05xx19 St. James Industrial Facilities.jpg

New and existing industrial facilities in St. James Parish's industrial corridor.

VACHERIE — Wanhua Chemical's bid to build a $1.25 billion chemical plant in Convent hit delays Wednesday after the company's plans to seek exemptions to federal trade tariffs recently came to light and temporarily clouded the previously assumed local tax benefits for the new facility.

The St. James Parish Council agreed unanimously Wednesday to send a key land use approval for the plastics' plant back to the parish Planning Commission after the new questions about a proposed Foreign Trade Zone for the proposed 250-acre complex.

The delay came as environmental groups and some local residents also questioned whether the company provided sufficient and accurate information about the potential health risks from the facility, including from any catastrophic release of deadly phosgene gas, on communities within a mile of the plant site.

There were also several people at the meeting who work in the chemical industry and urged the council to approve the project.

Wanhua Chemical expects to produce 400 kilo tons of methylene diphenyl diisocyanate at the new plant, a chemical used to produce polyurethane products such as foam for cushioning or insulation. 

Victor Franckiewicz Jr., one of the parish's attorneys, said in an interview that the zone, if granted by a federal board, not only exempts the company from the 25% tariffs but also can exempt the company from local inventory taxes and even sales tax collections. 

The Wanhua project has already been granted the 10-year, 100 percent state property tax exemption that existed before reforms under Gov. John Bel Edwards lessened the value of those tax breaks.  

Local inventory taxes, which are charged on major stores of chemicals and other materials but rebated up 75 percent by the state, are often seen as a consolation for local governments that lose out on property taxes under the industrial tax exemption. 

The pending trade zone application came to light on June 18, about a month after the Planning Commission approved the land use for the plant, when the Port of South Louisiana sent parish officials a letter informing them of the pending application.

The land use process requires the commission to weigh economic impact versus environmental and other factors.

The Tulane Environmental Law Clinic, which is representing community and environmental groups opposed to the plant, had appealed the commission’s land use approval of the plant before the Foreign Trade Zone came to light.

Lisa Jordan, director of the clinic, pointed out to the council Wednesday that had the land use not been appealed, the commission’s vote for it on May 20 would have been final.

She asked the council members “how much leverage” would the council and commission now have in the negotiations on the pending tax agreement had the land use approval gone through unchallenged.

While the land use application heads back to the commission probably in late August, the parish and Wanhua are working on an agreement in which the company will commit to pay the sales and inventory taxes that will include a waiver of any sovereign immunity, officials said. 

The Chinese government has an interest in the company's publicly traded parent through subsidiaries.

In an interview, James Newport, general manager of Wanhua Chemical U.S. Operations, said the company would not seek breaks on sales or inventory taxes. In a June 18 letter to parish, Alex Liu, chief executive officer of Wanhua Chemical's U.S. operations, regretted any miscommunication with the parish about the trade zone.  

Newport said he didn't even know the company was seeking the zone but it was being done by a different arm of the U.S. operations from those handling other aspects of the operation.

Still Newport said the permit delay would not affect the company's schedule to open the plant in late 2021.

The company projected previously that it would begin construction in February and wrap up in October 2021 but has yet to break ground pending local permits. 

Wanhua plans to sell its products in the North American market and, in November 2018, requested more than 50 exclusions from tariffs from the U.S. Trade Representative's office on Chinese products — approval of which the business described as critical to the success of the project — otherwise it would be forced to abandon its plants. 

As of July 19, only 11 of those requests have been granted by the the U.S. Trade Representative's office. Four of the company's exclusion requests have been denied by the U.S. government. The majority of the remaining requests are in Stage 3, which refers to administrative review and means the final decision has not yet been made. 

Wanhua expects to import chemical feed stocks that are subject to tariffs against China as part of its operation, according to the company. 

Wanhua previously indicated it was reevaluating the entire project last year when the 25% tariffs were initially introduced by the Trump Administration.

Since then, Wanhua applied for the Foreign Trade Zone inside the Port of South Louisiana. The port gave its initial support of an application from its board of directors on July 10.

"We've never denied (a foreign trade zone) application," Paul Aucoin, executive director at the Port of South Louisiana, said in an interview. 

Wanhua's plant would potentially be in a Foreign Trade subzone, which would enable the company not to pay tariffs for goods produced in Louisiana before export. That process could take several months before it's approved by U.S. Customs and Border Protection and there is a public comment period. 

Wanhua declined to disclose any subcontracting information when asked about whether businesses in Louisiana have been working on the project. 


Email David J. Mitchell at dmitchell@theadvocate.com

Follow David J. Mitchell on Twitter, @NewsieDave.