The Chattanooga Area Chamber of Commerce has been notified that the Foreign-Trade Zones (FTZ) Board has terminated the chamber's application for Temporary/Interim Manufacturing Authority made on behalf of Volkswagen Group of America Chattanooga Operations, LLC.
The termination results from a letter of opposition filed by the United Auto Workers (UAW).
Despite the termination of the temporary FTZ application, the process for receiving permanent manufacturing authority is underway, and no significant obstacles to its approval are expected, Chamber officials said.
"This is only a bump in the road," said Tom Edd Wilson, president and CEO of the Chattanooga Area Chamber of Commerce. "The temporary authorization is a fast-track process that is automatically terminated when anyone objects for any reason. We have already applied for permanent authority and anticipate receiving approval around February with no impact on Volkswagen's plans in Chattanooga."
The Foreign-Trade Zone (FTZ) application is a two-step process requiring that a company obtain FTZ status from the Foreign-Trade Zones Board, and then be activated for day-to-day operations by U.S. Customs and Border Protection. This approval process generally takes eight months. However, a Temporary/Interim Manufacturing Request allows companies to obtain manufacturing authority in as little as 75 days.
One of the conditions for obtaining this expedited approval is that the request must be "non-controversial." Because a request for Temporary/Interim Manufacturing authority does not involve a full investigative process, any negative comment filed with the FTZ Board renders the request "controversial," regardless of whether the comment has merit. As a result, the UAW letter of objection to Volkswagen's Temporary/Interim Manufacturing Authority request (TIM) served to terminate the process, it was stated.
Since there is no examination of the merits of the claims in such a letter, there is no chance for rebuttal or comment.
In its letter of opposition, the UAW acknowledges that Volkswagen's Chattanooga plant will employ 2,000 people and produce 150,000 vehicles annually with the potential for expanded capacity of 300,000 vehicles. The union goes on to claim that the Chattanooga project's application for a temporary FTZ manufacturing authority would place domestic auto manufacturers and suppliers at a competitive disadvantage.
According to Douglas S. Meyer, deputy director international and government affairs for the UAW, who wrote the letter, ï¿½Any potential increase in income and employment in Chattanooga resulting from such authority would come at the greater expense of lost income and employment elsewhere in the domestic economy.ï¿½
As the union also acknowledges in its opposition, Foreign-Trade Zones are a standard part of doing business for both domestic and foreign auto makers with manufacturing operations in the United States. Toyota, Nissan, BMW, Daimler, and Hyundai have been approved for permanent Foreign-Trade Zone manufacturing authority and Chrysler, Ford and GM have registered Foreign-Trade Zones in 14 states, according to the union.
"One of the assets that attracted Volkswagen to Tennessee was our commitment to working with the company to establish Foreign Trade Zone designation," said Matt Kisber, commissioner, Tennessee Department of Economic and Community Development.
"It's important for Tennessee to live up to its commitments in attracting new industry, and we are working with Volkswagen to achieve the level playing field that a Foreign Trade Zone provides."
Mr. Wilson said, "Every other auto company with operations in America has access to Foreign-Trade Zone authority. It's only fair that Volkswagen would be allowed to operate under the same conditions."
According to Craig Pool of Foreign-Trade Zone Corporation, the consultant which manages the Chattanooga area's Foreign-Trade Zone on behalf of the Chattanooga Chamber, Foreign-Trade Zones have a very positive economic impact for America. "The Foreign-Trade Zone status encourages companies to manufacture within the United States rather than producing goods elsewhere," Mr. Pool said. "The program has been incredibly successful at enhancing domestic economic activity. For example, total zone related activity is approximately $500 billion per year. For automobile manufacturers, Foreign-Trade Zone status is part of what justifies making automobiles in the United States. U.S.-based automobile production is vitally important for U.S.-based automobile parts producers as well."
UAW's letter of opposition on the Foreign-Trade Zone
Fast Facts about Volkswagen's Chattanooga Project from the Chamber:
- Volkswagen anticipates North American companies will provide 75% of the parts and components by value that make up the sedan it will build in Chattanooga.
- The University of Tennessee estimates that each year Volkswagenï¿½s operations will result in more than $500 million in new payroll for Chattanooga area workers. By contrast, Foreign-Trade Zone status has the potential to save Volkswagen about $1.9 million annually.
- Total Foreign-Trade Zone activity in the United States is approximately $500 billion annually.