Upholstered Furniture Company Okay'd for Foreign Trade Zone

On June 10, 2016, the Foreign Trade Zone Board published in the Federal Register (81 FR 37570) Subzone 230D; Authorization of Limited Production Activity; Klaussner Furniture Industries, Inc. (Upholstered Furniture); Asheboro and Candor, North Carolina.

On January 5, 2016, Klaussner Furniture Industries, Inc., operator of Subzone 230D, submitted a notification of proposed production activity to the Foreign Trade-Zones (FTZ) Board for its facilities within Subzone 230D, in Asheboro and Candor, North Carolina.

KFI has enjoyed authority to conduct cut-and-sew activity using certain foreign micro-denier suede upholstery fabrics to produce upholstered furniture and related parts (upholstery cover sets) on a restricted basis. Board Order 1745 authorized the production of upholstered furniture (sofas, sleep sofas, and recliners) for a five-year period, with a scope of authority that only provides FTZ savings on a limited quantity (5.79 million square yards per year) of foreign origin, micro-denier suede upholstery fabric finished with a hot caustic soda solution process (i.e., authorized fabrics). All foreign upholstery fabrics other than micro-denier suede finished with a hot caustic soda solution process (i.e., unauthorized fabrics) used in KFI's production within Subzone 230D are subject to full customs duties.

The request approved today extends KFI's existing FTZ authority indefinitely (with no increase in the company's annual quantitative limit of 5.79 million square yards) and adds foreign-status leather and certain polyurethane-type fabrics to the scope of authority. KFI also requested that the authority under Board Order 1745 be revised by modifying Condition #2 to allow KFI to admit unauthorized fabrics to Subzone 230D in privileged foreign status (19 CFR 146.41), which would preclude any change in customs classification through transformation under FTZ procedures. Pursuant to 15 CFR 400.14(b), additional FTZ authority would be limited to the specific foreign-status materials and components and specific finished products described in the submitted notification (as described below) and subsequently authorized by the FTZ Board.

Production under FTZ procedures exempts KFI from customs duty payments on the foreign-status fabrics used in export production. On its domestic sales, KFI would be able to apply the finished upholstery cover set (i.e., furniture part) or finished furniture duty rate (free) for the authorized fabrics and the additional fabrics. Customs duties also could possibly be deferred or reduced on foreign-status production equipment.

Upholstery fabric maker STI and thread manufacturer American & Efird supported KFI's application.