South Dakota is the only state in the country with no corporate income tax, no personal income tax, no personal property tax, no business inventory tax and no inheritance tax. In its 2012 State Business Tax Climate Index, the Tax Foundation ranked South Dakota number one for having the most pro-business tax structure in the nation, while the Small Business & Entrepreneurship Council ranked the state as the number one environment for entrepreneurs in its most recent Small Business Survival Index, released December 2010. The benefit of this type of pro-business tax structure is well understood by businesses that have already established operations in the state, foreign firms looking for operational locales within US boarders, and the state’s international business majors who eagerly anticipate beginning their careers in the most business-friendly state in the nation.
South Dakota’s International Trade Partners
South Dakota has enjoyed a surge in its export market following the implementation of US bilateral and regional free trade agreements. Since the North American Free Trade Agreement (NAFTA) went into effect, South Dakota’s exports to Canada and Mexico have increased more than six fold. As such, Canada and Mexico are now the state’s largest trade partners.
The International Trade Association’s 2010 report showed that South Dakota’s exports to Chile have increased 540 percent since the implantation of the U.S./Chile Free Trade Agreement. The creation of this trade pact with Chile, along with the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA), have boosted the state’s export of computers and consumer electronics by 149 percent, placing them among South Dakota’s top foreign exports.
Although merchandise exports play a large role in South Dakota’s GDP, professional services, such as finance, insurance, marketing and legal services, have proven vital to the diversification of South Dakota’s export base. Service exports account for 22.7 percent of the state’s GDP, two-and-a-half times more than manufacturing.
The number of international trade-related jobs in South Dakota grew almost twice as fast as domestic service and manufacturing jobs between 2004 and 2008. The largest sectors for international trade-related employment in South Dakota are wholesale and retail trade, finance and insurance, transportation and warehousing, manufacturing; and professional, scientific and technical services.
Export-related jobs in South Dakota accounted for 2.8 percent of the state’s total employment in the private sector in 2009. In South Dakota’s manufacturing industry, nearly 15 percent of all workers depended on export activities for their employment.
As of 2009, 594 South Dakota companies were involved in exporting activities. Of these companies, 81 percent were small- and medium-sized enterprises with fewer than 500 employees.
International Business Jobs in South Dakota
South Dakota is home to a number of multinational companies that originated in the state, including Carolina Ocean Lines Inc., a Rapid City-based company that exports poplar and red oak lumber to markets in Korea and China. Kohlberg Pioneer, headquartered in Yankton, is a manufacturer of industrial conveyors and components, and as one of the state’s biggest manufacturing exporters, posts annual revenues of around $75 million.
Foreign-controlled companies employed 7,400 workers and corporate professionals in South Dakota as of 2009, which accounted for 2.2 percent of the state’s total private sector employment.
One of the largest foreign-owned companies operating in South Dakota is AKG Midwest, Inc., a German company with operations in Mitchell that manufacturers agricultural and construction equipment. AKG Midwest, which has annual revenues of more than $100 million, opened an 80,000 square-foot facility in Mitchell in 2005.
BAE Systems, a United Kingdom manufacturer of defense and aerospace equipment, is the second largest global defense company in the United States based on revenue comparisons done in 2010. This company boasts customers in more than 100 countries.
The international reach of South Dakota based companies and the increase in foreign investment coming from businesses establishing operations in the state helps highlight the growing demand for international business professionals serving as trade specialists and import compliance officers, global supply chain and logistics managers, accountants familiar with International Financial Reporting Standards, among many others.
Making International Business Contacts in South Dakota
South Dakota has a number of organizations dedicated to providing information on international business, and that also serve to assist businesses interested in participating in international commerce: