An advanced materials manufacturer serving the semiconductor industry in Kyle could see significant annual tariff savings after a City Council vote April 7.
The overview
ENF (Kyle) Technology LLC has an active application to designate its Kyle facility, established in 2018, as a Foreign Trade Zone, according to agenda documents. At an April 7 meeting, the City Council approved a letter of no objection in support of the company’s application.
An FTZ is a federally approved area under the U.S. Customs and Border Protection’s supervision but considered outside of the department’s territory. Companies established as an FTZ can import goods without needing to pay tariffs or federal duties until goods enter the U.S. market. Exports from the zone are not taxed.
If granted the FTZ distinction, ENF would not be exempt from normal city or county taxation, according to agenda documents.
An FTZ designation would save the company approximately $300,000 in tariff duties each year, according to agenda documents, depending on factors including:
- Volume of imports
- Mix of products
- Tariff rates
- Overall production at the facility
Diving deeper
ENF has invested heavily in machinery and equipment at the Kyle site, according to agenda documents. The company has the opportunity to expand within the region’s growing semiconductor supply chain.
If approved, the company’s FTZ participation could reduce local inventory-related property tax revenues to the city. City staff proposed a Payment in Lieu of Taxes, or PILOT, agreement to ensure Kyle does not lose property tax revenue.
The proposed PILOT agreement would have required the company to make annual payments to the city equivalent to what would have been owed in inventory property taxes if not for the FTZ distinction.
The City Council voted to allow PILOT agreement negotiations between the city and ENF.
The agreement will be brought to the council for final review and approval at a future meeting.
