Republican House Member Cool to Senate FTZ Bill

Rep. Jodey Arrington, a Republican on the Ways and Means Committee, was cool to fellow Texas delegation member Sen. John Cornyn's proposal to study the possibility of allowing goods made in foreign-trade zones to be considered originating under USMCA.

For a few months last year, goods produced in FTZs avoided taxes on all inputs if the finished good met USMCA rule of origin. But with the passage of the USMCA technical fixes, manufacturers operating in FTZs again had to pay tariffs on the foreign inputs that come from countries other than Canada and Mexico, though they can potentially save money compared with traditional domestic manufacturing if the finished product has a lower tariff than the inputs. Cornyn (R) says that the Congressional Budget Office estimated that shift will cost manufacturers $2 billion over 10 years, and he wants a study to see if it puts FTZ manufacturing at a disadvantage to Canadian and Mexican exporters.

That bill (see 2106290024) does not yet have a House companion. When asked if he would be interested in such a bill, Arrington said July 1, "I’d have to look at that more." He said he is for free trade, but at the same time, wants to make sure "we are incentivizing North American production." He said it is nuanced, so he'd have to look at the details of Cornyn's bill. He said it's better for U.S. manufacturing to use components from North America as opposed to importing from China. He says that the Section 301 taxes -- which still apply to FTZ inputs -- neutralize the massive subsidies and other distortions China makes to its economy. He said those tariffs are meant to incentivize companies to choose suppliers outside China. "I understand the reason for those taxes and I support them in principle," he said during a brief phone interview.