Production Authority Not Approved; Foreign-Trade Zone 38; Teijin Carbon Fibers, Inc.

On April 17, 20245, the Foreign-Trade Zone Board published in the Federal Register (89 FR 27413) Production Authority Not Approved; Foreign-Trade Zone 38; Teijin Carbon Fibers, Inc.; (Carbon Fiber); Greenwood, South Carolina.

The Board adopted the findings and recommendations of the examiner's report, and found that the requirements of the FTZ Act and the Board's regulations have not been satisfied.

Therefore, the Board did not approve the application, as amended, requesting to remove the restriction requiring that all foreign status 24,000 tow PAN fiber admitted for production activity be re-exported (entry for U.S. consumption was not authorized) within FTZ 38 at the facility of Teijin Carbon Fibers, Inc., located in Greenwood, South Carolina, as described in the application and Federal Register notice.

Foreign-Trade Zone 38; Application for Production Authority; Teijin Carbon Fibers, Inc.; (Polyacrylonitrile-Based Carbon Fiber)

On March 1, 2023, the Foreign-Trade Zone Board published in the Federal Register (88 FR 12912) Foreign-Trade Zone 38; Application for Production Authority; Teijin Carbon Fibers, Inc.; (Polyacrylonitrile-Based Carbon Fiber); Extension of Comment Period on Submission Containing New Evidence.

This controversial FTZ application has been under consideration since 2019, as Agathon Associates previously reported.

Foreign-Trade Zone 38—Spartanburg County, South Carolina, Application for Production Authority, Teijin Carbon Fibers, Inc. (Polyacrylonitrile-Based Carbon Fiber), Opening of Comment Period on Submission Containing New Evidence.

On January 30, 2023, the Foreign Trade Zone Board published in the Federal Register (88 FR 5853) Foreign-Trade Zone 38—Spartanburg County, South Carolina, Application for Production Authority, Teijin Carbon Fibers, Inc. (Polyacrylonitrile-Based Carbon Fiber), Opening of Comment Period on Submission Containing New Evidence.

The FTZ Board is inviting public comment on a submission containing new evidence pertaining to the application, as amended, on behalf of Teijin Carbon Fibers, Inc. (TCF), requesting production authority within FTZ 38 in Greenwood, South Carolina. Specifically, the amended application requests removal of the restriction requiring the reexport of foreign status 24,000 filament tow polyacrylonitrile fiber used to produce carbon fiber.

This controversial FTZ application has been under consideration since 2019, as Agathon Associates previously reported.

Foreign-Trade Zone 38—Spartanburg County, South Carolina; Application for Production Authority; Teijin Carbon Fibers, Inc.; (Polyacrylonitrile-based Carbon Fiber); Extension of Rebuttal Comment Period

On July 19, 2021, the Foreign Trade Zone Board published in the Federal Register (86 FR 48982) Foreign-Trade Zone 38—Spartanburg County, South Carolina; Application for Production Authority; Teijin Carbon Fibers, Inc.; (Polyacrylonitrile-based Carbon Fiber); Extension of Rebuttal Comment Period

The current rebuttal comment period pertaining to the amended application for production authority within Foreign-Trade Zone (FTZ) 38 on behalf of Teijin Carbon Fibers, Inc., is being extended to September 10, 2021, based on a request from the applicant. The original closing of the rebuttal period had been set for September 2, 2021

This controversial FTZ application has been under consideration since 2019, as Agathon Associates previously reported.

Foreign-Trade Zone (FTZ) 38-Spartanburg County, South Carolina; Application for Production Authority; Teijin Carbon Fibers, Inc.; (Polyacrylonitrile-based Carbon Fiber); Invitation for Public Comment

On July 19, 2021, the Foreign Trade Zone Board published in the Federal Register (86 FR 38010) Foreign-Trade Zone (FTZ) 38— Spartanburg County, South Carolina; Application for Production Authority; Teijin Carbon Fibers, Inc.; (Polyacrylonitrile-based Carbon Fiber); Invitation for Public Comment

In response to a request from Hexcel Corporation, the FTZ Board is inviting public comment on the rebuttal submission of Teijin Carbon Fibers, Inc. (TCF) (dated July 1, 2021) pursuant to 15 CFR 400.32(c)(2). The rebuttal submission was presented in the context of the FTZ Board’s consideration of the pending application, as amended, requesting certain authority for TCF to produce polyacrylonitrile-based carbon fiber at its facility in Greenwood, South Carolina. In response to this invitation for public comment, parties may also address argument or evidence presented in the application and in other parties’ direct and rebuttal comment submissions in earlier comment periods in this proceeding.

