't know if you have
ever talked to each other, but how long does the basic
application take?
Mr. Puccinelli. The review process?
Mr. Pascrell. Yes.
Mr. Puccinelli. Can you all hear me?
Mr. Pascrell. Yes. Speak up.
Mr. Gross. The application process takes about 10 to 12
months. That allows for a comment period, Customs review and
then the interagency voting process at the end.
Mr. Pascrell. What do you think is the most helpful thing
to Ron and those within our area who want to make this a trade
zone? What do you think is the most helpful thing to them that
you could tell them about putting this application together?
Mr. Puccinelli. We have talked before and I think that it
sounds like they are on the right track to me. We would be glad
to look at a draft application and give them some comments.
Mr. Pascrell. How many pages is this application?
Mr. Gross. It is a book form. There are many pages to the
application.
Let me point out that we have worked closely with the trade
center at Mount Olive. They are working with me as a
consultant.
Mr. Pascrell. Is it better that they go piggy-back or try
to do this on our own?
Mr. Puccinelli. We would be glad to talk to them. They have
both of those alternatives available and it just depends on
what they want to do.
I know the other zones in the area would probably work with
them, or they could apply for their separate zone if they
believe that they really have enough separateness here in terms
of their economic development initiatives, and that is kind of
what I am hearing; isn't that right, Ron?
Mr. Gross. That is true. We have also been in touch with
the Newark, New Jersey Foreign Trade Zone who has promised us
to work closely, if we want their assistance, to work with us
on the application process. It's part of the already
established trade zone.
Mr. Pascrell. Thank you, Ron. I want to thank Phil and
Deborah also for shaping this because they have the experience
of what the zone is about and also how ineligible you become if
you are a few steps away. That to me is kind of crazy and
insane.
Chairwoman Kelly. I just wanted to thank you all also, but
I have another question actually for those of you who are
business people.
This committee, this regulatory reform paperwork reduction,
which I am chairing the subcommittee, which of the agencies
that you deal with ask for the most amount of paperwork, and do
you have any, and do you have any suggestions there where we
can perhaps give you some help?
Mr. Waitts. Well, most of our paperwork comes from,
surprisingly enough, from the DEP over the years----
Mr. Pascrell. Gee, that is a surprise.
Mr. Waitts. Yes. But most of the government regulation in
what we deal with--and other parts of it are very small
compared overall to that department in comparison.
Mr. Pascrell. You know, we have been struggling with that
in Congress. All of us want to protect the environment and all
of us want to leave our children a healthy legacy, but what we
need to do is also understand the opportunities about economic
growth. They need not be in contact with one another.
Mr. Waitts. True.
Mr. Pascrell. We need to make sure that they are
complementing one another and that we do not go to an extreme
to cut off our nose to spite our face.
I don't know how you feel about this, but I see in terms of
environmental regulations much more of a civil attitude about
environmental prerogatives and more of an attitude of abating
problems rather than prosecuting them.
I mean, there are only a few fakers. Most people are
sincere in trying to deal with their environmental
responsibilities, and I think we should make sure we develop
that abatement process, and we have done that with SuperFund,
we have done that with Brownsfield which is part of the budget.
We don't have too much time to read the thing, but I want
to read specifically what is in here about Brownsfield. I think
it is very, very important. We can't compete--industry can't
compete in America if we have this standard, and countries
where we are supporting jobs with no standards and we are
foolish enough to think that our trade relationships with these
countries are going to, you know, we are going to be protecting
the environment by giving away jobs. I want to protect the
environment. I am very proud of my record on the environment
but we need not cut off our nose to spite our face.
Mr. Russo. I think over the past years I have seen actually
less of a requirement for controls. Our particular industry is
kind of environmentally clean as it is, but with programs like
the City has put out, where they have these programs of
hazardous waste materials, for instance, they have a program
now where once a year they come by with a truck and they pick
up all the hazardous waste of all small businesses, which I
think is a great thing.
Where it used to cost us thousands of dollars previously,
they have come up with ideas where it is now much less, a
smaller percentage of that. But the documentation and
everything from the State itself, seems to me to be less
anyway. That is my perception.
Mr. Pascrell. The reason why I brought that up is because
we mentioned the environmental question. But I see State
governments, particularly in the northeast, and the Federal
Government trying to come to closure on many of these
environmental issues so that it does not become a noose around
one's neck in protecting the environment and in developing the
economy.
These are tough issues. These are issues that we need to
address in paperwork in and of itself that have hurt us. I
mean, if we think that throwing out more paperwork is going to
clean up a piece of property, we are nuts.
On the other hand, I know there needs to be some paperwork
and I know that there needs to be some response. We are not
going to back off on high standards on the environment, whether
it is clean water and clean air.
However, I believe that removing ourselves from that
extreme position is going to be very helpful so that we can
bring closure, and this is what people really want. And I know
that Sue has done everything in her power, since she has been
in Congress, not only to protect the environment but to move
the economic development.
I want to make two points before we finish and the
Chairwoman will then conclude the meeting and we will open it
up to questions.
I believe that the establishment of a Foreign Trade Zone in
our area is critical if we ought to sustain job growth. I am
going to form a committee--I hate to even say that, you know
what I think about committees--for the express purpose of
securing Federal Trade Zones in our area.
It will not be a paper committee. None of our committees
are, but one that is focused on a single goal, and I would
hope, George, that you would be involved in that, and Ron, I
don't know if this is the first time you met George, but it's
people like George Waitts that we need to get on this committee
in terms of practical application, what we are talking about.
And we have the proper personnel here and you will be able
to get a hold of them, not only because you have the web
number, but because you have everything else, except their age,
weight and whatever. But we need to understand that this is
going to mean a lot of communication.
The second thing that I am going to adjust to the best of
my ability is the HUBZone program so that it does not exclude a
business only because it's across the street from a certain zip
code, and maybe that can be worked out through a regulatory
process rather than simply a bill that we can generate.
We generate millions of bills, but we want to get something
done and I know Sue feels the same way about that, this gray
zone of eligibility, and with that I would like to turn it over
to the Chairlady and again, thank you so much for your
tremendous input here and your cooperation.
Chairwoman Kelly. Well, with that I want to thank all of
you for being here this afternoon. It has been a very
interesting and good hearing and I hereby adjourn.
I now think we are available for questions.
Mr. Pascrell. Please make your questions short and we will
make the answers short so we get to more people.
[Whereupon, at 4:45 p.m., the subcommittee was adjourned.]