Helping Sonoma County companies export

When Santa Rosa’s Thermochem had trouble obtaining a key financial guarantee to pay for equipment destined for Kenya a year ago, the geothermal testing company turned for help to officials with the U.S. Commerce Department.

“We already had spent a lot of money,” Thermochem President Paul von Hirtz recalled of the $360,000 contract.

The company had agreed to ship equipment that measures the capacity of geothermal wells to generate electricity, similar to what occurs in Sonoma County at The Geysers steam fields. The buyer was Kenya’s main electrical generator, but the overseas company didn’t provide a letter of credit and for a time its staff stopped responding to requests about the delay.

Thermochem contacted officials at the San Rafael office of the U.S. Commercial Service, a trade promotion arm of the Commerce Department. Those officials worked with counterparts at the U.S. Embassy in Nairobi to contact the company in Kenya and to help procure the letter of credit this spring.

“If we didn’t have Commerce people to call, it could have not ended well,” said von Hirtz. Instead, the equipment was shipped in May, with payment received in the summer after the goods arrived.

Exports remain a significant part of the Sonoma County economy, amounting to ?$1.19 billion last year, an increase of 6.7 percent from 2015.

And helping local companies boost exports is the commercial service’s mission.

“It’s the only thing we’re evaluated on,” said Elizabeth Krauth, director of the service’s North Bay office in San Rafael.

Sonoma County has a varied assortment of exporters that produce everything from wine to tech products. The companies include large, publicly traded corporations, such as Santa Rosa-based Keysight Technologies, the world’s largest maker of electronics measurement products, and Milpitas-based Viavi Solutions, whose Santa Rosa division’s products include anti-counterfeiting pigments that are used on the currency of more than 100 nations.

But smaller, privately held businesses and divisions of larger companies also export goods.

In Santa Rosa they include such enterprises as Loring Smart Roast, a maker of specialty coffee-roasting equipment; Blentech Corp., a manufacturer of custom-made industrial cookers and mixers; and Reltek, a Santa Rosa producer of high-performance adhesives, sealants and coatings.

What the county manufacturers offer are quality products that serve niche markets, Krauth said.

“These are technologies that companies around the world need,” she said.

For their part, several company officials said that when shipping products overseas, it helps to have U.S. officials on the ground in foreign lands who can find out key information and troubleshoot when issues arise.

In the Internet era, any businessman can “make yourself look superficially quite good” with a well-done website, said Tom Moulton, director of marketing and sales for global markets at Labcon, a Petaluma maker of pipette tips, medical containers and transfer devices. However, the reality may be “there’s no one behind the curtain.”

When considering work with an overseas business, Labcon officials often “find it pretty much invaluable” to hire the U.S. Commercial Service to speak with the foreign company leaders and obtain financial references, Moulton said.

“It’s a service that can save you a lot of time and money,” he said. “It’s a big help and we’ve done several of those with the commercial service.”

Labcon, which employs about 240 workers in Petaluma, also has hired the commercial service to expand its business in India by conducting a study of potential markets there and to locate potential partners. Labcon eventually found a partner there to help distribute its products, Moulton said.

The commercial service also has aided a Petaluma maker of water desalination systems for sailboats, resorts and remote coastal communities.

For one project, commercial service officials helped put Katadyn Desalination in touch with the Export-Import Bank of the United States, said Michael Anderson, an applications engineer for the company. The EXIM Bank provided a loan guarantee for bridge financing for a system that was installed and leased in Kenya.

“They’ve been really good about helping us connect the dots,” Anderson said of the commercial service.

Katadyn Desalination is a division of Swiss-based Katadyn Group and the maker of Spectra Watermaker systems. The division moved its 23 workers from San Rafael to Petaluma early this year.

Katadyn is preparing this month to ship to Kenya another system capable of running on solar power and producing up to 21,000 gallons of clean drinking water per day. The system is being coupled with a Tesla Powerwall energy storage system, and has been purchased by the Give Power Foundation, a nonprofit begun by clean energy provider SolarCity.

For the new system, Katadyn reached out to Krauth’s office because the installation site in northeast Kenya is “a little close to the Somali border,” Anderson said. The commercial service made contact with embassy personnel in Nairobi to advise Katadyn on steps to ensure their personnel can safely oversee the installation of a system that will be located near Somalia, a country where the State Department warns U.S. citizens to avoid travel “because of widespread terrorist and criminal activity.”

For 2016, the county’s top five export sectors all involve manufacturing. Ranking first was the sector for computer and electronic products, which last year was valued at $422 million. The other sectors were machinery, $184 million; chemical products, $146 million; beverage products, $102 million; and electrical equipment, appliance and component products, $68 million.

Asia is the top export region for the county and last year received $477 million worth of overseas shipments from here. Exports to Asia increased 23 percent in the previous 10 years.

In that same period, exports to Canada and Mexico jumped ?82 percent to $291 million. However, exports to the European Union declined 30 percent to nearly $217 million.

Krauth noted that many parts of the world are turning to the U.S. for help in acquiring fresh drinking water or finding cleaner sources of energy.

“One of the things that we’re seeing is that stringent environmental laws that California companies have to deal with have actually helped them in international markets,” she said.

One such company is Thermochem, which began business three decades ago to conduct chemical testing of steam at The Geysers geothermal fields. The company’s work expanded to other locales for Unocal, which at the time was the world’s most active geothermal company, von Hirtz said.

Thermochem has done business in 20 countries around the globe. It employs 25 workers in Santa Rosa and another 60 at a sister company in Indonesia, a locale with a considerable amount of geothermal energy development.

Southeast Asia remains a busy region for geothermal testing, von Hirtz said. But Africa also has considerable potential.

“Kenya could be the next big place,” he said.

Looking ahead, one trade group leader said the proposed corporate tax cuts now pushed by GOP leaders in Congress could lead to an expansion of U.S. manufacturing and exports.

The proposed cut in those tax rates could make U.S. locales look more competitive for multinational corporations, and “that could mean you add the (production) line here” rather than oversees, said Dick Herman, president of 101 MFG, a Petaluma-based alliance of manufacturing executives. Such expansion also could benefit smaller U.S. companies that supply components to the larger manufacturers.

Much of the developing world is going through a boom in consumption similar to what the U.S. experienced in the 1960s, Herman said. For companies that don’t export, he said, “you’re ignoring where the most attractive growth will be.”

Economic development officials said the recent wildfires in Sonoma County showed the value of exporting in adding diversification to commercial activity. In the fire and its aftermath, they said, the local service sector took a hit as consumers were displaced or for a time were focused narrowly on meeting basic needs.

Exporting “buffers local economic crisis,” said Craig Dermody, a research coordinator for the Sonoma County Economic Development Board.

Ben Stone, the economic development board’s executive director, said the county’s businesses won’t succeed by making the world’s cheapest wine or technology products. But the good news is that many people around the globe are becoming more affluent.

“As the world gets richer,” said Stone, “they will buy Sonoma County products.”