Tesla’s Texas Megapack factory won foreign-trade zone status, but China tariffs still apply

Tesla’s Megapack factory in Brookshire, Texas, now holds foreign-trade zone status, and the grant comes with a fourteen-month clock. Foreign-Trade Zones Board Order B-60-2026, published Nov. 2, 2026, authorizes production of battery storage products inside Subzone 84AM on what the order calls a limited basis. The approval defers some import duties. By Electrek’s reading of the notice, it leaves the Section 301 duty on Chinese battery cells in place, so China tariffs still apply.

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Tesla asked for the status on May 20, 2026. The Commerce Department told the company on Oct. 28 that no further review of the activity was warranted at this time.

Board Order B-60-2026 and Subzone 84AM

The Federal Register notice lists Tesla, Inc. as the applicant for production of battery storage products and components at a facility in Subzone 84AM, part of Foreign-Trade Zone 84 in the Houston area. Colin Agostisi, executive secretary of the Foreign-Trade Zones Board, signed it. The authorization is granted under the FTZ Act and section 400.14 of the Board’s rules, on a limited basis and subject to a fourteen-month period. Electrek’s Fred Lambert counts that clock as running out around the end of 2027.

The June 8 application notice describes the request. Megapacks and Bento inverters are the finished products, with duty rates from free to 3.4 percent, and a long list of imported inputs carries rates from free to 6.5 percent. The inputs include battery cells, busbars, wiring harnesses, power transformers, centrifugal coolant pumps, static inverters and printed circuit boards. Electrek puts the count at roughly 80 components, and a summary of the filing on PolicyRisk confirms the Brookshire site and the Megapack and inverter scope.

Privileged foreign status and the Section 301 bill

Tesla’s request was published for comment on June 8, 2026, and the 91 Federal Register citation for that notice is page 34602. It sought zone treatment for Megapacks and Bento inverters, and the approval followed about five months later. The application notice states that some materials are subject to duties under Section 122, Section 232 or Section 301 depending on country of origin, and that such decisions require admission to the zone in privileged foreign status. Privileged foreign status fixes a part’s tariff treatment at the moment it enters the zone. As Electrek lays it out, a Chinese lithium iron phosphate cell inside a Megapack sold in the U.S. still draws the Section 301 duty on Chinese non-EV lithium-ion batteries, which Electrek says rose from 7.5 percent to 25 percent on Jan. 1, 2026. Tesla pays it when the finished product leaves the zone.

The status changes when duties are paid, not whether China-origin cells carry them.

What Tesla does gain, per Electrek, is deferral of duty payments during the production ramp, no U.S. duty on Megapacks exported straight from the zone, the lower finished-product rate on parts not caught by China, steel or other special tariffs, and no duty on scrap. Eastman Chemical, Rose Batteries and Qorvo received similar limited-basis, time-limited approvals this year, and Tesla’s California sites at Fremont, Livermore and Lathrop got an identical decision with a one-year limit in August.

The arithmetic of the benefit comes from the gap between input and output rates. Normally a company operating inside a zone can pay the lower finished-product rate in place of the rate on each imported part; with inputs running up to 6.5 percent and finished Megapacks and inverters between free and 3.4 percent, that gap is where the savings sit for parts without special tariffs. Electrek adds that the Brookshire plant began Megapack 3 production in August 2026 and is designed for 50 GWh a year, on top of 40 GWh at Lathrop, so the deferred duties apply to a very large parts flow.

Megapack 3 output and the China cell exposure

Energy-Storage.News reported that Megapack 3 production has begun at Brookshire, with 50 GWh of annual capacity planned and deliveries expected toward the end of 2026. Each Megapack 3 stores 5 MWh, against 3.9 MWh for the Megapack 2 XL, in the same footprint. Each unit is rated at 2.5 MW, designed for up to eight hours of duration, with 92.5 percent round-trip efficiency and at least 10,000 cycles, and the report puts the price near $1.39 million per unit. For scale, it says the Lathrop, California, and Shanghai plants each produce around 40 GWh a year. The same report says Tesla’s main cell supply still comes from China and Southeast Asia, which leaves it exposed to tariffs and to foreign-entity content rules requiring at least 55 percent domestic content by cost in 2026.

Tesla’s own finance chief has described the exposure. Vaibhav Taneja said in April 2025, as Electrek recounts, that tariffs would hit the energy storage business harder than most because Tesla sources lithium iron phosphate cells from China, and that its Nevada cell plant would cover only a fraction of installed capacity.

The longer fix is domestic supply. LG Energy Solution is expected to ship LFP cells from Michigan for Megapack 3 under a $4.3 billion contract, with mass production expected in the second half of 2027. That lands close to the end of the fourteen-month authorization, and no source read this run says whether Tesla will seek an extension.

This article was produced with the assistance of AI and reviewed by Morning Overview editors prior to publication.

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