On August 13, 2019, the Foreign Trade Zone Board published in the Federal Register (84 FR 40021) Antonio, Texas; Authorization of Production Activity; CGT U.S., Ltd. (Polyvinyl Chloride Coated Upholstery Fabric Cover Stock); New Braunfels, Texas.
CGT U.S., Ltd. (CGT) submitted a notification of proposed production activity to the FTZ Board for its facility in New Braunfels, Texas.
Production under FTZ procedures will exempt CGT from customs duty payments on the foreign-status materials/components used in export production.
On its domestic sales, for the foreign-status materials/components noted below, CGT will be able to choose the duty rate during customs entry procedures that applies to PVC coated upholstery fabric cover stock (duty free). CGT would be able to avoid duty on foreign-status components which become scrap/waste. Customs duties also could possibly be deferred or reduced on foreign-status production equipment.
The materials/components sourced from abroad include polyester knit woven dyed fabric and PVC plasticizer (duty rates are 14.9% and 6.5%, respectively).
The request indicated that the polyester knit woven dyed fabric will be admitted to the zone in privileged foreign status (19 CFR 146.41), thereby precluding inverted tariff benefits on such items. The request also indicates that certain materials/components are subject to special duties under Section 301 of the Trade Act of 1974 (Section 301), depending on the country of origin. The applicable Section 301 decisions require subject merchandise to be admitted to FTZs in privileged foreign status.
The request appears to by primarily directed toward deferring the 10% China 301 duty until the fabric enters U.S. commerce, avoiding duty on inputs that become scrap in the manufacturing process, and avoiding import duties entirely on non-textile inputs.