DEPARTMENT OF THE TREASURY
Customs Service
AGENCY: U.S. Customs Service, Treasury.
19 CFR PARTS 18, 24, 112, 141, 144, 146, and 191
Foreign Trade Zones; Proposed Specialized and General
Provisions
49 FR 28855
July 17, 1984
ACTION: Proposed revision.
SUMMARY: This proposed revision of the Customs Regulations relating to
foreign-trade zones is undertaken essentially to incorporate a new
audit-inspection method of zone supervision by Customs into those
regulations. A foreign-trade zone is a defined area, considered to be
outside the customs territory of the United States, where certain lawful
activities can be conducted with a minimum of formalities. A zone provides
a site at or adjacent to a Customs port of entry where operations
involving foreign merchandise can take place which otherwise might have
been done abroad for tariff and trade reasons. The proposed revision
sets forth the general provisions applicable to the administration of all
zones and other specialized provisions applicable to subzones and
noncontiguous zone sites. In addition, changes in the language of the
regulations are proposed to clarify some provisions, eliminate
inconsistencies, and conform the Customs Regulations to current
administrative practices.
DATE: Comments must be received on or before October 15, 1984.
ADDRESSES: Written comments (preferably in triplicate) may be addressed
to the Commissioner of Customs, Attention: Regulations Control Branch,
U.S. Customs Service, 1301 Constitution Avenue, NW., Washington, D.C.
20229. Comments relating to the information collection aspects of the
proposal should be addressed to the Office of Information and Regulatory
Affairs, Office of Management and Budget, Washington, D.C. 20503,
Attention: Desk Officer for the U.S. Customs Service, as well as to the
Commissioner of Customs, as noted above.
FOR FURTHER INFORMATION CONTACT:
General operational aspects: John Holl or Louis Razzino (202-566-8151).
Inventory control and recordkeeping system aspect: Marcus Sircus
(202-566-2812).
Appraisement and valuation aspect: Myles Flynn (202-566-5307).
Liquidated damages, penalty and suspension aspect: William Lawlor
(202-566-5856).
Economic aspect: Daniel Norman (202-566-5307).
All of the above Customs personnel are located at: U.S. Customs Service
Headquarters, 1301 Constitution Avenue, NW., Washington, D.C. 20229.
TEXT: SUPPLEMENTARY INFORMATION:
Background
Although free trade is an ancient concept, free trade zones did not
develop until the 19th century. The success of free trade zones in
northern Europe, notably the "free port" of Hamburg, stimulated American
interest in the concept and in establishing free trade zones.
In 1934, Congress enacted the Foreign-Trade Zones Act "to expedite and
encourage foreign commerce." The Act created domestic "foreign-trade
zones", and was designed to stimulate international trade and create jobs
in the United States. At that time, zones were envisioned as storage,
manipulation, and transshipment (exportation) centers. In 1950, an
emendment to the Act was passed authorizing manufacturing and exhibition
inside zones.
Foreign-trade zones (zones) are areas within the United States (but
outside of the "Customs territory" of the United States, as defined in
@ 146.1, Customs Regulations (19 CFR 146.1)), where foreign or domestic
merchandise may be brought for manipulation, manufacture, assembly or
other processing, or for storage or exhibition, provided that these
operations are not otherwise prohibited by law. Foreign merchandise may
be brought into a zone without being subject to the usual Customs entry
procedures and payment of duty. Foreign or domestic merchandise may be
exported or entered into the Customs territory from a zone. Quota
restrictions do not normally apply to foreign merchandise in a zone.
Merchandise moved to a zone for export may be considered exported upon
its admission to a zone for purposes of excise tax rebates and drawback.
Zones are established under the Foreign-Trade Zones Act of 1934, as
amended (19 U.S.C 81a-81u), and the general regulations and rules of
procedure of the Foreign-Trade Zones Board (the Board), Department of
Commerce (15 CFR Part 400). Part 146, Customs Regulations (19 CFR Part
146), governs the admission of merchandise into a zone; the manipulation,
manufacture, or exhibition in a zone; the exportation of merchandise from
a zone; and the transfer of merchandise from a zone into the Customs
territory.
Typically, a foreign-trade zone is a fenced-in area with a general
warehouse type building or buildings and access to all modes of
transportation. Space is available for leasing to firms for authorized
zone activity. Some zones have industrial park characteristics or are
located within such facilities and have lots on which zone users can
construct their own facilities. Subzones are sites authorized by the board
through zone grantees for operations by individual firms when zone
procedures are vital for an operation that is in the public interest but
cannot be accompanied within an existing zone.
Between 1934 and 1970, just 12 zones were approved by the Board. At
this time, there are 97 zones approved, of which 56 are in operation. In
addition, there are about 30 subzones approved, of which 24 are in
operation. There are pending with the Board at least 12 applications for
zone approval. It has been estimated that the volume of business in zones
has multiplied 50 times during the decade 1970-1980, with zones now
handling about $3.5 billion worth of merchandise each year.
As can be appreciated from the foregoing, the number of zones and the
operations conducted therein have increased tremendously in recent years.
Historically, Customs has administered zones and their operations by the
physical presence of Customs officers at the various zone locations.
However, as time has passed, Customs staffing available to supervise
zones has declined while zones have continued to proliferate. This has
resulted in delays in the approval or activation of a given zone, and
has presented problems for Customs in the exercise of effective control
over some zone operations, especially subzone manufacturing activities.
Therefore, Customs undertook an effort to devise a method to reduce
Customs staffing requirements in zones and other areas (notably bonded
warehouses) without endangering the revenue or law enforcement priorities,
while also not hampering the growth of those areas and not impeding
commerce.
The "audit-inspection" program approach to administration of those
areas of Customs responsibility, which de-emphasizes the physical
presence of a Customs officer to supervise each transaction, was
successfully implemented in regard to the operation of bonded warehouses
(see Treasury Decision 82-204, published in the Federal Register on
November 1, 1982 (47 49355)). This notice proposes to extend the audit-
inspection program, by regulation, to zones as a method of reducing
Customs staffing commitment to those operations. The audit-inspection
method no longer requires a Customs officer to be physically present to
supervise the admission of merchandise into or removal of merchandise
from a zone. The zone operator, on the other hand, has increased
responsibilities for supervision, recordkeeping and other responsibilities
under its bond, and must pay an activation and annual reimbursement fee.
Customs will verify operator compliance with regulatory and other
requirements through selective merchandise examination, and other spot
checks and audits. It should be noted that Customs initiated use of the
audit-inspection method in August 1983, on the basis of voluntary
agreements between Customs and zone operators. At present, four subzones
and one general-purpose zone have entered into voluntary agreements to
use the audit-inspection method to administer their operations. Customs
has endeavored to take that limited experience under the audit-inspection
method applied to zones into account in preparing this revision.
This proposed revision is part of the on-going general revision of the
Customs Regulations and would amend Chapter I, title 19, Code of Federal
Regulations, by removing the text of present Part 146 and adding a new
Part 146.
Proposed Part 146 sets forth the general regulatory provisions
applicable to the administration of foreign-trade zones. Substantive
changes have been made in proposed Part 146. That part will follow the
same basic format as the current Part 146, but will contain changes in or
additions to language to clarify the current provisions that have been
retained in the revision.
Proposed (revised) Part 146 is divided into seven subparts. Following
is a summary discussion of the major new changes in each of those subparts.
A general point needs to be made here; that wherever the word "days"
appears in this revision, it means calendar days, unless "working days"
is specified.
Subpart A -- General Provisions
1. Proposed @ 146.1 defines the primary terms used throughout the
revision. Some of the terms are new and some follow the definitions
contained in a notice of proposed rulemaking on zones issued by the
Foreign-Trade Zones Board, and published in the Federal Register on
February 18, 1983 (48 FR 7188). They are:
a. Activation.
b. Alteration.
c. Deactivation.
d. Conditionally admissible merchandise.
e. Prohibited article.
f. Operator.
g. Reactivation.
h. Subzone.
2. Proposed @ 146.3(b) states the scope of Customs supervision
exercised at a zone. That supervision may be physical, at the discretion
of the district director. However, normal Customs supervision is
envisioned to involve selective merchandise examination, other spot
checks and audits.
3. Proposed @ 146.4 describes the increased supervisory
responsibilities of the operator over zone merchandise and for
recordkeeping. That section also allows the operator to provide, or
contract for, private guard service to protect the revenue.
4. Proposed @ 146.5 provides that the operator or grantee of a zone
will be charged a nonrefundable fee for activation of a zone or any
portion thereof, or to alter or relocate a zone. Moreover, the operator
of a zone will be charged a nonrefundable annual fee for each activated
zone as payment for the cost of additional Customs service required by
law. The fee schedule would be revised annually and published in the
Customs Bulletin and the Federal Register. Examples of fees established
for 1983 and 1984 under the voluntary audit-inspection program are:
Activation
1. General-Purpose Zone -- $1,020.
2. Subzone or noncontiguous zone site -- $1,960.
Alteration -- $360 per site.
Annual
1. Small zone (under $10 million volume) -- $2,600.
2. Large zone (over $10 million volume) -- $7,600.
A special fee for certain large subzones is tailored to each according
to its size and other characteristics. Examples of the calculation of
activation and alteration fees, and annual fees are included in this
document as Appendices A and B, respectively. Those examples are taken
from guidelines prepared by Customs as part of the voluntary audit-
inspection program method and the acceptance by operators of the
agreements corresponding to that program.
5. Proposed @ 146.6 establishes the procedure for activation of a
zone, including the required application, and actual activation.
6. Proposes @ 146.7 describes the procedures to be followed when the
following zone changes occur:
a. Boundary modification.
b. Alteration of an activated area.
c. Deactivation or reactivation.
d. Suspension of all or part of an activated area.
e. New bond required by district director.
f. New operator.
g. Demand by district director for list of zone officers, employees,
and other persons.
7. Proposed @ 146.8 authorizes the operator to affix or break a
Customs seal on a vehicle or container arriving at or leaving a zone. That
section also obligates the operator to notify the district director of
any broken, missing, or improperly affixed seal.
8. Proposed @ 146.9 allows the operator to grant permission for zone
operations, rather than the grantee. This conforms the regulations to
current practice.
9. Proposed @ 146.13 establishes the procedure necessary for an
operator of a subzone or a noncontiguous zone site to follow if that
operator wants to: (1) Self-verify the quantity of merchandise admitted
to the zone, and (2) accept responsibility for supervision of removal of
zone merchandise on entries for consumption, transportation, or
transportation and exportation. This section details the application
procedure, including the criteria the district director will consider
before a decision on the operator's application. As this section qualifies
an operator to use maximum flexibility and independence in its activities,
and is cross-referenced to other proposed sections which offer radical
departures from current zone administration, it is recommended for
especially close consideration by commenters.
10. Proposed @ 146.14 states the conditions necessary to be met before
certain domestic status merchandise may be admitted to a zone without
prior application and permit for each shipment.
11. Proposed @ 146.15 describes the procedure to be followed when
merchandise from a subzone more than 35 miles from the limits of an
adjacent port of entry is to be admitted to or removed from the subzone.
Liquidated damages are prescribed for losses.
12. Proposed @ 146.16 allows an operator to apply to the district
director for permission to have zone merchandise examined not at the
zone, but at another place within the limits of the port where the zone
is located.
13. Proposed @ 146.17 specifies that records required by this revision
be retained at the zone for at least 5 years after the date of entry of
the subject merchandise that is removed from the zone.
Subpart B -- Inventory Control and Recordkeeping System
This proposed subpart is entirely new. It is essential to the audit-
inspection method of zone supervision, and given the greatly increased
operator responsibility for recordkeeping, it should be carefully studied
by commenters.
1. Proposed @ 146.21 sets forth the general requirements for an
inventory control and recordkeeping system, including the system
capability, procedures manual, and the responsibility of the operator to
ensure that its system meets regulatory requirements. Customs will not
approve or disapprove a system.
2. Proposed @ 146.22 provides the system requirements for admission of
merchandise to a zone.
