In a peculiar decision just before Christmas, presumably timed so nobody would notice it, the U.S. Department of Commerce’s Foreign Trade Zones Board issued a finding that says that exporters manufacturing in an FTZ cannot use foreign-source products if they are subject to U.S. anti-dumping or countervailing duties.
Foreign Trade Zones serve many purposes, but one is to provide a means for U.S. manufacturers to make goods for export without the cost of paying duties on imported components since they will be leaving the country again. They do pay duties if the end product is sold in the United States. A decision to disallow foreign inputs because they must pay additional penalty duties is bizarre. Goods used for manufacturing within an FTZ or an FTZ subzone do not legally enter the United States so duties applied upon entry should not be applied.
It also doesn’t make economic or commercial sense. Products made in an FTZ do not compete in the U.S. market (which countervailing and anti-dumping duties are meant to protect) and – if other countries wish to artificially lower prices via subsidies or predatory pricing – why shouldn’t our exporters be allowed to take advantage of the situation?
So why was the decision made? I smell politics. The inputs in question are silicon metals for which the U.S. price has been rising. A silicon metals production facility was recently opened in New York to take advantage of the higher prices, but they are afraid of anything that might reduce U.S. demand, such as lower-priced foreign silicon metals being used in an FTZ to produce U.S. exports. One wonders if New York’s Congressional delegation had anything to do with this decision?
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