Tesla’s Texas Megapack Factory Gets Trade Zone Status, but China Tariffs Remain

Tesla’s Megapack factory in Brookshire, Texas, has been approved as a foreign-trade zone, allowing the company to defer certain duties on imported components. The Foreign-Trade Zones Board’s decision was published in the Federal Register on Monday and authorizes production on a limited basis for 14 months.

The approval does not exempt Tesla from tariffs on components covered by Sections 301, 232 or 122. Under the terms described in Tesla’s application, those goods must enter the zone in “privileged foreign status,” which preserves their tariff classification and treatment. Chinese lithium iron phosphate (LFP) cells used in Megapacks sold in the United States would therefore still face the applicable Section 301 tariff; payment is deferred until the finished product leaves the zone.

Tesla applied on May 20 to establish Subzone 84AM, part of Foreign-Trade Zone 84 in the Houston area. Its application lists about 80 imported components, including battery cells, transformers, coolant pumps, wiring harnesses and circuit boards. Duties on listed parts can reach 6.5%, while rates for finished Megapacks and Bento inverters range from zero to 3.4%.

Foreign-trade zone procedures can let manufacturers pay the lower rate applicable to a finished product instead of the rate on each imported part, where the rules allow. Tesla’s approval can also defer duties until products leave the zone, eliminate US duties on Megapacks exported directly from it, and reduce customs filings. It does not remove tariffs that apply to specific imported components.

The approval’s 14-month limit is similar to time-restricted decisions issued to other manufacturers in 2026. Tesla also received limited-term authorizations for Megapack and inverter production at facilities in California. The Brookshire factory began Megapack 3 production in August and is planned to reach annual capacity of 50 GWh.

The tariff issue is significant because Tesla has said its energy-storage business relies on LFP cells from China. The company has started operating an LFP cell factory in Nevada, but Tesla’s CFO has said its output would cover only a fraction of the company’s installed capacity. Brookshire is planned for 50 GWh a year, in addition to the 40 GWh Lathrop factory in California.

Sources: Electrek.