This controversial FTZ application has been under consideration since 2019, as Agathon Associates previously reported.

Foreign-Trade Zone 38-Spartanburg County, South Carolina; Application for Production Authority; Teijin Carbon Fibers, Inc.; Extension of Rebuttal Comment Period

On June 24, 2021, the Foreign Trade Zone Board published in the Federal Register (86 FR 33218) Foreign-Trade Zone 38-Spartanburg County, South Carolina; Application for Production Authority; Teijin Carbon Fibers, Inc.; Extension of Rebuttal Comment Period.

The rebuttal period for the amended application for production authority within FTZ 38 on behalf of Teijin Carbon Fibers, Inc., in Greenwood, South Carolina, submitted by the South Carolina State Ports Authority (85 FR 49359, August 13, 2020), is being extended to July 2, 2021, based on a request from the applicant, to allow additional time for the submission of rebuttal comments.

This controversial FTZ application has been under consideration since 2019, as Agathon Associates previously reported.

Carbon Fiber FTZ Applicant Gives up Fight over PAN

As Agathon Associates REPORTED on February 2, 2021, Teijin Fibers and Hexcel Corp have been battling over FTZ since 2019.

On May 4, 2021, the Foreign-Trade Zone Board published in the Federal Register (86 FR 23672) Foreign-Trade Zone 38--Spartanburg County, South Carolina, Application for Production Authority, Teijin Carbon Fibers, Inc., Amendment of Application.

The amendment removes 12,000 tow polyacrylonitrile fiber (precursor) from the foreign-status materials/components that TCF could use under the requested FTZ authority.

Tariff Classification of Core Spun Single Yarn and Eligibility for United States-Mexico-Canada Agreement

In a recent ruling (H309704) Customs addressed the tariff classification, country of origin, and USMCA elgibility of a 2-ply yarn constructed of one black partially oxidized polyacrylonitrile (PAN) staple yarn (36.2% by weight) twisted to one beige/yellow core-spun aramid/glass yarn (63.8% by weight). The core-spun yarn is constructed of a beige/yellow aramid yarn (53.3% by weight) that is wrapped around a core of glass fibers (46.7% by weight).

Teijin Fibers and Hexcel Corp Continue to Battle over FTZ

On February 1, 2021, the Foreign-Trade Zone Board published in the Federal Register (86 FR 7695) Foreign-Trade Zone (FTZ) 38— Spartanburg County, South Carolina; Application for Production Authority; Teijin Carbon Fibers, Inc.; Extension of Rebuttal Comment Period.

On December 17, 2020, the Foreign-Trade Zone Board published in the Federal Register (85 FR 81875) Foreign-Trade Zone (FTZ) 38— Spartanburg County, South Carolina, Application for Production Authority, Teijin Carbon Fibers, Inc. (Polyacrylonitrile-Based Carbon Fiber); Invitation for Public Comment on Rebuttal Submission.

On October 29, 2020, the Foreign Trade Zone Board announced Extension of Rebuttal Comment Period for Docket B-52-2020, Foreign-Trade Zone 38--Spartanburg County, South Carolina; Application for Production Authority; Teijin Carbon Fibers, Inc.

On August 13, 2020, the Foreign-Trade Zone Board published in the Federal Register (85 FR 49359) Foreign-Trade Zone 38-Spartanburg County, South Carolina; Application for Production Authority; Teijin Carbon Fibers, Inc. (Polyacrylonitrile-Based Carbon Fiber); Greenwood, South Carolina. [Docket 2020-52-B].

    Comments in support were filed by:

        Amplas Compounding
        Atlantic Precision Products
        Congressman Jim Banks (R., Ind., 3rd)
        Barrday Corp
        Collins Aerospace
        Continental Structual Plastics
        Congressman Jeff Duncan (R., S.C., 3rd)
        Congressman Chuck Fleischmann (R., Tenn., 3rd)
        Greenwood, S.C., Commissioners of Public Works
        Institute for Advanced Composites Manufacturing Innovation
        Congressman Robert Latta (R., Ohio, 5th)
        Metis Design
        Midwest Resins
        Nano-Engineered Composite aerospace STructures (NECST) Consortium
        NICCA
        Piedmont Technical College
        ready SC, a Div. of SC Tech. Col. Sys.
        Self Regional Healthcare
        Upper Savannah Workforce Development Division
        Vectorply 

    Comments in opposition were filed by:

        Congressman Mo Brooks (R., Alabama,5th), on behalf of Hexcel
        Hexcel
        Senator Doug Jones (D., Alabama), on behalf of Hexcel
        Congressman Daniel Meuser (R., Penn., 9th), on behalf of Hexcel
        Senator Richard Shelby (R., Alabama), on behalf of Hexcel
        USW Union, on behalf of Hecel 

Teijin originally filed in 2019 and was rebuffed by Hexcel, as have been other companies applying for carbon fiber Foreign-Trade Zones.