3. Proposed @ 146.23 provides the system requirements for basic
accountability of merchandise in a zone.
4. Proposed @ 146.24 provides the system requirements for removal of
merchandies from a zone.
5. Proposed @ 146.25 provides the requirement for an annual
reconciliation prepared by the operator along with its certification that
the reconciliation is accurate, and available for review by Customs.
6. Proposed @ 146.26 states the operator's obligation to perform an
annual internal review of its system and to notify Customs of any
deficiency discovered and corrective action taken.
Subpart C -- Admission of Merchandise to a Zone
1. Proposed @ 146.31 describes merchandise permitted in a zone, and
differentiates between a prohibited article (not permitted) and
conditionally admissible merchandise (permitted under condition).
2. Proposed @ 146.32(b)(1) requires that among the supporting documents
to be filed with an application for admission of merchandise to a zone,
the operator shall submit two copies of an invoice or similar commercial
document.
3. Proposed @ 146.32(b)(5) authorizes the district director to require
any additional information or documentation needed to conduct an
examination of merchandise to be admitted, or to determine the
admissibility of that merchandise.
4. Proposed @ 146.32(c)(3) states that one of the conditions for
issuance of a permit for admission of merchandise to a zone is that the
merchandise be retained for examination at the place of unlading, the
zone, or other place designated by the district director, except where
direct delivery to a subzone or zone site is authorized.
5. Proposed @ 146.32(d) provides for a blanket application for
admission of merchandise to a zone (rather than a separate application of
each admission), when certain specified criteria are met.
6. Proposed @ 146.35 allows for the temporary deposit of merchandise
in a zone for 5 working days, upon approval of an application by the
district director, when documentation is incomplete. However, certain
conditions specified in that section must be met, and the operator must
submit complete documentation to Customs within the 5-working day period
of temporary deposit.
7. Proposed @ 146.36 reserves to Customs the right to examine any
merchandise at the place of unlading, the zone, or other place designated
by the district director. However, the section also states that the
district director may authorize release of the merchandise without
examination.
8. Proposed @ 146.37 describes the responsibility of the operator for
the maintenance of admission documentation, its liability for the receipt
of merchandise, and its duty to supervise the receipt of merchandise into
the zone (when authorized by the district director).
9. Proposed @ 146.38 provides that Customs will now authorize for
delivery of merchandise in lieu of certifying arrival of merchandise at
a zone.
10. Proposed @ 146.39 states that once the district director has
approved a blanket application for the admission of certain domestic
status merchandise, no other application for admission of that
merchandise will be accepted. For domestic status merchandise not covered
by an approved application for blanket admission, an application for
each admission will be required on Customs Form 214.
11. Proposed @ 146.40 sets forth the special procedures for admission
of merchandise to a subzone or noncontiguous zone site. The district
director may allow the direct delivery of merchandise without prior
application or approval of Customs Form 214 and without Customs
examination, if the operator qualifies uder proposed @ 146.13. The
operator handles the arrival of the merchandise on the conveyance,
completing the documentation formalities and notifying the district
director of any irregularities. The operator has its option of filing
either a cumulative Customs Form 214 for merchandise received each
business day, or an individual Customs Form 214 for each shipment received
on a given business day. Merchandise which arrives at a subzone or zone
site must be formally admitted within 5 working days or it will be sent
to general order, unless the district director grants an extension of
that time period or the operator enters the merchandise and removes it
from the premises. In addition, the operator generally assumes
responsibility for the manifested quantity of merchandise, and must
maintain an in-bond mainfest file of incomplete shipments as well as a
continuing in-put quality control program for its inventory and
recordkeeping system.
Subpart D -- Status of Merchandise in a Zone
The major new change of substance in this revised subpart is that a
Customs Form 7502 will no longer be required to be filed on election of
privileged foreign status for merchandise. There also has been a change
in organization to include the concept of what previously was separately
designated "privileged domestic merchandise," in proposed @ 146.43 that
is now entitled only "Domestic merchandise."
Subpart E -- Handling of Merchandise in a Zone
1. Proposed @ 146.52(a)(2) provides for the approval by the district
director of a blanket application for a continuous or repetitive
manipulation, manufacture, or exhibition for a period up to one year.
2. Proposed @ 146.52(d)(2) provides that in lieu of the approved
Customs Form 216 for manipulation or manufacture of merchandise, an
operator may be granted approval of a blanket application and must
maintain a record in its inventory control and recordkeeping system which
provides an audit trail of the merchandise under blanket approval through
the approved operation.
3. Proposed @ 146.52(c) requires that the operator shall certify a
destruction of zone merchandise on Customs Form 216, and also maintain
the report in its inventory control and recordkeeping system.
4. Proposed @ 146.54 states explicitly that it is the operator that
is responsible for the security of merchandise in a zone (including
storage and handling), and for the maintenance of records pertaining to
that merchandise.
5. Proposed @ 146.55 relates to a shortage or overage of merchandise
in a zone, and damage to merchandise in a zone. Much of the material in
the section is new, specifically:
a. A report by the operator to the district director is required in
the case of thefts or excess merchandise discovered in a zone;
b. The operator must record all shortages, overages, and damage, in
its inventory control and recordkeeping system;
c. The liability of the operator under its bond for the shortages of
merchandise, and liability for duty and taxes;
d. The treatment of merchandise that is considered an overage; and
e. The adjustment of the operator's liability under its bond for damage
to merchandise.
Subpart F -- Removal of Merchandise From a Zone
1. Proposed @ 146.61 provides that merchandise may be considered
constructively transferred to Customs territory without the necessity to
file a Customs Form 215, but upon presentation of any entry document.
2. Proposed @ 146.62, "Right to make entry," takes its content from
the definition of who may make entry contained in Pub. L. 97-446.
3. Proposed @ 146.63(b)(2) provides that when an entry for consumption
is made for merchandise to be removed from a subzone or noncontiguous
zone site approved under proposed @ 146.13, the district director may
allow the importer to file an entry on Customs Form 3461 for the
estimated removal of merchandise during the calendar week. The entry must
be accompanied by a pro forma invoice covering the merchandise to be
removed during the week and its value. If the merchandise actually
removed exceeds the estimate, a supplemental entry must be filed to cover
the additional merchandise before its removal from the subzone or zone
site.
4. Proposed @ 146.63(c) specifies that either a daily entry summary
or, in the case of a subzone or noncontiguous zone site approved under
proposed @ 146.13, a weekly entry summary, may be filed for merchandise
removed from a zone.
5. Proposed @ 146.63(d) provides that except for a statement of the
quantity, zone status and value, and dutiable value of merchandise
covered by an entry summary, the district director may waive presentation
of an invoice and supporting documentation with the entry or entry
summary.
6. Proposed @ 146.64(c) specifies that an entry of zone merchandise for
warehouse must be made within the time limit provided for in 19 U.S.C.
1557(a), i.e., five years from date of importation.
7. Proposed @ 146.65(a) provides that Customs may examine any
merchandise on its removal from a zone. The section also states that all
requirements and restrictions applicable to imported merchandise may also
apply to merchandise constructively transferred to Customs territory from a
zone.
8. Proposed @ 146.65(b) allows for the classification of foreign
merchandise at the time of the filing of an entry or entry summary with
Customs.
9. Proposed @ 146.65(c)(2) provides for the determination of the
dutiable value of merchandise removed from a zone, reflecting the cost
or value of components having a foreign status, exclusive of any costs of
processing or fabrication in the zone.
10. Proposed @ 146.66 states the documentation requirements for entry
of merchandise for transportation to another port.
11. Proposed @ 146.67(b)(1) states the procedure to be followed when
zone merchandize (other than domestic status merchandise) is transferred
from one zone to another at the same port.
12. Proposed @ 146.67(d) describes the procedure to be followed when
zone merchandise (other than domestic status merchandise) arrives at the
destination zone at the same or at another port.
13. Proposed @ 146.69 sets forth the procedures applicable to
merchandise removed from a subzone or noncontiguous zone for
transportation or exportation. The district director may allow a person
with the right to make entry to file an application for a weekly permit
to enter and release merchandise during a calendar week. The application
must be accompanied by a pro forma invoice or other satisfactory
documentation. After approval, that person would be able to execute
individual entries for merchandise covered by the weekly permit. However,
the person with the right to make entry must file shortly thereaafter
with the district director a statement of all merchandise entered under
the approved weekly permit.
14. Proposed @ 146.71(c) provides that zone-restricted merchandise may
be returned to Customs territory for warehousing in accordance with
Treasury Decision 83-139, published in the Federal Register on June 16,
1983 (48 FR 27536).
15. Proposed @ 146.72(c) states that domestic status merchandise may be
transferred into the Customs territory by means of a blanket submission
prepared by the operator and filed with Customs on the next working day
after that merchandise was removed from the zone. It is also noted in the
section that certain domestic status merchandise admitted to a zone under
the procedure described in proposed @ 146.14 may be removed from a zone
without Customs permit.
16. Proposed @ 146.73 governs the general release and removal of
merchandise from a zone. As a normal rule, no merchandise may be removed
from a zone without a Customs permit on the appropriate entry or
withdrawal form or other required document. In general, the operator will
be held liable, absent an adjustment, for the quantity of merchandise in
a zone shown on the entry, withdrawal or other document. The operator
will be relieved of responsibility for the merchandise on receipt of the
removal document signed by the carrier or importer. Merchandise for
which a Customs permit has been issued must be segregated from other zone
merchandise, not further manipulated or manufactured, and must be removed
from the zone premises within 5 working days after the permit is issued.
Of special note is a provision in this section (paragraph (d)(i)) which
allows merchandise entered for consumption (and duty paid) to remain in
the zone with the permission of the district director, subject to
certain detailed conditions (e.g., no further processing). Furthermore,
paragraph (d)(2) allows the restoration to former zone status of a
component of merchandise entered because of clerical error, mistake
of fact, or other indvertance not amounting to an error in the
construction of the law. If the district director decides that there has
been no error, etc., then the component will be treated as an overage.
Paragraph (d) of proposed @ 146.72 was drafted to remedy certain problems
encourtered in administration of manufacturing subzones, and should be
carefully studied by commenters.
Subpart G -- Liquidated Damages; Penalties; Suspension; Revocation
This subpart is entirely new.
1. Proposed @ 146.81 sets forth the operator's liability under its
bond for liquidated damages for defaults involving certain merchandise
(three times the value of the merchandise) or any of the terms and
conditions of that bond ($200 maximum for each default). In addition,
that section provides for the imposition of liquidated damages for a
default by the principal in respect to tardy payment of the annual fee.
2. Proposed @ 146.82 provides for a fine of $1,000 for each violation
of the Foreign-Trade Zones Act of 1934, as amended (Act), or any
regulations issued thereunder. Each day a violation continues will
constitute a separate offense. Any penalty assessed may be augmented by
applicable liquidated damages. All fines imposed by the district director
will be reviewed at Customs Headquarters.
3. Proposed @ 146.83 provides for the suspension by the district
director, for cause enumerated in that section, of the activated status
of a zone or zone site, for a period generally not to exceed 30 days.
Prior to the suspension a notice and hearing procedure set forth in the
section must be followed. The regional commissioner of the region in
which the zone is located is charged with making the final Customs
administrative decision in the matter.
4. Proposed @ 146.84 provides for a recommendation by the district
director to the Foreign-Trade Zones Board that the zone or subzone grant
be revoked by the Board for willful and repeated violations of the Act.
A recommendation for grant revocation may be made in addition to any
applicable liquidated damages, penalty, or suspension of activation for
cause.
Editorial and Conforming Changes
Throughout the revision, numerous editorial changes have been made to
clarify and simplify the language contained in the foreign-trade zone
regulations. Furthermore, changes in other parts of the Customs
Regulations have been proposed to conform them to the proposed revision
of Part 146.
