In From the Cold
There are three federally designated foreign trade zones in Minnesota. One is in the Twin Cities; another is at the Port of Duluth-Superior. The third? It’s in International Falls.
Not much economic activity has been going on in the International Falls zone since it was established in 2004. But the local business community has global visions.
The focal point of the zone is the CN railroad bridge over the Rainy River between Fort Frances, Ontario, and the town of Ranier, just east of International Falls. According to Paul Nevanen, director of the Koochiching Economic Development Authority, which guides development efforts for the city and surrounding Koochiching County, 15 to 17 trains cross the bridge a day. The trains originate at the port in Prince Rupert, British Columbia, and transport containers full of goods from Asia. “This is the busiest rail port in North America in terms of the number of containers, the number of trains coming through here on an annualized basis,” Nevanen says.
International Falls wants to get beyond “timber and tourism,” Nevanen says. The keystone of the city’s economy is the Boise paper plant, which has been operating since 1910. Boise, Inc., currently employs about 850 people, and layoffs announced in early May will reduce that by 265. Many business leaders in International Falls would like to see the city of 6,400 diversify beyond its longtime Boise base. The zone could offer one of those opportunities.
There are more than 200 foreign trade zones in the United States, all adjacent to places where goods enter the United States. The zones allow U.S.-based operations engaged in international trade to store and assemble products from overseas components without having to pay taxes or tariffs.
“You don’t pay any duty until it leaves the zone,” Nevanen says. “Or if you manipulate it—say, take some components and assemble them—the finished product can come out at a lower duty rate. It also helps to streamline your supply chain if you’re doing just-in-time manufacturing.” Items in the zone aren’t subject to custom until they leave it for sale, which can help a company manage its cash flow.
Nevanen believes that manufacturers in particular could be attracted to International Falls’ zone. “This would be a strategic location where they could take items off, assemble them or repackage them or hold them, and then put them back on the train or ship them by truck,” he says. The city has a 90-acre site for the zone; the Minnesota Dakota and Western, a short-line railroad that runs from Ranier to the Boise plant, could help connect zone tenants with other transport options.
Nevanen acknowledges that no one has yet signed up for space in the zone. And one wonders: Does International Falls need this? That might sound heretical, especially give the Boise layoffs. But one thing that you hear a lot in the Northland is that companies are finding it challenging to find skilled workers. Many industries, notably the taconite mines, are looking at a coming wave of retirements. Are jobs needed?
Koochiching County’s unemployment rate offers one answer. The seasonal nature of much of the work there (largely due to the timber industry) means rates fluctuate widely throughout the year. (See chart at right.) Jobs that pay better and require more skills than service-sector work can help attract workers because they provide income for spouses. Faye Whitbeck, president of the International Falls Chamber of Commerce, says that a lack of second-career positions is “one of the challenges we have” in luring talent to her city.
Lori Lyman, public affairs manager for Boise, says her company is “very supportive” of all the city’s economic development efforts, including the foreign trade zone. More development makes International Falls “a better place” for “attracting and retaining employees.”
Many northern Minnesota cities assert that people want to live up here; the problem is a lack of opportunities. “There are young people that want to return and enjoy a rural lifestyle up here on Rainy Lake,” Nevanen says. “We hear that all the time.” International Falls has a program called Your Ticket Home that keeps those who sign up informed of job possibilities that fit their skills and background.
The city isn’t putting all of its economic development eggs in the foreign trade basket. Nevanen’s organization is also looking into energy production from wood fiber and other biomass, as well as a plasma gasification plant. Another possibility is data centers. International Falls no longer seems to want to tout itself as the coldest place in the Lower 48. But its meteorological cool would mean lower energy costs for these facilities, which must guard against overheating.
Nevanen says that International Falls also wants to encourage a “more entrepreneurial culture” among its young people—something many Northland communities see as key to their economic future. Business organizations have established a Junior Achievement program as well as workshops, to raise entrepreneurial consciousness. The city sent three finalists to this April’s Labovitz Awards, a program of the University of Minnesota–Duluth that recognizes Northland entrepreneurs. Two of them won in their categories.
But International Falls seems focused on the “international” potential of its location. “That’s our future somehow,” Nevanen says, “tied to that cargo that is coming from China, the Pacific Rim, on to Chicago.”
Gene Rebeck is TCB’s northern Minnesota correspondent.