Carbon Fiber FTZ Comment Period Re-Opened

On December 17, 2020, the Foreign-Trade Zone Board published in the Federal Register (85 FR 81875) Foreign-Trade Zone (FTZ) 38— Spartanburg County, South Carolina, Application for Production Authority, Teijin Carbon Fibers, Inc. (Polyacrylonitrile-Based Carbon Fiber); Invitation for Public Comment on Rebuttal Submission.

This application was first filed in 2019 and has been opposed by Hexcel Corporation

Teijin Carbon Fibers, Inc. Foreign Trade Zone Application Extension of Rebuttal Comment Period

On October 29, 2020, the Foreign Trade Zone Board announced Extension of Rebuttal Comment Period for Docket B-52-2020, Foreign-Trade Zone 38--Spartanburg County, South Carolina; Application for Production Authority; Teijin Carbon Fibers, Inc.

The rebuttal period for the application for production authority within FTZ 38 on behalf of Teijin Carbon Fibers, Inc. in Greenwood, South Carolina, submitted by the South Carolina Ports Authority (85 FR 49359, August 13, 2020), is being extended based on a request from the applicant to November 10, 2020, to allow additional time for the submission of rebuttal comments.

Carbon Fiber FTZ Application Filed

On August 13, 2020, the Foreign-Trade Zone Board published in the Federal Register (85 FR 54837) Foreign-Trade Zone 38-Spartanburg County, South Carolina; Application for Production Authority; Teijin Carbon Fibers, Inc. (Polyacrylonitrile-Based Carbon Fiber); Greenwood, South Carolina. Teijin filed for FTZ benefits in 2019 and was opposed, as is typical for carbon fiber applications, was opposed by Hexcel Corporation. The FTZ Board granted FTZ benefits for export production only. Teijin now seeks to have that restriction lifted.

Carbon Fiber FTZ Approved for Export Only

On June 24, 2019, the Foreign-Trade Zone Board published in the Federal Register (84 FR 29496) Notification of Proposed Production Activity; Teijin Carbon Fibers, Inc. (Polyacrylonitrile-Based Carbon Fiber); Greenwood, South Carolina

Production under FTZ procedures will exempt TCF from customs duty payments on the foreign-status components used in export production. On its domestic sales, for the foreign-status materials/components noted below, TCF wanted to able to choose the duty rate during customs entry procedures that applies to carbon fiber (duty free).

On October 11, 2019, the Foreign-Trade Zone Board published in the Federal Register (84 FR 54837) Foreign-Trade Zone (FTZ) 38— Spartanburg County, South Carolina; Authorization of Limited Production Activity; Teijin Carbon Fibers, Inc. (Polyacrylonitrile-Based Carbon Fiber); Greenwood, South Carolina.

The Board authorized the production activity described in the notification on a limited basis, subject to a restriction requiring that all foreign status polyacrylonitrile (PAN) fiber admitted for production activity must bere-exported (entry for U.S. consumption was not authorized).

This is consistent with earlier FTZ filings relating to carbon fiber approved for export only.

Carbon Fiber FTZ Application Filed, Comments Dues August 5, 2019

On June 24, 2019, the Foreign-Trade Zone Board published in the Federal Register (84 FR 29496) Notification of Proposed Production Activity; Teijin Carbon Fibers, Inc. (Polyacrylonitrile-Based Carbon Fiber); Greenwood, South Carolina

The South Carolina State Ports Authority, grantee of FTZ 38, submitted a notification of proposed production activity to the FTZ Board on behalf of Teijin Carbon Fibers, Inc. (TCF), located in Greenwood, South Carolina. The notification conforming to the requirements of the regulations of the FTZ Board (15 CFR 400.22) was received on June 7, 2019.

The applicant indicates that it will be submitting a separate application for FTZ designation at the TCF facility (currently under construction) under FTZ 38. The facility will be used for the production of polyacrylonitrile-based (PAN) carbon fiber. Pursuant to 15 CFR 400.14(b), FTZ activity would be limited to the specific foreign-status materials and components and specific finished product described in the submitted notification (as described below) and subsequently authorized by the FTZ Board.