Comments
Before adopting this proposal, consideration will be given to any
written comments, preferably in triplicate, that are submitted timely to
the Commissioner of Customs. Comments submitted will be available for
public inspection in accordance with @ 103.11(b), Customs Regulations
(19 CFR 103.11(b)), on regular business days between the hours of 9:00
a.m. to 4:30 p.m. at the Regulations Control Branch, Headquarters, U.S.
Customs Service, 1301 Constitution Avenue, NW., Room 2426, Washington,
D.C. 20229.
Executive Order 12291
The proposed regulation is not a major regulation as defined in
section 1(b) of E.O. 12291. Accordingly, a regulatory impact analysis is
not required.
Regulatory Flexibility Act
The provisions of the Regulatory Flexibility Act relating to an
initial and final regulatory flexibility analysis (5 U.S.C. 603, 604),
are applicable to this proposal. Accordingly, an initial regulatory
flexibility analysis prepared by Customs is attached to this document as
Appendix C. Comments on the analysis are also solicited and should
accompany comments submitted on the proposal.
Paperwork Reduction Act
The proposed regulation is subject to the Paperwork Reduction Act of
1980, Pub. L. 96-511 (44 U.S.C. 3504(h)). Accordingly, applicable
sections of this document have been submitted to the Office of Management
and Budget. Comments on the collection of information requirements
contained in this document should be directed to the Office of
Information and Regulatory Affairs, OMB, Washington, D.C., 20503, ATTN:
Desk Officer for the U.S. Customs Service. Customs also requests that
copies of those comments be sent to Customs at the address previously
specified.
Drafting Information
The principal author of this document was Todd J. Schneider, Regulations
Control Branch, U.S. Customs Service. However, personnel from other Customs
offices participated in its development.
List of Subjects in 19 CFR Part 146
Customs duties and inspection, Exports, Foreign-trade zones, Imports.
Proposed Revision to the Customs Regulations
Under the authority of 5 U.S.C. 301, R.S. 251, as amended (19 U.S.C.
66), secs. 1-21, 48 Stat. 998, 999, as amended, 1000, 1001, 1002, as
amended, 1003 (19 U.S.C. 81a-81u), 77A Stat. 14 (Gen. Hdnote 11)
(19 U.S.C. 1202), secs. 623, as amended, 624, 46 Stat. 759 (19 U.S.C.
1623, 1624), and 96 Stat. 1051 (31 U.S.C. 9701), it is proposed to amend
the Customs Regulations as set forth below:
It is proposed to amend Chapter I, Title 19, Code of Federal
Regulations, by revising Part 146 to read as follows:
PART 146 -- FOREIGN-TRADE ZONES
Sec.
146.0 Scope.
Subpart A -- General Provisions
146.1 Definitions.
146.2 District director as Board representative.
146.3 Customs supervision.
146.4 Operator supervision.
146.5 Activation fee and annual fee.
146.6 Procedure for activation.
146.7 Zone changes.
146.8 Seals; affixing and breaking.
146.9 Permission of operator.
146.10 Authority to examine merchandise.
146.11 Transportation of merchandis to a zone.
146.12 Use of zone by carrier.
146.13 Special procedure for subzone and noncontiguous zone site.
146.14 Special provision for certain domestic status merchandise.
146.15 Subzone distant from adjacent port of entry.
146.16 Place of examination outside zone.
146.17 Record retention.
Subpart B -- Inventory Control and Recordkeeping System
146.21 General requirements.
146.22 Admission of merchandise to a zone.
146.23 Accountability for merchandise in a zone.
146.24 Removal of merchandise from a zone.
146.25 Annual reconciliation.
146.26 System review.
Subpart C -- Admission of Merchandise to a Zone
146.31 Merchandise permitted in a zone.
146.32 Application and permit for admission of merchandise.
146.33 Temporary deposit for manipulation.
146.34 Merchandise transiting a zone.
146.35 Temporary deposit in a zone; incomplete documentation.
146.36 Examination of merchandise.
146.37 Operator responsibility.
146.38 Certificate of arrival of merchandise.
146.39 Domestic merchandise.
146.40 Subzone and noncontiguous zone site.
Subpart D -- Status of Merchandise in a Zone
146.41 Privileged foreign merchandise.
146.42 Nonprivileged foreign merchandise.
146.43 Domestic merchandise.
146.44 Zone-restricted merchandise.
Subpart E -- Handling of Merchandise in a Zone
146.51 Customs control of merchandise.
146.52 Manipulation, manufacture, or exhibition.
146.53 Destruction.
146.54 Safekeeping of merchandise and records.
146.55 Shortage, overage, and damage.
Subpart F -- Removal of Merchandise From a Zone
146.61 Constructive transfer to Customs territory.
146.62 Right to make entry.
146.63 Entry for consumption.
146.64 Entry for warehouse.
146.65 Examination, classification, valuation, and liquidation.
146.66 Entry for transportation to another port.
146.67 Transfer from one zone to another.
146.68 Removal for exportation.
146.69 Removal for transportation or exportation; subzone or noncontiguous
zone site.
146.70 Supplies, equipment, and repair material for vessels or aircraft.
146.71 Transfer of zone-restricted merchandise into Customs territory.
146.72 Transfer of domestic merchandise into Customs territory.
146.73 Release and removal of merchandise from zone.
Subpart G -- Liquidated Damages; Penalties; Suspension; Revocation
146.81 Liquidated damages.
146.82 Penalties.
146.83 Suspension.
146.84 Revocation of zone grant.
Authority: R.S. 251, secs. 1-21, 48 Stat. 998, 999, as amended, 1000,
1001, 1002, as amended, 1003, 77A Stat. 14, sec. 623, as amended, 624,
46 Stat. 759; 19 U.S.C. 66, 81a-81u, 1202 (Gen. Hdnote 11), 1623, 1624;
sec. 501, 96 Stat. 1051; 31 U.S.C. 9701. Additional authority and
statutes interpreted or applied are cited in the text or following the
sections affected.
@ 146.0 Scope.
Foreign-trade zones are established under the Foreign-Trade Zones Act
and the general regulations and rules of procedure of the Foreign-Trade
Zones Board contained in 15 CFR Part 400. This Part 146 of the Customs
Regulations governs the admission of merchandise into a foreign-trade
zone, manipulation, manufacture, exhibition, destruction,or storage in
a zone; inventory control and recordkeeping system in a zone; exportation
of merchandise from a zone; and transfer of merchandise from a zone into
Customs territory.
Subpart A -- General Provisions
@ 146.1 Definitions.
The following are general definitions for the purposes of this part:
(a) Act. "Act" means the Foreign-Trade Zones Act of June 18, 1934, as
amended (48 Stat. 998-1003; 19 U.S.C. 81a-81u).
(b) Activation. "Activation" means approval by the grantee and district
director for operations and for the admission and handling of merchandise
in zone status. An area in a zone which is not activated will be
considered part of the Customs territory.
(c) Alteration. "Alteration" means a change in the boundaries of an
activated zone or subzone; activation of a separate noncontiguous site
of an already-activated zone or subzone with the same operator at the
same port; or the relocation of an already-activated site with the same
operator.
(d) Board. "Board" is the Foreign-Trade Zones Board established by the
Foreign-Trade Zones Act to carry out the provisions of the Act.
(e) Customs territory. "Customs territory" is the territory of the
United States in which the general tariff laws of the United States apply
but which is not included in the activated portion of any zone. "Customs
territory of the United States" includes only the States, the District
of Columbia, and Puerto Rico. (Gen. Hdnote. 2, Tariff Schedules of the
United States (19 U.S.C. 1202)).
(f) Deactivation. "Deactivation" means voluntary discontinuation of
the activation of an entire zone or subzone site by the grantee or
operator. Discontinuance of the activated status of only a part of a
site is treated as an alteration.
(g) Grantee. "Grantee' is a corporation to which the privilege of
establishing, operating, and maintaining a foreign-trade zone has been
granted by the Foreign-Trade Zones Board.
(h) Merchandise. "Merchandise" includes goods, wares and chattels of
every description, except prohibited articles. Building materials,
production equipment, and supplies for use in operation of a zone are
not "merchandise" for the purposes of this part.
(1) Domestic merchandise. "Domestic merchandise" is merchandise which
has been --
(i) Produced in the United States and not exported therefrom, or
(ii) Previously imported into Customs territory and properly released
from Customs custody.
(2) Foreign merchandise. "Foreign merchandise" is imported merchandise
which has not been properly released from Customs custody in customs
territory.
(3) Conditionally admissible merchandise. "Conditionally admissible
merchandise" is merchandise which may be imported into the United States
under certain conditions. Merchandise which is subject to permits or
licenses, or which may be reconditioned to bring it into compliance with
the laws administered by various Federal agencies, is an example of
conditionally admissible merchandise.
(4) Prohibited article. "Prohibited article" is an article the
importation of which into the United States is prohibited by law on
grounds of public policy or morals, or any article which is excluded from
a zone by order of the Board. Books urging treason or insurrection against
the United States, obscene pictures, and lottery tickets are examples of
prohibited articles.
(i) Operator. "Operator" is a corporation, partnership, or person that
operates a zone, noncontiguous activated zone site, or a subzone. An
operator's responsibilities and functions are covered in an operating
agreement with the grantee, which can contract for the operation and
maintenance of a zone or a zone activity, but cannot assign the grant of
authority itself Those agreements are subject generally to the Act and
regulations and should include the terms between the parties concerning
such matters as the time length of the agreement and termination
provisions, as well as the responsibilities for dealing with the Customs
Service. The district director's concurrence is required for the party
designated "operator" to be recognized as such. A firm that is the sole
occupant of a noncontiguous zone site or a subzone may be designated by
the grantee as an operator. Where used in this part, the term "operator"
also applies to a "grantee" that operates its own zone.
(j) Reactivation. "Reactivation" means a resumption of the activated
status of an entire area that was previously deactivated without any
change in the operator or the area boundaries. If the boundaries are
different, the action is treated as an alteration. If the operator is
different, it is treated as an activation.
(k) Subzone. "Subzone" is a special-purpose ancillary zone site
authorized by the board through grantees of public zones, for operations
by individual firms that cannot be accommodated within an existing zone,
when it can be demonstrated that the activity, usually manufacturing,
will result in a significant public benefit. It is considered a
noncontiguous extension of a zone for a single user, usually at its own
facility and, in this sense, is a private rather than a public zone
facility. A separate zone site within an industrial or commercial complex
subject to common management and covenants is part of a zone, rather
than a subzone.
(l) Zone. "Zone" is a foreign-trade zone established under the
Foreign-Trade Zones Act. Where used in this part, the term also applies
to a subzone, unless specified otherwise.
@ 146.2 District director as Board representative.
The district director in whose district the zone is located shall be
in local charge of the zone as the resident representative of the Board.
@ 146.3 Customs Supervision.
(a) Assignment of Customs officers. Customs officers will be assigned
or detailed to a zone as necessary to maintain appropriate Customs
supervision of merchandise and records pertaining thereto in the zone,
and to protect the revenue.
(b) Supervision. Customs supervision over any zone or transaction
provided for in this part will be in accordance with @ 161.1 of this
chapter. The district director may direct a Customs officer to supervise
any transaction or procedure at a zone. Supervision may be performed
through a periodic audit of the operator's records, quantity count of
goods in a zone inventory, spot check of selected transactions or
procedures, or review of recordkeeping, security, or conditions of
storage in a zone. The operator shall permit any Customs officer access
to a zone at any reasonable hour.
@ 146.4 Operator supervision.
(a) Supervision. The operator shall supervise all admissions, removals,
recordkeeping, manipulations manufacturing, destruction, exhibition,
physical and procedural security, and conditions of storage in the zone
as required by law and regulation. Supervision by the operator shall be
that which a prudent manager of a storage, manipulation, or manufacturing
facility would be expected to exercise, and may take into account the
degree of supervision exercised by the zone firm having physical
possession of zone merchandise.
(b) Guard service. The operator is authorized to provide guards or
contract for guard service to safeguard the merchandise and ensure the
security of the zone (section 146.54). This authorization does not limit
the authority of the district director to assign Customs guards to
protect the revenue under section 4 of the Act (19 U.S.C. 81d).
