Cargo hub to be free trade area
Could give MidAmerica a big boost
BY MIKE FITZGERALD
News-Democrat
Sep. 17, 2006

MASCOUTAH - It might be an iPod that finally makes MidAmerica St. Louis Airport sing.

Or a computer. Or a television set.

"If they make all the parts in China, but we assemble it here ..." said Paul McKee, a partner in Trade Zone Partners LLC that plans to use the airport as their base for an international cargo operation. "What we're going to do is show them how they're going to save a lot of money. There's some real tax advantages."

The key to the airport's potential success as an air cargo hub lies with its location in a foreign trade zone, McKee said. As a result, an Asian electronics firm can ship components to MidAmerica for assembly, but not deal with customs or pay import duties or federal excise taxes on the finished goods until they leave the airport grounds -- a big competitive advantage.

Over the next decade, a cluster of warehouses and assembly plants could sprout up at the airport, McKee predicted.

"It'll be mixed use," McKee said. "Everything but residential."

McKee is president of McEagle Properties, of O'Fallon, Mo., a real estate development firm that teamed up with Sunset Transportation, a freight logistics company, to last week become the first tenant at the airport's nearly $8 million cargo warehouse. The St. Clair County board isn't scheduled to vote on the deal until Sept. 25.

Bruce Janis, the president of Mach 1 Global Services, an air cargo firm based in Phoenix with six offices on mainland China, said it'd be hard to overstate the advantages of locating a business at an airport in a foreign trade zone. The foreign trade designation allows merchandise to be treated as if it weren't within U.S. boundaries while it is stored, assembled, manufactured or processed.

"Anything that's delaying not having to pay upfront duties is a benefit," Janis said. "So I can collect the duties from the customer beforehand. It gives me time to turn that payment around."

Gene Redmon, of O'Fallon, is a retired Air Force colonel who works for Young Tiger Consultants LLC and consults for Volga-Dnepr, a Russian-based air cargo outfit. He also played up the importance of MidAmerica's trade zone status.

"So what that means is, it's better able for companies to bring cargo directly into MidAmerica without clearing customs elsewhere," Redmon said.

What's more, the impact of Trade Zone Partners' decision to lease part of the airport warehouse helped break the ice, Redmon said. "The first client is the hardest one to get. The second and third ones are more easy because its the first guy that has to take the chance."

Redmon lauded the airport's extra-long and reinforced runway.

"It's a beautiful piece of concrete," he said. "Because it's a solid runway with a great taxiway and a good cargo ramp, it would be an encouragement for anybody to take their business there."

McKee, who declined to elaborate on Trade Zone Partners' specific plans, said another key to understanding his firm's intentions for the airport was his firm's alliance with St. Clair County in dealing with overseas governments.

"Governments only deal with governments," he said, "And when you're talking about international stuff, it's for sure the case."

An example of this "public-private" partnership in action can be found with St. Clair County's recent efforts to forge a bond with the Indonesian government.

In late July, county leaders welcomed to the airport Ismeth Abdullah, the governor of the Riau Islands, an Indonesian free trade zone near Singapore that is home to more than 5,000 factories.

Ismeth told county leaders during his visit that he liked what he had seen.

"It's a very strategic location," Ismeth said of the airport at the time. "It's straight in the middle of the United States. We will learn from here to how to create the cooperation."

County leaders have drawn encouragement from such positive reviews, along with the ambitious plans unveiled by McKee and his partner, Jim Williams, the president of Sunset Transportation.

But this time around county leaders are refraining from painting too rosy a picture or touting successes before they materialize.

After all, after nearly a decade of trying to market the airport as a passenger airline hub, they've had to deal with the disappointment of seeing four different airlines pull out or go bust. Allegiant Air, of Las Vegas, today flies out of the airport four times a week to airports in Las Vegas and Sanford-Orlando, Fla.

Mark Kern, the county board chairman, declined to discuss Trade Zone Partners' upcoming plans.

"We have diligently worked for many years now to fill our toolbox with all the tools necessary to attract trade at MidAmerica Airport," Kern said. "The possibilities with a foreign trade zone are endless. The amount of job and revenue creation -- certainly the potentials for that are very great."

"It's one of those things -- risk and reward," said Rick Sauget, the chairman of the Public Building Commission, which oversees the airport. "It fits. We're right in the middle of the United States. We have infrastructure we took advantage of."

Under the lease the commission signed Tuesday, Trade Zone Partners will pay a flat fee of $10,000 to rent out nearly 26,000 square feet of the warehouse, while agreeing to split equally with the county all profits earned that first year.

By year seven, the partnership will be paying $152,124 -- or $6 a square foot -- to rent the warehouse, while the county's share of profits drops to 10 percent, the lease shows.

Williams acknowledged the partnership's strategy centers on convincing foreign governments and businesses to consider MidAmerica based on its location in the geographical center of the United States, and in close proximity to river barges, highways and rail lines.

The aim will be to persuade these big customers to think "about MidAmerica and the St. Louis region as being a port of choice for the likes of a foreign entity that is wanting to do trade within the United States," Williams said.

The county's decision to pursue air cargo could hardly come at a better time, said Janis, of Mach 1.

Air freight operations are growing rapidly because of improved computer technology, overwhelmed container ports on the East and West coasts, plus the need "to move their goods in a safe, timely manner, which means the life or death of their business," said Janis, who said his firm has grown 30 percent a year for the past five years.