Production under FTZ procedures could exempt TCF from customs duty payments on the foreign-status components used in export production. On its domestic sales, for the foreign-status materials/components noted below, TCF would be able to choose the duty rate during customs entry procedures that applies to carbon fiber (duty free). TCF 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 components and materials sourced from abroad include sizing agent, spinning oil, 12,000 tow PAN precursor and 24,000 tow PAN precursor (duty rate ranges from 5.3% to 7.5%). The request 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 (19 CFR 146.41).

Recently Approved Carbon Fiber FTZ Demonstrates that Logistical Savings, with No Duty Savings, Can Justify Seeking FTZ Benefits

On March 30, 2017, SGL Automotive Carbon Fibers, LLC (SGLACF), submitted a notification of proposed revision to existing production authority to the Foreign-Trade Zone Board for its facility within FTZ 203--Site 3, in Moses Lake, Washington. The application related to the importation of polyacrylonitrile (PAN) fiber for use in the production of carbon fiber. Through the years there have been a few other carbon fiber FTZ applications. The U.S. producer Hexcel has always opposed and the applications have been approved, but with significant restrictions.

This time the applicant appears to have recognized the opposition from Hexcel would be a likely impediment and addressed it in the application by applying for FTZ benefits only for logistical reasons, not for duty savings. They even took the unusual step of not seeking tariff relief on the small portion of their imported PAN that becomes waste in the manufacturing process. In the application, SGLACF stated:

"[T]he purpose of this request is not for duty reduction purposes but for logistical recordkeeping purposes. Since the carbon fiber being produced in the zone that will be entered into the customs territory will have duties assessed at the rate applicable to the imported PAN (7.5%) there will be no duty reduction benefit. For example, in 2016 it took 2kg of PAN to produce 1kg of carbon fiber. If, in 2017, the ratio remains 2kg of PAN to make 1kg of carbon fiber and the cost of the PAN is $4.00 per kg, every kg of carbon fiber that will be entered into the customs territory will be valued at $8.00. Thus, every kg of PAN that will be used in the production of the carbon fiber to be entered into the customs territory will be subject to duty at 7.5%. SGLACF recognizes that there is a small amount of scrap that is generated during the process. For 2016, the scrap factor was slightly higher than 1%. SGLACF would add its scrap factor from the previous year to each entry of carbon fiber it files. For example, assuming a scrap factor for 2016 of 1%, if SGLACF files an entry in 2017 for 1,000kg of carbon fiber with a value of $8,000 (2,000kg of PAN, at $4 per kg, would be used in the production of the 1,000kg of carbon fiber), SGLACF would include on the entry an addition of 10kgs valued at $80 covering the scrap generated and it would be subject to duty at the 7.5% rate applicable to the PAN. Thus, the total amount of duty paid by SGLACF on the carbon fiber produced using privileged foreign status PAN should be virtually identical to the total amount of duty that would have been paid on the imported PAN when entered into the customs territory of the United States at the U.S. port of unlading prior to its use as imported duty-paid domestic status PAN in the production of carbon fiber."

They were successful in obtaining a letter from Hexcel stating that there was no objection to the application.

Yesterday the FTZ Board announced its approval of the application involving SGLACF's admission of all foreign-status status polyacrylonitrile (PAN) fiber in privileged foreign status (19 CFR 146.41). The proposed revision described in the notification was authorized, subject to the FTZ Act and the FTZ Board's regulations, including Section 400.14. For U.S. entry of carbon fiber produced in the FTZ, SGLACF will make duty payment at the polyacrylonitrile (PAN) fiber duty rate on the full value of PAN fiber introduced into the production process, including making duty payment at the PAN fiber duty rate on an estimated value of PAN fiber contained in scrap resulting from the production process (based on the actual percentage of scrap and the PAN to carbon fiber ratio from the preceding year's production).

Foreign-Trade Zone (FTZ) 203--Moses Lake, Washington, Proposed Revision to Production Authority, SGL Automotive Carbon Fibers, LLC, (Carbon Fiber), Moses Lake, Washington

SGL Automotive Carbon Fibers, LLC (SGLACF), operator of FTZ 203--Site 3, submitted a notification that proposes a revision to its existing production authority at its facility located in Moses Lake, Washington. The notification conforming to the requirements of the regulations of the FTZ Board (15 CFR 400.22) was received on March 30, 2017.

SGLACF previously requested and received FTZ Board approval for authority to produce carbon fiber from foreign-status polyacrylonitrile (PAN) fiber for export only within Site 3 of FTZ 203 (see FTZ Board Order 1889, 78 FR 16247, 3/14/2013). Under that existing authority, SGLACF must export all carbon fiber made from foreign-status PAN fiber. In the current request, SGLACF proposes to replace the export-only limitation pertaining to carbon fiber produced from foreign-status PAN fiber with a requirement for the company to admit all foreign-status PAN fiber (duty rate 7.5%) in privileged foreign (PF) status (19 CFR 146.41).