@ 146.5 Activation fee and annual fee.
The operator, or where there is no operator, the grantee, will be
charged a nonrefundable fee to activate a zone or any portion of a zone,
or to alter or relocate an activated portion of a zone, under the
provisions of 31 U.S.C. 9701. The operator of an activated zone will be
charged a nonrefundable annual fee for each activated zone as payment of
the cost of the additional Customs service required under the Act, as
provided in 19 U.S.C. 81n on the regulations in this part. The operator
or grantee shall pay the annual fee to the district director of Customs
of the district in which the zone is located within 14 days after
activation and within 14 days after the effective date of the published
fee schedule of each year thereafter that the area remains activated.
The fee schedule will be revised annually and published in the Federal
Register and the Customs Bulletin.
@ 146.6 Procedure for activation.
(a) Application. A zone operator, or where there is no operator, a
grantee, shall make written application to the district director of the
district in which the zone is located to obtain approval of activation
of a zone or zone site. The application must include a description of
all the zone sites covered by the application, any operation to be
conducted therein, and a statement of the general character of the
merchandise to be admitted.
(b) Supporting documents. The application must be accompanied by the
following:
(1) The application fee required by @ 146.5 of this part;
(2) A blueprint of the area approved by the Board to be activated
showing area measurements, including all openings and buildings; and
all outlets, inlets, and pipelines to any tank for the storage of liquid
or similar product, that portion of the blueprint certified to be
correct by the operator of the tank;
(3) A gauge table, when appropriate, showing the capacity in the
appropriate unit, of any tank certified to be correct by the operator
of the tank;
(4) An executed Foreign-Trade Zone Operator's Bond on Customs Form 301
containing the bond conditions of @ 113.73 of this chapter;
(5) A procedures manual describing the inventory control and
recordkeeping system that will be used in the zone, certified by the
operator or grantee to meet the requirements of Subpart B; and
(6) The written concurrence of the grantee, when the operator applies
for activation, in the requested zone activation.
(c) Inquiry by district director. As a condition of approval of the
application, the district director may order an inquiry by a Customs
officer into:
(1) The qualifications, character, and experience of an operator and/
or grantee and their principal officers; and
(2) The security, suitability, and fitness of the facility to receive
merchandise in a zone status.
(d) Decision of the district director. The district director shall
promptly notify the applicant in writing of his decision to approve or
deny the application to activate the zone. If the application is denied,
the notification will state the grounds for denial which need not be
limited to those listed in section 146.83 of this part. The decision
of the district director will be the final Customs administrative
determination in the matter. The applicant may seek review by the Board
of the decision to deny the application within 10 days after receipt of
the notification.
(e) Activation. Upon the district director's approval of the
application and acceptance of the executed bond, the zone or zone site
will be considered activated, and merchandise may be admitted to the
zone. Execution of the bond by an operator does not lessen the liability
of the grantee to comply with the Act and implementing regulations.
@ 146.7 Zone changes.
(a) Boundary modification. A modification of a zone boundary involving
a significant expansion of zone operations will be approved in accordance
with the procedure established in the regulations of the Board (15 CFR
Part 400). A boundary modification which is not significant may be
approved by the Executive Secretary of the Board with the concurrence of
the district director. The district director shall provide that
concurrence, where warranted, in writing to the Executive Secretary and
the applicant.
(b) Alteration of an activated area. An operator shall make written
application to the district director for approval of an alteration of an
activated area, including an alteration resulting from a zone boundary
modification. The application must be accompanied by the fee required in
@ 146.5 and the other requirements specified in @ 146.6. The district
director may review the security, suitability, and fitness of the area,
and shall reply to the applicant as provided for in @ 146.6.
(c) Deactivation or reactivation. A grantee, or an operator with the
concurrence of a grantee, shall make written application to the district
director for deactivation of a zone site, indicating by layout or
blueprint the exact site to be deactivated. No fee is required for
deactivation. The district director shall not approve the application
unless all merchandise in the site in zone status has been removed at
the risk and expense of the operator. The district director may require
an accounting of all merchandise in a zone as a condition of approving the
deactivation. A zone may be reactivated using the above procedure if a
sufficient bond is on file under @ 146.6(b)(4).
(d) Suspension. When approval of an activated area has been suspended
through the procedure in Subpart G, the district director may require all
goods in that area to be transferred to another zone, a bonded warehouse,
or other location, where they may lawfully be stored, if the district
director considers that transfer advisable to protect the revenue or
administer any Federal law or regulation.
(e) New bond. The district director may require an operator to furnish
on 10 days notice a new Foreign-Trade Zone Operator's Bond on Customs
Form 301. If the operator fails to furnish the new bond, no more
merchandise will be received in the zone and that merchandise therein will
be removed at the risk and expense of the operator. A new bond may be
required if the activated zone area is substantially altered; the
character of merchandise admitted to the zone or operations performed in
the zone are substantially changed; a new operator is authorized by the
grantee; the existing bond lacks good and sufficient surety; or for any
other reason that substantially affects the liability of the operator
under the bond. Although a new bond may not be required, the operator
shall obtain the consent of the surety to any material alteration in the
boundaries of the zone.
(f) New operator. A grantee of an activated zone site shall make written
application to the district director for approval of a new operator,
submitting with the application a copy of the proposed operating
agreement, a certification by the new operator that the inventory control
and recordkeeping system meets the requirements of subpart B, and a copy
of the system procedures manual if different from the previous operator's
manual. The district director may order an inquiry into the
qualifications, character, and experience of the operator and its
principal officers. The bond in @ 146.6(b)(4) shall be submitted by the
operator before the operating agreement may become effective. The district
director shall promptly notify the grantee in writing of the approval or
disapproval of the application.
(g) List of officers, employees, and other persons. The district
director may make a written demand upon the operator to submit, within
30 days after the date of the demand, a written list of the names,
addresses, social security numbers, and dates and places of birth of all
officers and persons having a direct or indirect financial interest in the
operator; and of all persons employed in the carriage, receipt or delivery
of merchandise in zone status, whether employed by the zone operator or a
zone tenant. If a list was previously furnished, the district director may
make a written demand for the same information in respect to new persons
employed in the carriage, receipt, or delivery of zone status merchandise
within 10 days after such employment. The list need not include employees
of common or contract carriers transporting goods to or from the zone.
@ 146.8 Seals; affixing and breaking.
The district director may authorize an operator to break a Customs in-
bond seal affixed under @ 18.4 of this chapter, or under any Customs
order or directive, on any vehicle or container of district director
approved for admission to the zone upon its arrival at the zone; or
affix a Customs in-bond seal to any vehicle or container of merchandise
for which an entry, withdrawal, or other approval document has been
obtained for movement in bond from the zone. The authorized affixing or
breaking of that seal will be considered to have been done under Customs
supervision. The operator shall report to the district director, upon
arrival of the vehicle or container at the zone, any seal found to be
broken, missing, or improperly affixed, and hold the vehicle or container
and its contents intact pending instructions from the district director.
If the operator does not obtain the written concurrence of the carrier as
to the condition of the seal or delivering conveyance, the district
director shall deem the seal or delivering conveyance to be intact.
@ 146.9 Permission of operator.
An application for permission to tranfer merchandise into a zone, or
to do anything involving merchandise in a zone must include the written
concurrence of the operator, except where the regulations of this part
provide for the making of application by the operator itself or where
the operator files a separate specific or blanket approval. The written
concurrence of the operator in the removal of merchandise from a zone is
not required, because the merchandise is released by the district
director to the operator for delivery from the zone, as provided in
@ 146.73(a).
@ 146.10 Authority to examine merchandise.
The district director may cause any merchandise to be examined before
or at the time of admission to a zone, or at any time thereafter, if the
examination is considered necessary to facilitate the proper
administration of any law, regulation, or instruction which Customs is
authorized to enforce.
@ 146.11 Transportation of merchandise to a zone.
(a) From outside Customs territory. Merchandise may be brought directly
to a zone from any place outside Customs territory.
(b) Through Customs territory; foreign merchandise. Foreign merchandise
destined to a zone and transported in bond through Customs territory will
be subject to the laws and regulations applicable to other merchandise
transported in bond between two places in Customs territory.
(c) From Customs territory; domestic merchandise. Domestic merchandise
may be brought to a zone from Customs territory by any means of
transportation which will not interfere with the orderly conduct of
business in the zone.
(d) From a bonded warehouse. Merchandise may be withdrawn from a bonded
warehouse under the procedure in @ 144.37(g) of this chapter and
transferred to a zone in the same or at a different port for admission
in zone-restricted status.
@ 146.12 Use of zone by carrier.
(a) primary use; lading and unlading. The water area docking
facilities, and any lading and unlading stations of a zone are intended
primarily for the unlading of merchandise into the zone or the lading of
merchandise for removal from the zone. Their use for other purposes may
be terminated by the Commissioner of Customs if found to endanger the
revenue or by the Board if found to impede the primary use of the zone.
(b) Carrier in zone not exempt from law or regulation. Nothing in the
Act or the regulations in this part shall be construed as excepting any
carrier entering, remaining in, or leaving a zone from the application
of any other law or regulation.
@ 146.13 Special procedure for subzone and noncontiguous zone site.
(a) Application. An operator of a subzone or noncontiguous zone site,
desiring to verify a count of its own merchandise upon admission to the
zone and carry out the special procedures of Subparts C and F (see @@
146.40, 146.63, 146.69) shall file a written application with the
district director at least 30 days before the special procedure is to
become effective. The application will describe the merchandise to be
handled or processed, and the kind of operation which it will undergo.
(b) Criteria. The district director shall approve the application if
the following criteria are met:
(1) The operator has made an arrangement to transmit statistical
information directly to the Bureau of the Census, relieving Customs of
the responsibility of collecting the information on Customs Form 214-A;
(2) The merchandise to be admitted to the zone, and the operations to
be conducted therein, are known well in advance, are predictable and
stable over the long term, and are relatively fixed in variety by the
nature of the business conducted at the site;
(3) The operator owns or has a share in the ownership of the
merchandise brought into the zone, or has decision-making authority over
whether the merchandise may be accepted for shipment to the zone;
(4) The merchandise is not restricted or sensitive or of a type which
requires Customs examination or documentation review before or upon its
arrival at the zone; and
(5) The site is a subzone, or a noncontiguous zone site operated and
occupied by a single enterprise (whether or not that enterprise consists
of more than one separate but relegated legal entity). A zone area which
is in, or abuts, a general purpose zone site may be considered
"noncontiguous" if:
(i) It is separated from the rest of the general purpose site by a
barrier meeting Customs cargo security standards set in T.D. 72-56;
(ii) There are no openings in the barrier for the movement of
merchandise or persons between that area and the rest of the general
purpose site; and
(iii) All merchandise for the area is received directly into, and
delivered directly from, that area without passing through any other
activated area of the general purpose site.
(c) Decision on application. The district director shall promptly
notify the operator in writing of Customs decision on the application.
If the decision is to deny the application, the district director shall
specify the reason for denial in his reply. The district director's
decision will constitute the final Customs' administrative determination
concerning the application.
(d) Revocation of approval. Approval of the application will not
affect the right of a Customs officer to examine the merchandise at any
time it is under Customs custody or control. The district director may
revoke the approval given under this section if it becomes necessary for
Customs routinely to examine the merchandise or documentation before or
upon admission to the zone.
@ 146.14 Special provision for certain domestic status merchandise.
(a) Appliction. A prospective applicant for admission of domestic
merchandise (@ 146.39) may make written application to the district
director to allow the merchandise to be admitted to a zone without prior
application and permit for each individual shipment.
