Rug Manufacturing Seeks Foreign-Trade Zone

According to a report on centralmaine.com, Flemish Master Weavers ("FMW") of Sanford, Maine, has filed an application to the Foreign-Trade Zone ("FTZ") Board in Washington for authorization to use FTZ procedures in their production of rugs of man-made fiber yarns.

If this story is correct (Agathon Associates could not independently verify it) it would be the company's second attempt at this proposal which could save them around $1 million annually. On March 31, 2016, they submitted a Notification Requesting Production Authority ("Notification"). A Notification is a short document answering four questions. In the case of Flemish Master Weavers, the Notification was two pages long. The Notification requested production under FTZ procedures which could exempt FMW from customs duty payments on foreign status materials used in export production. On its domestic sales, FMW would be able to choose the duty rate during customs entry procedures that applies to area rugs (free) for the polypropylene and polyester yarns (duty rates: 8.0% and 8.8%, respectively) sourced from abroad. Customs duties also could possibly be deferred or reduced on foreign status production equipment.

Authorization for production was opposed by National Spinning Co., Inc., the American Fiber Manufacturers Association, the National Council of Textile Organizations, and the United States Industrial Fabrics Institute. On July 29, 2016, the FTZ Board approved FMW's application, but with restrictions that eliminated most of the value of the authorization. With FTZ procedures as approved, FMW will avoid duty on the imported yarn, but only until the rugs made from the yarn enter the U.S. market. In other words, they got a brief deferral of the duty, plus avoidance of duty on rugs they export outside of the U.S.

In granting FMW limited authorization, the Board also informed FMW that have the option of re-filing, using the more extensive Application for Production Activity. It appears, from the news account, that they have opted to re-file, using that longer, 41-question, application.

To learn if your company can save money using FTZ procedures, contact David Trumbull at david@agathonassociates.com for an initial free consultation. In his FTZ work David works closely with Glenn Page of FTZ Solutions.