SGLACF's notification indicates the following: Production under FTZ procedures with the proposed PF status requirement for admission of foreign-status PAN fiber could exempt the company from customs duty payments on foreign-status PAN fiber used in export production. For SGLACF's domestic sales of carbon fiber, PF status would not allow the company to elect the carbon fiber duty rate (free) on the value of foreign-status PAN fiber used to produce the carbon fiber, thereby precluding inverted tariff savings. In addition, at the time of customs entry for each shipment of carbon fiber to the U.S. market, the company would apply the PAN fiber duty rate (7.5%) on an estimated value of PAN fiber contained in scrap resulting from the production process (based on the actual percentage of scrap from the preceding year's production). SGLACF's scrap rate was about 1% in 2016. The company is seeking these changes to its FTZ authority for ``logistical recordkeeping purposes.''

Public comment is invited from interested parties. Submissions shall be addressed to the FTZ Board's Executive Secretary at the address below. The closing period for their receipt is May 30, 2017.

Two Carbon Fiber Foreign Trade Zones Approved for Export Only

On December 15, 2014, the FTZ Board published notice in the Federal Register (79 FR 74063) Restricted Approval for Production Authority, Foreign-Trade Zone 143, Mitsubishi Rayon Carbon Fiber and Composites, Inc., Subzone 143D (Carbon Fiber); Sacramento, California, and Foreign-Trade Zone 83, Toray Carbon Fibers America, Inc. (Carbon Fiber); Decatur, Alabama.

Toray Carbon Fibers America, Inc. FTZ Application Re-Opened Due to New Evidence

An application has been submitted to the Foreign-Trade Zones Board by the Huntsville-Madison County Airport Authority, grantee of FTZ 83, requesting production authority on behalf of Toray Carbon Fibers America, Inc. (Toray), located in Decatur, Alabama. Toray is requesting authority to produce polyacrylonitrile (PAN) fiber and PAN-based carbon fiber under FTZ procedures. The Toray facility produces carbon fiber from both proprietary, domestically-produced PAN and foreign-sourced PAN.

On March 7, 2014, Toray made a submission to the FTZ Board that included new evidence in response to the examiner's preliminary recommendation for approval with a restriction requiring re-export of all foreign-status PAN. Public comment is invited on Toray's new evidence through April 21, 2014. Rebuttal comments may be submitted during the subsequent 15-day period, until May 5, 2014.

FTZ Application to Extend Production Authority at Mitsubishi's Carbon Fiber Facility in Sacramento

Production authority and subzone status were approved at the facilities of Mitsubishi Rayon Carbon Fiber and Composites, Inc. (MRCFC) for a period of five years, until May 7, 2014 (Board Order 1620, May 7, 2009; 74 FR 24798, 5/26/2009). The current application is requesting to extend indefinitely FTZ authority to produce carbon fiber from foreign-status polyacrylonitrile (PAN) precursor (B-54-2012, 77 FR 45575-44575, 8/1/2012).

On February 21, 2014, MRCFC made a submission to the FTZ Board that included new evidence in response to the examiner's preliminary recommendation for export only authority. Public comment is invited on MRCFC's new submission through April 3, 2014. Rebuttal comments may be submitted during the subsequent 15-day period, until April 18, 2014.

Reminder, Comments on Carbon Fiber FTZ Application are Due Monday, August 12th

An application has been submitted to the Foreign-Trade Zones Board by the Huntsville-Madison County Airport Authority, grantee of FTZ 83, requesting production authority on behalf of Toray Carbon Fibers America, Inc. (Toray), located in Decatur, Alabama. The application conforming to the requirements of the regulations of the FTZ Board (15 CFR 400.22) was received on May 30, 2013.

Production under FTZ procedures could exempt Toray from customs duty payments on the foreign materials used in export production. The company anticipates that some 15 to 20 percent of the plant's carbon fiber shipments will be exported, and some 5 to 10 percent of its PAN fiber production will be exported. On its domestic sales, Toray would be able to choose the duty rates during customs entry procedures that apply to its finished carbon fiber (duty free) for the foreign inputs noted below. (The PAN fiber produced at the plant has higher duty rates than any of its foreign-sourced components.) Toray would also be exempt from duty payments on any foreign-origin materials that become scrap or waste during production. Customs duties also could possibly be deferred or reduced on foreign status production equipment.

Public comment is invited from interested parties. Submissions shall be addressed to the FTZ Board's Executive Secretary at the address below. The closing period for their receipt is August 12, 2013. For more information see my earlier blog post here.