(b) Criteria. The district director shall approve the application if:
(1) The applicant has made an agreement with the Bureau of the Census
for direct transmittal to that agency of statistical information on the
merchandise and Customs consequently need not collect and transmit a
Customs Form 214-A to Census;
(2) Merchandise commercially identical to the merchandise covered by
the application is not, nor will be received in the zone in a foreign or
zone-restricted status;
(3) Domestic merchandise will not be mixed, combined or manufactured
with foreign merchandise in such a way as to lose its identity;
(4) The merchandise is not a prohibited article;
(5) The operator has given written approval of the application; and
(6 The district director does not consider the prior application and
permit for admission of the merchandise to be necessary for the
protection of the revenue or the administration of any Federal law or
regulation.
(c) Decision on application. The district director shall promptly notify
the applicant in writing of the decision on the application. If the
decision is to deny the application, the district director shall specify
the reaon for the denial in the reply. The decision of the district
director will constitute the final Customs administrative determination
concerning the application. Approval of the application will be valid
until revocation by the district director. Approval of the application
will not affect the right of a Customs officer periodically to review any
transaction involving the covered merchandise.
(d) Admission, handling, recordkeeping, and removal. Upon approval of
the application, the district director shall allow merchandise covered by
the application to be admitted to the zone; manipulated, manufactured,
exhibited, or destroyed in the zone; or removed from the zone without
prior application or permit. This privilege extends to merchandise
covered by the application which was in the zone in domestic status at
the time the application was approved. An application and permit will be
required for transactions involving merchandise of any other status with
which such domestic status merchandise will be combined in the zone, and
covered domestic status merchandise must be clearly identified in the
application. The operator shall comply with the inventory control and
recordkeeping requirements in Subpart B.
(e) Revocation of approval. The district director may revoke the
approval of the application made under this section, if it becomes
necessary for the district director to require prior application and
permit for transactions involving the merchandise. The revocation will
extend to merchandise which is in the zone at the time the revocation
takes effect.
@ 146.15 Subzone distant from adjacent port of entry.
(a) Examination and inspection at adjacent port. When a subzone or
subzone site more than 35 miles from the limits of the adjacent Customs
port of entry is approved by the Board, the district director may order
that merchandise destined for the subzone or to be removed from the
subzone, and the required documentation, be presented for Customs
examination and inspection at a designated location within the adjacent
port of entry.
(b) Merchandise to be admitted. Foreign or zone-restricted status
merchandise to be admitted to the subzone will be considered admitted in
its quantity and condition at the time of delivery authorization to the
subzone by the district director, and the operator will be responsible
for any loss of merchandise occurring after the delivery authorization.
(c) Merchandise to be removed. Foreign or zone-restricted status
merchandise being removed from the subzone will be considered to be
removed in its quantity and condition at the time of delivery
authorization from the subzone by the district director, and the operator
will be responsible for any loss of merchandise occurring before delivery
authorization.
(d) Liquidated damages. The subzone operator shall pay liquidated
damages as required in Subpart G for any loss occurring under paragraphs
(b) and (c) of this section as though the loss occurred in the subzone.
(e) Direct delivery. If a subzone under this section has been approved
under @ 146.13 for the special procedures in Subparts C and F, zone
status merchandise may be admitted to, or removed from, the site as
provided in those sections without respect to paragraphs (b) and (c). The
documentation for that merchandise will be delivered to the district
director within the limits of the adjacent port, and the district director
may order the delivery of the merchandise to the adjacent port for
examination.
(f) Domestic merchandise. Domestic merchandise for which no permit for
admission is required as provided in @ 146.14 need not be presented for
Customs examination, and an application need not be filed with the
district director. Domestic merchandise for which an application and
permit is required, will be presented for examination only when ordered
by the district director, but documentation for any transaction involving
that merchandise must be presented to the district director within the
limits of the adjacent port for review and permit as provided in this part.
@ 146.16 Place of examination outside zone.
(a) Application. An operator may request in writing that the district
director examine or inspect merchandise destined to, or being removed
from, the zone at a location outside the zone but within the limits of
the port where the zone is located, with the understanding that the
operator will be responsible for delivery of the merchandise between the
zone and the place of examination. The district director shall not grant
a request made under this section for merchandise to be transported from
one port to another port, or from the jurisdiction of one port to that
of another port.
(b) Certification. The request must be accompanied by a certification
that the operator agrees to be responsible for the loss of any
merchandise between the zone and the place of examination as though the
merchandise were lost in the zone, and agrees to pay liquidated damages
for loss as set forth in Subpart G.
(c) Approval of application. The district director shall approve the
request if he is satisfied that the merchandise can be conveniently
examined elsewhere than at the zone, the revenue is protected, and all
Customs laws and regulations can be administered.
@ 146.17 Record retention.
The operator shall retain the records required in this part and
defined in @ 162.1a of this chapter at the zone for at least 5 years
after the date of entry relating to the merchandise removed from the zone.
Subpart B -- Inventory Control and Recordkeeping System
@ 146.21 General requirements.
(a) System capability. The operator shall maintain either a manual or
automated inventory control and recordkeeping system or combination manual
and automated system capable of:
(1) Accounting for all merchandise temporarily deposited, admitted,
granted a zone status and/or status change, stored, exhibited,
manipulated, manufactured, destroyed, and/or removed from a zone;
(2) Producing accurate and timely reports and documents as required by
this part;
(3) Identifying shortages and overages of merchandise in a zone in
sufficient detail to determine the quantity, description, tariff
classification, zone status, and value of the missing or excess
merchandise;
(4) Accounting for the physical output from a given input;
(5) Providing all the information necessary to make entry for
merchandise being transferred to the Customs territory;
(6) Providing an audit trail to Customs forms from admission through
manipulation, manufacture, destruction, or removal of merchandise from
a zone; and
(7) Safeguarding and making available to Customs all records
pertaining to the inventory control and recordkeeping system for
merchandise admitted to a zone.
(b) Procedures manual. (1) The operator shall provide the district
director with a copy in English of its written inventory control and
recordkeeping system procedures manual in accordance with requirements
of this part.
(2) The operator shall keep current its inventory control and
recordkeeping system procedures manual and shall submit to the district
director any change at the time of its implementation.
(3) The operator may authorize a zone user to maintain its individual
inventory control and recordkeeping system procedures manual. The
operator shall furnish a copy of the zone user's procedures manual,
including any subsequent changes, to the district director. However, the
operator will remain responsible to Customs and liable under its bond for
supervision, defects in, or failures of a system.
(4) The operator's procedures manual and subsequent changes will be
furnished to the district director for information purposes only.
Customs receipt of a manual does not indicate approval or rejection of
a system.
(c) Liability of operator. Zone activation approval does not relieve
the operator of liability for complying with all inventory control and
recordkeeping system requirements set forth in this part.
@ 146.22 Admission of merchandise to a zone.
(a) Identification. All merchandise will be recorded in a receiving
report or document using a lot control or unique identifier. All
merchandise, except domestic status merchandise for which no permit for
admission is required under @ 146.14, will be traceable to a Customs
Form 214 and accompanying documentation.
(b) Reconciliation. Quantities received will be reconciled to a
receiving report or document such as an invoice with any discrepancy
reported upon discovery to the district director as provided in @ 146.37.
(c) Incomplete documentation. Merchandise received without complete
Customs documentation or which is unacceptable to the inventory control
and recordkeeping system will be recorded in a suspense account or
record until documentation is complete or the system is capable of
accepting the information. The receiving report or document will provide
sufficient information to identify the merchandise and distinguish it
from other merchandise. The suspense account or record will be completely
documented for Customs review to explain the differences noted and
corrections made.
(d) Recordation. Merchandise received will be accurately recorded in
manual and/or automated inventory system records from the receiving
report or document using the lot control or unique identifier for
traceability. The inventory record will state the quantity and date
received, cost or value where applicable, zone status, and description
of the merchandise, including any part or stock number.
@ 146.23 Accountability for merchandise in a zone.
(a) Identification of merchandise. (1) General. A zone lot or other
unique identifier will be used to identify and track merchandise.
(2) Fungible merchandise. Fungible merchandise may be identified by
an inventory method authorized by the Commissioner of Customs which is
consistently applied, such as First-In-First-Out (FIFO).
(b) Inventory record. The inventory record will specify by lot number
or unique identifier:
(1) Location of merchandise;
(2) Zone status;
(3) Cost or value; unless operator's or user's financial records
maintaincost or value and the records are made available for Customs
review;
(4) Beginning balance, cumulative receipts and disbursements or
removals, adjustments, and current balance on hand by date and quantity;
(5) Destruction of merchandise; and
(6) Scrap, waste, by-products, and joint products.
(c) Physical Inventory -- (1) Annual. The Operator shall take at least
an annual physical inventory of all merchandise in the zone (unless
continuous cycle counts are taken as part of an ongoing inventory control
program) with prior notification of the date(s) given to Customs for any
supervision of the inventory deemed necessary. The operator shall notify
the district director promptly of any adjustments required to reconcile
the inventory record with a physical count of the merchandise taken as
provided under @ 146.25.
(2) Overage. An inventory overage of merchandise except for domestic
merchandise for which no permit is required, will require zone admission,
unless that merchandise is transferred to general order or an appropriate
entry filed.
(3) Shortage. An inventory shortage except for domestic merchandise
for which no permit for admission is required, will be subject to the
assessment of duties and taxes plus liquidated damages under the
operator's bond.
@ 146.24 Removal of merchandise from a zone.
(a) Accountability. (1) All zone status merchandise removed from a
zone, will be accurately recorded within the inventory control and
recordkeeping system. All removals, excepts for domestic merchandise for
which no permit for removal is required, will be accurately documented on
the appropriate Customs form traceable within the inventory control and
recordkeeping system.
(2) The inventory control system for inventory relief (removal) must
have the capability to trace a merchandise removal back to a zone
admission, even where the merchandise is changed through manipulation,
manufacture, or any other means.
(b) Information. The inventory control and recordkeeping system must
be capable of providing all information necessary to make entry for
transfer of merchandise to the Customs territory.
@ 146.25 Annual reconciliation.
(a) Statement. The operator shall prepare a reconciliation statement
within 90 days after the end of the zone/subzone year. The operator shall
retain that annual reconciliation for a spotcheck or audit by Customs,
and need not furnish it to Customs unless requested. There is no form
specified for the preparation of the statement.
(b) Information required. The statement must contain a description of
merchandise for each lot or other unique identifier, zone status,
quantity on hand at the beginning of the year, cumulative receipts and
removals (by unit), quantity on hand at the end of the year, and
cumulative positive and negative adjustments (by unit) made during the
year.
(c) Certification. The operator shall submit to the district director
within 10 working days after the annual reconciliation a letter signed
by the operator certifying that the annual reconciliation has been
prepared, is available for Customs review, and that it is accurate. The
certification letter must contain the name and street address of the
operator, where the required records are available for Customs review;
and the name, title, and telephone number of the person having custody
of the records. Reporting of shortages and overages based on the annual
reconciliation will be made in accordance with @ 146.55. Those reports
must accompany the certification letter.
@ 146.26 System review.
The operator shall perform an annual internal review of the inventory
control and recordkeeping system and shall report to the district
director any deficiency discovered and corrective action taken to ensure
that the system meets the requirements of this part.
Subpart C -- Admission of Merchandise to a Zone
@ 146.31 Merchandise permitted in a zone.
Merchandise of every description, including over-quota merchandise,
may be brought into a zone unless prohibited by law. A distinction is
made between prohibited articles and conditionally admissible merchandise.
(a) Prohibited article. District directors are required to exclude this
class of article and shall not permit it to be transferred to a zone if
aware of its prohibited status. If there is a question as to whether the
merchandise may be prohibited, district directors may permit the temporary
deposit of the merchandise in a zone pending a final determination of
its status. Any prohibited article which is found within a zone will be
disposed of in the manner provided for in the laws and regulations
applicable to that article.
(b) Conditionally admissible merchandise. The admission of merchandise
of this class into a zone is subject to any requirements of the Federal
agency concerned.
@ 146.32 Application and permit for admission of merchandise.
