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FTZ Subzone Sought for Electric Car Factories in California

Monday, January 16, 2012
Sandler, Travis & Rosenberg Trade Report

The Foreign-Trade Zones Board has received an application from the City of San Jose, Calif., grantee of FTZ 18, requesting special purpose subzone status for the electric passenger-vehicle manufacturing facilities of Tesla Motors Inc. in Palo Alto and Fremont, Calif. These facilities are used to manufacture electric passenger vehicles and related components, including battery packs, powertrain systems, and electronic modules (up to 200,000 units of each per year), for commercial sale.

FTZ procedures could exempt Tesla from customs duty payments on the foreign components used in export production, and the company anticipates that 40-65% of the facilities’ shipments will be exported. On its domestic sales, Tesla would be able to choose the duty rates that apply to finished electric passenger vehicles, battery packs, powertrain components and electronic modules (zero to 3.4%) for foreign inputs. FTZ designation would further allow Tesla to realize logistical benefits through the use of weekly customs entry procedures, possibly defer or reduce customs duties on foreign status production equipment, and obtain a duty exemption on foreign inputs that become scrap during the production process.

Comments on this request are due no later than March 19.

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