Textiles Continue to be a "No Go" for FTZs

Earlier this month, automobile manufacturer Mercedes Benz filed three Foreign-Trade Zone Notifications of Production relating to facilities in California, Georgia, and Maryland. Mercedes Benz currently pays import duties on imported components which are used in the production of cars that have a lower import duty than the components. Using FTZ procedures, Mercedes will import the components duty-free, assemble the vehicles, and then, when the finished vehicles entered U.S. commerce, they will pay duty on the value of the foreign components, but calculated at the lower rate applicable to motor vehicles. However, in the case of the one textile input that is imported, carpet of man-made fiber, Mercedes has elected to not request the duty savings. Other applicants over the past several months have, also, elected to not ask for tariff relief for textile inputs.

Until 2009 most textile articles were not eligible for consideration for an FTZ operation. Since then there have been several applications relating to textiles and in each case where the U.S. textile industry objected because they were willing and able to supply the textile article in question, the application was denied in whole, or at least as regards the textile component that was available from a domestic source. It appears that the consultant employed by Mercedes recognized that they were unlikely to succeed in getting FTZ benefits for the textile component and that excluding textiles from the application would avoid having the whole application held up due to a dispute over textiles.