(a) Application on Customs Form 214 and permit. Except for merchandise
temporarily admitted (@ 146.33), in-transit merchandise (@ 146.34), or
domestic merchandise admitted without permit (@ 146.39(a)), merchandise
may be admitted into a zone only upon application on a uniquely-numbered
Customs Form 214, Application for Foreign-Trade Zone Admission and/or
Status Designation, and the issuance of a permit by the district director.
The operator shall present the application to the district director in
the number of copies that officer considers necessary, and shall include
a statistical copy on Customs Form 214-A for transmittal to the Bureau
of the Census, unless the operator has made arrangements for the direct
transmittal of statistical information to that agency.
(b) Supporting documents -- (1) Commercial documentation. The operator
shall submit with the application two copies of an invoice or similar
commercial document which meets the requirements of Subpart F, Part 141,
of this chapter, for any merchandise to be admitted to a zone. The
notation of tariff classification and value required by @ 141.90 of this
chapter need not be made, unless the merchandise is to be admitted in
privileged status.
(2) Evidence of right to make entry. The operator shall submit with
the application a document like that which would be required as evidence
of a right to make entry for merchandise in Customs territory under @@
141.11 or 141.12 of this chapter.
(3) Release order. Merchandise will not be authorized by Customs for
delivery to a zone until a release has been executed by the carrier that
brought the merchandise to the port, unless the merchandise is released
back to that same carrier for delivery to the zone (see @ 141.11 of this
chapter concerning Customs responsibility). When a release order is
required, it will be made on Customs Form 7529 or by the following
statement on the reverse side of the Customs Form 214:
Authority is hereby given to release the merchandise described in
this application to
Name of carrier
Signature and title of carrier representative
A blanket or qualified release order may be authorized for the transfer
of merchandise to a zone as provided for in @ 141.111 of this chapter.
(4) Application to unlade. For merchandise unladen in the zone
directly from the importing carrier, the application on Customs Form 214
will be supported by an application to unlade on Customs Form 3171.
(5) Other documentation. The district director may require additional
information or documentation as needed to conduct an examination of
merchandise under Customs selective entry processing criteria, or to
determine whether the merchandise is admissible to the zone.
(c) Conditions for issuance of a permit. Merchandise for which an
application for admission to a zone is made will be admitted when:
(1) The application is properly executed and includes the zone status
desired for the merchandise as provided in Subpart D of this part;
(2) The operator's approval appears either on the application or in
a separate specific or blanket approval;
(3) The merchandise is retained for examination at the place of
unlading, the zone, or other location designated by the district director,
except for a subzone or zone site specified in @ 146.13. The merchandise
may be examined as if it were to be entered for consumption or warehouse;
and
(4) The permit is granted by the district director, as representative
of the Board, when satisfied that all requirements have been fulfilled.
(d) Blanket application for admission of merchandise. Merchandise may
be admitted to a zone upon presentation of a Customs Form 214 covering
more than one shipment of merchandise, i.e., a blanket application for
admission, when:
(1) The shipments arrive under one trasportation entry as described in
@ 141.55 of this chapter; or
(2) The shipments are destined to the same zone applicant on a single
business day, and the applicant --
(i) Submits statistical trade information concerning the merchandise
directly to the Bureau of the Census under an agreement with the agency,
and
(ii) Presents to the district director before the merchandise is
released into the zone the invoices or other documentation required by
paragraph (b) of this section.
Each invoice must contain a unique identifier to relate the shipment to
the manifest of the carrier that brought the merchandise to the port
having jurisdiction over the zone, and the inventory control and
recordkeeping system of the operator as described in Subpart B.
@ 146.33 Temporary deposit for manipulation.
Imported merchandise for which an entry has been made and which has
remained in continuous Customs custody may be brought temporarily to a
zone for manipulation and return to Customs territory under Customs
supervision pursuant to section 562, Tariff Act of 1930, as amended
(19 U.S.C. 1562), and @ 19.11 of this chapter. That merchandise will not
be considered within the purview of the Act but will be treated as
though remaining in Customs territory. No zone form or procedure will be
considered applicable, but the merchandise will remain subject in the
zone to any requirements necessary for the enforcement of section 562
and other Customs laws.
@ 146.34 Merchandise transiting a zone.
The following procedure is applicable when merchandise is to be
unladen from any carrier in the zone for immediate transfer to Customs
territory, or if it is to be transferred from Customs territory through
the zone for immediate lading on any carrier in the zone:
(a) Application. Application for permission to lade or unlade will be
filed with the district director on Customs Form 3171 prior to transfer
of the merchandise into the zone.
(b) Permit. The district director shall permit the transfer unless he
has reason to believe that the merchandise will not be moved promptly
from the zone or made the subject of an application for zone status on
Customs Form 214 in accordance with @ 146.32(a).
(c) Treatment of merchandise. Upon the issuance of a permit to lade,
or unlade, the merchandise will be treated as though the lading or
unlading were in the Customs territory.
(d) Failure to lade merchandise without delay. Merchandise brought
into a zone for lading on a carrier, but not laden without a delay which
may endanger the revenue, must be made the subject of an application for
zone status in accordance with @ 146.32(a) or be removed from the zone.
@ 146.3 Temporary deposit in a zone; incomplete documentation.
(a) General. If information or documentation necessary to complete the
Customs Form 214 is not available at the time of arrival of merchandise
at the port, the person with the right to apply for admission will be
allowed, upon application and compliance with the conditions in paragraph
(c) of this section, to deposit the merchandise in the zone for a
period not to exceed 5 working days unless a longer period is granted by
the district director. The merchandise will be subject to examination as
provided in @ 146.36.
(b) Application. An application for temporary deposit will be made by
submitting to the district director:
(1) A properly signed and uniquely-numbered Customs Form 214 in the
number of copies requested by the district director; and
(2) A declaration that the information or ducumentation necessary to
complete the Customs Form 214 is unavailable.
(c) Conditions. Merchandise temporarily deposited under the provisions
of this section will:
(1) Be segregated from all other zone merchandise;
(2) Have no zone status and be considered to be in the Customs
territory;
(3) Be held under the bond, and at the risk, of the operator; and
(4) Be manipulated only to the extend necessary to obtain sufficient
information about the merchandise to file the appropriate admission or
entry documentation.
(d) Submission of completed Customs Form 214. A complete and accurate
Customs Form 214 will be submitted as provided in @ 146.32 within 5
working days plus any extension granted by the district director, or the
merchandise may be placed in general order.
@ 146.36 Examination of merchandise.
All merchandise covered by a Customs Form 214 will be retained for
Customs examination at the place of unlading, the zone, or another
location, as designated by the district director. The district director
may authorize release of the merchandise without examination, as provided
in @ 151.2(a)(2) of this chapter. If a physical examination is conducted,
the Customs officer shall note the results of the examination on the
invoices.
@ 146.37 Operator responsibility.
(a) Maintenance of admission documentation -- (1) Lot file. The operator
shall open and maintain a lot file containing a copy of the Customs Form
214 and the examination invoice received from Customs, and all other
documentation necessary to account for the merchandise covered by each
Customs Form 214. The lot file will be maintained in sequential order by
using the unique number assigned to each Customs Form 214 as the file
reference number. In zones where a Customs-authorized inventory method
other than specific identification of merchandise is used, e.g., First-
In-First-Out (FIFO), no lot file is required but the operator shall
maintain a file of all Customs Form 214 in sequential order.
(2) Examination invoice. The operator shall give a copy of the
examination invoice to the person making entry to remove the merchandise
from the zone, upon request of that person or the district director.
(b) Liability for merchandise. The operator will be held liable under
its bond for the receipt of merchandise in the quantity and condition as
described on the Customs Form 214, except as modified by a discrepancy
report:
(1) Signed jointly by the operator and carried on the Customs Form
214 or other approved form within 15 days after admission of the
merchandise, and reported to the district director within 2 working days
thereafter; or
(2) Submitted on Customs Form 5931 under the provisions of Subpart A,
Part 158, of this chapter within 20 days after admission of the
merchandise. The operator may file a Customs Form 5931 on behalf of the
person who applied for admission of merchandise to the zone.
(c) Supervision of merchandise. The district director may authorize
the receipt of zone status merchandise at a zone without physical
supervision by a Customs officer (see @ 146.8). In that case, the
operator shall supervise the receipt of merchandise into the zone,
report the receipt and condition of the merchandise, and mark packages
with the unique Customs Form 214 number so that the merchandise can be
traced to a particular Customs Form 214. Packages that are accounted for
under a Customs-authorized inventory method other than specific
identification, need not be marked with a unique Customs Form 214 number
but must be adequately identified so Customs can conduct an inventory
count. The operator shall submit the Customs Form 214 to Customs at the
location specified by the district director.
@ 146.38 Certificate of arrival of merchandise.
Whenever a certificate prepared by Customs as to the arrival of any
merchandise in a zone is required by a Federal agency, the district
director shall issue the document certifying only that authorization to
deliver the merchandise to a zone has been made. The operator shall
issue a certificate of arrival of merchandise at a zone.
@ 146.39 Domestic merchandise.
(a) Special procedure approved. After approval by the district director
of an application submitted under @ 146.14 for domestic status mechandise,
no other application for admission of the merchandise will be accepted
by Customs.
(b) Other domestic merchandise. Domestic status merchandise not
covered by an approved application under @ 146.14 will require an
application for admission on Customs Form 214 (without supporting
documentation) as provided in @ 146.32(a).
@ 146.40 Subzone and noncontiguous zone site.
(a) Direct delivery -- (1) Authorization. The district director may
allow direct delivery of merchandise to a subzone or zone site approved
under @ 146.13 without prior application and approval on Customs Form
214 or Customs examination of the merchandis.
(2) Right to examine. The district director retains the authority,
notwithstanding paragraph (a)(1) of this section, to conduct a physical
examination of merchandise before or upon its admission to a subzone or
zone site. The district director may order such an examination whenever
it is deemed necessary to protect the revenue or administer any Federal
law or regulation.
(b) Arrival of conveyance. Upon arrival at a subzone or zone site of
a conveyance containing foreign merchandise, the operator shall:
(1) Collect in-bond or cartage documentation from the carrier, and
notify the district director before unloading the conveyance if the
shipment should have been in bond but is not;
(2) Check the condition of any seal affixed to the conveyance, and if
broken, missing or improperly affixed, notify the district director and
receive instructions before unloading the merchandise;
(3) Check each incoming in-bond and cartage shipment to determine if
the manifested quantity or the quantity on the cartage document agrees
with the quantity actually received;
(4) Sign and date the in-bond or cartage documentation; and
(5) Forward the in-bond or cartage documentation so as to reach the
district director within 2 working days after the date of arrival of the
conveyance at the subzone or zone site.
(c) Admission of merchandise; alternative procedures -- (1) Cumulative
Customs Form 214. The operatorf shall submit to the district director
each business day a properly signed and uniquely-numbered Customs Form
214 listing all merchandise, except for domestic status merchandise
admitted under @ 146.14, recorded into the inventory control and
recordkeeping system during the previous business day. The Customs Form
214 must contain a list of all in-bond (I.T.) numbers or the unique
number of any cartage document, as well as the number of invoices for
each I.T. or cartage document, pertaining to merchandise which has been
entered into the system.
(2) Individual Customs Form 214. If a cumulative Customs Form 214 is
not submitted as provided in paragraph (c)(1) of this section, the
operator shall file with the district director each business day an
individual Customs Form 214 covering each shipment recorded into the
inventory control and recordkeeping system during the previous business
day.
(3) General order. Merchandise which is not admitted into a subzone or
zone site as provided in this section within 5 working days after its
arrival there may be sent to general order unless:
(i) The district director grants the operator's request for an
extension of the 5-working day period; or
(ii) The importer of record files an appropriate Customs entry for
the merchandise and removes it from the zone premises.
(d) Operator responsibility for merchandise -- (1) Manifested
quantities. The manifested quantity or the quantity stated on the
cartage document will be considered the quantity admitted to the subzone
or zone site unless:
(i) The in-bond or cartage documentation is amended by the operator
and carrier in joint agreement noting any discrepancy, prior to
forwarding that documentation to the district director; or
(ii) The operator independently submits to the district director a
discrepancy report on Customs Form 5931, and that official finds the
operator not liable for any discrepancy.
(2) In-bond manifest file. The operator shall maintain a file of open
in-bond manifests in chronological order of date of conveyance arrival to
identify shipments that have arrived but the entire contents of which
have not been admitted to the subzone or zone site as provided in this
section. The operator shall notify the district director, by annotation
on the Customs Form 214, when the entire contents of a shipment have been
admitted.
(3) Inventory control and recordkeeping system. The operator shall
establish and maintain a continuing input quality control program to
ensure that information concerning merchandise in admission documents,
verified or corrected by counts and checks, is accurately recorded in
the inventory control and recordkeeping system. Quantities recorded in
the system, after allowance by the district director for any discrepancies,
will be the quantities of merchandise for which the operator shall be
held liable under its bond for admission to the subzone or zone site. A
discrepancy involving a within-case shortage (or overage) need not be
reported on Customs Form 5931, if the operator is able to report that
information in another manner so the district director can determine
whether there is liability for the discrepancy under the bond of any
party to the importation.
Subpart D -- Status of Merchandise in a Zone
@ 146.41 Privileged foreign merchandise.
(a) General. Foreign merchandise which has not been manipulated or
manufactured so as to effect a change in tariff classification will be
given status as privileged foreign merchandise on proper application to
the district director.
(b) Application. Each application for this status will be made on
Customs Form 214 at the time of filing the application for admission of
the merchandise into a zone or at any time thereafter before the
merchandise has been manipulated or manufactured in the zone in a manner
which has effected a change in tariff classification.
(c) Supporting documentation. Each applicant for this status shall
submit to the district director with the application an invoice noted
as provided for in @ 141.90 of this chapter.
(d) Determination of duties and taxes. Upon receipt of the application
and accompanying invoice, the district director may examine the
merchandise to determine whether to approve the application. The
merchandise will be subject to appraisement as provided in @ 146.65, and
tariff classification according to its condition and quantity, at the
rate of duty and tax in force, on the date the application is filed in
complete and proper form.
(e) Merchandise subject to tariff-rate quota. Classification of
merchandise subject to a tariff-rate import quota will be made only at
the higher non-quota duty rate in effect on the date privileged foreign
status was granted. If entry is made under Subpart F, the entry will be
liquidated at the higher non-quota duty rate.
(f) Status as privileged foreign merchandise binding. A status as
privileged foreign merchandise cannot be abandoned and remains applicable
to the merchandise even if changed in form by manipulation or manufacture,
except in the case of recoverable waste (see @ 146.65(c)(2)), as long as
the merchandise remains within the purview of the Act. However,
privileged foreign merchandise may be exported or withdrawn for supplies,
equipment, or repair material of vessels or aircraft without the payment
of taxes and duties, in accordance with @@ 146.68 and 146.70.
@ 146.42 Nonprivileged foreign merchandise.
All of the following will have the status of nonprivileged foreign
merchandise:
(a) Foreign merchandise. Foreign merchandise properly in a zone which
does not have the status of privileged foreign merchandise or of
zone-restricted merchandise;
(b) Waste. Waste recovered from any manipulation or manufacture of
privileged foreign merchandise in a zone; and
(c) Certain domestic merchandise. Domestic merchandise in a zone which
by reason of noncompliance with the regulations in this part has lost
its identity as domestic merchandise will be treated as foreign
merchandise. Any domestic merchandise will be considered to have lost
its identity if the district director determines that it cannot be
identified positively by a Customs officer as domestic merchandise on
the basis of an examination of the articles or consideration of any
proof that may be submitted promptly by a party in interest.
@ 146.43 Domestic merchandise.
(a) General. Domestic status may be granted to merchandise:
(1) The growth, product, or manufacture of the United States on which
all internal-revenue taxes, if applicable, have been paid;
(2) Previously imported and on which duty and tax has been paid; or
(3) Previously entered free of duty and tax.
(b) Application. Application for domestic status shall be included in
the application on Customs Form 214 to admit the merchandise into the
zone, but the documents in support of the application described in @
146.32(b) are not required. Domestic merchandise admitted without
application and permit under @ 146.14 will be granted domestic status.
(c) Domestic packing and repair materials. If the district director
is satisfied that the revenue will be protected, and the rights of
importers will not be prejudiced, that official may permit the transfer
to a zone of domestic packing and repair materials and related articles
without requiring an application on Customs Form 214.
(d) Return of merchandise to Customs territory. Upon compliance with
the provisions of this section and @ 146.72, any of the merchandise
specified in paragraph (a) of this section, may subsequently be returned
to Customs territory free of quotas, duty, or tax.
@ 146.44 Zone-restricted merchandise.
(a) General. Merchandise taken into a zone for the sole purpose of
exportation, destruction (except destruction of distilled spirits, wines,
and fermented malt liquors), or storage will be given zone-restricted
status on proper application. That status may be requested at any time
the merchandise is located in a zone, but cannot be abandoned once
granted. Merchandise in zone-restricted status may not be removed to
Customs territory for domestic consumption except where the Board
determines the return to be in the public interest.
(b Application. Application for zone-restricted status will be made
on Customs Form 214.
(c) Merchandise considered exported -- (1) For Customs purposes. If
the applicant desires a zone-restricted status in order that the
merchandise may be considered exported for the purpose of any Customs
law, all pertinent Customs requirements relating to an actual exportation
shall be complied with as though the admission of the merchandise into
the zone constituted a lading on an exporting carrier at a port of final
exit from the United States. Any declaration or form required for actual
exportation will be modified to show that the merchandise has been
deposited in a zone in lieu of actual exportation, and a copy of the
approved Customs Form 214 may be accepted in lieu of any proof of
shipment required in cases of actual exportation.
(2) For other purposes. If the merchandise is to be considered
exported for the purpose of any Federal law other than the Customs laws,
the district director shall be satisfied that all pertinent laws,
regulations, and rules administered by the Federal agency concerned have
been complied with before the Customs Form 214 is approved.
(d) Merchandise entered for warehousing transferred to a zone.
Merchandise entered for warehousing and transferred to a zone, other
than temporarily for manipulation and return to Customs territory as
provided for in @ 146.33, will have the status of zone-restricted
merchandise when admitted into the zone. The application on Customs Form
214 will state that zone-restricted status is desired for the merchandise.
Subpart E -- Handling of Merchandise in a Zone
@ 146.51 Customs control of merchandise.
No merchandise, other than domestic merchandise approved under @
146.14, will be manipulated, manufactured, exhibited, destroyed, or
removed from a zone in any manner or for any purpose, except under
Customs permit as provided for in this part. The district director may
require segregation of any zone merchandise when that official considers
it necessary for the protection of the revenue.
@ 146.52 Manipulation, manufacture, or exhibition.
(a) Application -- (1) Filing. The operator shall file with the district
director an application on Customs Form 216 for permission to manipulate,
manufacture, or exhibit merchandise in a zone. None of those operations
may be conducted until the district director has approved the application.
(2) Blanket application. The district director is authorized to approve
a blanket application for a period up to one year for a continuous or
repetitive operation. The district director may disapprove or revoke
approval of a blanket application and may require the operator to file
an individual application when necessary to protect the revenue or
administer any law or regulation.
(b) Approval of application -- (1) General. The district director
shall approve the application unless the proposed operation would be in
violation of law or regulation; the place designated for its performance
is not suitable for preventing confusion of the identity or status of
the merchandise or for safeguarding the revenue; or the Executive
Secretary of the Board has not granted approval of a new manufacturing
operation.
(2) Privileged foreign merchandise. An application made under this
section for permission to manipulate or manufacture privileged foreign
merchandise will not be approved until the district director is
satisfied that the examination provided for the @ 146.41(d) has been
completed.
(3) Lot system merchandise. When an operator maintains a zone inventory
under a lot system, merchandise from different lots will not be mixed
without approval by the district director on Customs Form 216.
(c) Appeal of adverse ruling. If the application is denied by the
district director for any reason, the applicant or the grantee may appeal
the adverse ruling to the Board. If any revenue protection considerations
are involved in the application, the Board shall be guided by the
determinations of the Secretary of the Treasury with respect to them.
(d) Report -- (1) Separate application. The operator shall report on
Customs Form 216 the results of an approved manipulation or manufacture
of merchandise (other than that covered by a blanket application made
under paragraph (a)(2) of this section, unless the district director
chooses physically to supervise the operation. The operator shall retain
the completed Customs Form 216 in its inventory control and recordkeeping
system.
(2) Blanket application. The operator shall maintain an approved
blanket application to manipulate or manufacture in its inventory control
and recordkeeping system. In lieu of the report on Customs Form 216
required in paragraph (d)(1) of this section, the operator shall maintain
a record of the operation in its inventory control and recordkeeping
system so as to provide an accounting and audit trail of the merchandise
through the approved operation.
@ 146.53 Destruction.
(a) Application. Each application to destroy merchandise in a zone will
be filed with the district director on Customs Form 216. A blanket
application may be approved or revoked under the same circumstances as
provided for in @ 146.52.
(b) Approval of application and procedure. (1) The district director
shall approve the application if satisfied that the destruction will be
effective and complete, and the revenue will be protected. The district
director may permit the destruction to be done outside the zone, in whole
or in part and at the risk and expense of the applicant, and under such
conditions necessary to protect the revenue, if proper destruction cannot
be accomplished within the zone. Any residue of destruction which is
entirely worthless may be removed to Customs territory for disposal.
(2) Distilled spirits, wines, and fermented malt liquors may not be
brought into a zone for the purpose of destruction, as provided for in @
146.44(a). If those products have been admitted to a zone for another
purpose and subsequently become unmerchantable, they may be destroyed
under Customs supervision, with the approval of the appropriate official
of the Bureau of Alcohol, Tobacco, and Firearms under the provisions of
Title 27, Code of Federal Regulations.
(c) Report of destruction. The operator shall certify the destruction
on Customs Form 216, and maintain the report in its inventory control and
recordkeeping system.
@ 146.54 Safekeeping of merchandise and records.
The operator is responsible for the safekeeping of merchandise and
records concerning merchandise admitted to a zone. The operator, at its
liability, may allow the zone importer or owner of the goods to store
, safeguard, and otherwise maintain or handle the goods and the inventory
records pertaining to them.
(a) Records maintenance. The operator shall maintain the inventory
control and recordkeeping system in accordance with the provisions of
Subpart B, retain all records pertaining to zone merchandise for 5 years
after the merchandise is removed from the zone, and protect proprietary
information in its custody from unauthorized disclosure.
(b) Merchandise security. The operator shall maintain the zone and
establish procedures adequate to ensure the security of merchandise
located in the zone in accordance with applicable Customs security
standards and specifications.
(c) Storage and handling. The operator shall store and handle
merchandise in a zone in a safe and sanitary manner to minimize damage
to the merchandise, avoid hazard to persons, and meet local, state, and
Federal requirements applicable to a specific kind of goods. All trash
and waste will be promptly removed from a zone. Aisles will be
established and maintained, and doors and entrances left unblocked for
access by Customs officers and other persons in the performance of their official
duties.
@ 146.55 Shortage, overage, and damage.
(a) Report required. The operator shall report in writing to the
district director upon discovery of:
(1) Theft or suspected theft of merchandise;
(2) Excess merchandise not properly admitted to the zone;
(3) Shortage of one percent (1%) or more of the quantity of merchandise
in a lot or covered by a unique identifier, if the missing merchandise
would have been subject to duties and taxes of $100 or more upon entry
into the Customs territory; or
(4) Damage amounting to one percent (1%) or more of the value of
merchandise in a lot or covered by a unique identifier, if the damage is
$1,000 or more.
The operator shall record upon discovery all shortages, overages, and
damage, whether or not required to be reported at that time to the
district director, in its inventory control and recordkeeping system. The
operator shall report shortages, overages, and damage to Customs as
required in the annual reconciliation statement under @ 146.25.
(b) Certain domestic merchandise. Except in a case of theft or
suspected theft, the operator need not file a report with the district
director or note in the annual reconciliation statement, any shortage,
overage, or damage concerning domestic status merchandise for which no
permit for admission is required.
(c) Shortage -- (1) Operator responsibility. The operator is
responsible under its Foreign-Trade Zone Operator's Bond for any loss of
merchandise or for any merchandise which cannot be located or otherwise
accounted for (except domestic status merchandise for which no permit for
admission was required), unless the district director is satisfied that
the merchandise was:
(i) Never received in the zone;
(ii) Removed from the zone under proper permit;
(iii) Not removed from the zone; or
(iv) Lost or destroyed in the zone through fire or other casualty,
evaporation, spillage, leakage, absorption, or similar cause, and did
not enter the commerce of the Untied States.
(2) Liability for duty and taxes. Upon demand of the district director,
the person with the right to make entry shall make entry for and pay
duties and taxes applicable to merchandise which is missing or otherwise
not accounted for. An entry for the payment of duties and taxes on that
merchandise will not relieve the operator of liability under its bond,
but the district director shall consider those acts in determining whether
to assess liquidated damages, or to cancel a liquidated damage assessment
upon payment of a lesser amount.
(d) Overage. The person with the right to make entry shall file,
within 5 days after discovery of an overage, an application for admission
of the merchandise to the zone on Customs Form 214 or file a Customs
entry for the merchandise. If a Customs Form 214 or a Customs entry is
not timely filed, and the district director has not granted an extension
of the time provided, the merchandise may be sent to general order.
(e) Damage. The liability of the operator under its Foreign-Trade
Zone Operator's Bond may be adjusted for the loss of value resulting from
damage to merchandise occurring in the zone. The operator shall segregate,
mark, and otherwise secure damaged merchandise to preserve its identity.
The operator shall handle merchandise so as to minimize damage or
deterioration, as provided for in @ 146.54.
Subpart F -- Removal of Merchandise From a Zone
@ 146.61 Constructive transfer to Customs territory.
The district director shall accept receipt of any entry in proper form
provided under this subpart, and the merchandise described therein will
be considered to have been constructively transferred to Customs
territory at that time, even though the merchandise remains physically in
the zone. If the entry is thereafter rejected or cancelled, the
merchandise will be considered at that time to be constructively
transferred back into the zone in its previous zone status.
@ 146.62 Right to make entry.
Entry of merchandise under this subpart may be made only by the owner
or purchaser or, when appropriately designated by the owner, purchaser,
or consigneee, by a licensed customhouse broker.
@ 146.63 Entry for consumption.
(a) General. The provisions of this section are applicable to the
following merchandise:
(1) Privileged foreign merchandise that has not been mixed, combined,
or repacked in a zone;
(2) Products of manipulation or manufacture in a zone composed of, or
derived from, privileged foreign and domestic merchandise;
(3) Articles composed entirely of, or derived entirely from,
nonprivileged foreign and domestic merchandise;
(4) Articles composed in part of, or derived in part from,
nonprivileged foreign and domestic merchandise; and
(5) Recoverable waste resulting from the manipulation or manufacture
of foreign merchandise.
(b) Entry documentation -- (1) General. When merchandise is removed
from a zone for consumption, entry will be made on Customs Form 3461,
Customs Form 7501, or other applicable Customs form and will be
accompanied by the entry documentation, including invoices, as provided
in Parts 141 and 142 of this chapter. The importer of record shall
submit any other supporting documents required by law or regulation that
relate to the transaction removing the merchandise from the zone, and
provide the information necessary to support the admissibility, the
declared zone and dutiable value, quantity, and classification of the
merchandise. If the declared zone and dutiable value are predicated on
estimates or estimated costs furnished either in advance or at the time
of entry, that information must be clearly stated in writing at the time
an entry or entry summary is filed.
(2) Subzone or noncontiguous zone site. The district director may
allow the importer of merchandise from a subzone or noncontiguous zone
site approved under @ 146.13 to file an entry on Customs Form 3461 for
the estimated removal of merchandise during the calendar week. The
Customs Form 3461 filed with the district director must be accompanied
by a pro forma invoice or schedule showing the number of units of each
type of merchandise to be removed during the week and the zone and
dutiable value of each unit to be removed. Merchandise covered by an
entry made under the provisions of this section will be considered to be
entered, and may be removed, only when the district director has
accepted the entry on Customs Form 3461. If actual removals will exceed
the estimate for the week, the importer of record shall file a
supplemental Customs Form 3461 to cover the additional units before their
removal from the subzone or zone site. The procedure described in this
subparagraph will not be allowed if the importer of record is required to
file an entry summary at the time of entry as provided for in @ 142.13
of this chapter.
(c) Entry summary. -- (1) Individual. When entry is made on Customs
Form 3461, the importer shall file an entry summary for the merchandise
within 10 working days after the time of entry. The entry summary must
be accompanied by any duties and taxes estimated to be due on the
merchandise, and a statement of the quantity, zone status, zone value,
and dutiable value of the merchandise covered by the entry summary.
(2) Weekly. The importer of record in a subzone or noncontiguous zone
site approved under @ 146.13 shall file an entry summary for the
merchandise described on the weekly entry and any supplemental entries,
within 10 working days after presentation of the initial Customs Form
3461 for the calendar week. The entry summary must be accompanied by any
duties and taxes estimated to be due on the merchandise, and a statement
of the quantity, zone status, zone value, and dutiable value of the
merchandise actually removed during the covered week, reconciled to the
entry summary. Notwithstanding that a weekly entry may be allowed under
paragraph (b) of this section, all merchandise will be dutiable in its
actual condition at the time of its removal from the zone or zone site
for consumption. When estimated removals exceed actual removals, that
excess merchandise will not be considered to have been entered or
constructively transferred to the Customs territory. Merchandise covered
by a weekly entry and entry summary will be removed promptly from the
zone or zone site, unless retained as domestic status merchandise as
provided for in @ 146.73(d).
(d) Waiver of supporting documents. The district director may waive
presentation of an invoice and supporting documentation (except the
statement required in paragraph (c) of this section) with the entry or
entry summary, if satisfied that presentation of those documents would
be impractical, and the importer of record or operator either files
invoices and supporting documentation with the district director or
maintains and makes those records available for examination by Customs.
(e) Removal for transportation to another port for consumption -- (1)
Application for transfer. When merchandise is to be transferred to
Customs territory for transportation to another port for entry for
consumption, an entry for transportation will be made on Customs Form
7512, bearing the notations in @@ 146.66, and 146.71 when applicable, as
an application for the transfer.
(2) Condition for acceptance of entry for transportation. The district
director shall not accept an entry for transportation for products of
manipulation or manufacture of privileged foreign merchandise until
satisified that the merchandise exists in the zone in its final form as
described in the entry and that all other documents required to be
submitted with the entry have been received.
(3) Release of merchandise for transportation. Upon acceptance of the
entry, the district director shall release the merchandise to the
operator for delivery to the bonded carrier.
(4) Entry for consumption at port of destination. An entry for
consumption will be made at the port of destination on Customs Form 7501
or other approved Customs form by the person who has the right to make
entry.
@ 146.64 Entry for warehouse.
(a) Foreign merchandise. Merchandise in privileged foreign status or
composed in part of merchandise in privileged foreign status may not be
entered for warehouse from a zone. Merchandise in nonprivileged foreign
status containing no components in privileged foreign status may be
entered for warehouse in the same or at a different port.
(b) Zone-restriced merchandise. Foreign merchandise in zone-restricted
status may be entered for warehouse in the same or at a different port
only for storage pending exportation, unless the Board has approved
another disposition.
(c) Time Limitation. An entry for warehouse must be made within the
time limit provided for in section 557(a), Tariff Act of 1930 (19
U.S.C. 1557(a)).
@ 146.65 Examination, classification, valuation, and liquidation.
(a) Examination. Customs may examine any merchandise on its removal
from a zone. All requirements and restrictions applicable to imported
merchandise entered for consumption or warehouse, e.g., labelling,
radiation standards, trademarks, quotas, visas, etc., also may apply to
merchandise constructively transferred to the Customs territory from a
zone.
(b) Tariff classification -- (1) Privileged foreign merchandise.
Privileged foreign merchandise provided for in this section will be
subject to tariff classification according to its condition and quantity,
at the rate of duty and tax in force on the date of filing, in complete
and proper form, the application for privileged status.
(2) Nonprivileged foreign merchandise. Nonprivileged foreign
merchandise provided for in this section will be subject to tariff
classification in accordance with its character and condition at the
time the entry or entry summary is filed with Customs
(c) Valuation -- (1) Total zone value. The total zone value of
merchandise provided for in this section will be determined in accordance
with the principles of valuation contained in sections 402 and 500 of
the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979
(19 U.S.C. 1401a, 1500). Generally, the total zone value would be that
price paid or a payable to the zone seller in the transaction that caused
the merchandise to be removed from the zone. Where there is no price paid
or payable, the total zone value would be the cost of all materials and
zone processing costs related to the merchandise removed from the zone.
(2) Dutiable value. The dutiable value of merchandise provided for in
this section will reflect the cost or value of components having a
foreign status, exclusive of any cost of processing or fabrication
incurred in the zone, general expenses and profit, international freight
and insurance costs, the United States inland freight costs. Generally,
the dutiable value would be, or represent, the price paid or payable by
the zone operator in the transaction that caused the merchandise or
component to be admitted into a zone. Where there is no price paid or
payable, or reasonable representation of that cost, the dutiable value
may be determined by excluding from the total zone value any cost of
processing or fabrication, general expenses and profit, international
freight and insurance costs, the United States inland freight costs. The
dutiable vaue of recoverable waste or scrap from a zone operation will be
the price paid or payable to the zone seller in the transaction that
caused the recoverable waste or scrap to be removed from the zone. An
allowance in the dutiable value of zone merchandise may be made by the
district director in accordance with the provisions of Subparts B and C
of Part 158 of this chapter, relating to damaged or defective merchandise
and casualty while merchandise is in Customs custody.
(d) Liquidation -- (1) General. The entry provided for in this section
will be liquidated in accordance with the provisions of Part 159 of this
chapter.
(2) Extension to update cost data. When the declared value of the
merchandise is based on an estimate, the importer of record may request
an extension of liquidation pending the presentation of updated or actual
cost data. A request for an extension may be granted at the discretion
of the district director. If the extension is granted, the importer of
record shall submit the updated or actual cost data to the district
director, within 90 days after the close of the accounting year.
@ 146.66 Entry for tranportation to another port.
The person making entry for merchandise to be transported to another
port in accordance with any provision of this subpart shall note all
copies of the entry to state that the merchandise covered by the entry
is foreign-trade zone merchandise; the number of the zone from which the
merchandise was removed; and the zone status of the merchandise.
@ 146.67 Transfer from one zone to another.
(3) Domestic merchandise. The transfer of domestic merchandise from
one zone to another is not subject to Customs control, except that the
removal of the merchandise from the first zone and its admission into
the zone of destination will be in accordance with @@ 146.39, 146.43,
146.72, and 146.73.
(b) Other merchandise -- (1) At the same port. A transfer of
merchandise to another zone with a different operator at the same port
(including a consolidated port) will be by a licensed cartman under an
entry for immediate transportation on customs Form 7512 or other
appropriate form with a customs Form 214 filed at the destination zone.
A transfer of merchandise between zone sites at the same port (including
a consolidated port) having the same operator may be made under a local
control system approved by the district director wherein any loss of
merchandise between sites will be treated as if the loss occurred in the
zone.
(2) At a different port. A transfer of merchandise from a zone at one
port of entry to a zone at another port will be by bonded carrier under
an entry for immediate transportation on Customs Form 7512. All copies of
the entry must bear a notation in addition to those required in @ 146.66
that the merchandise is being transferred to another zone designated by
its number. A transfer of merchandise from the first zone into Customs
territory and its admission into the zone of destination will be in
accordance with @ 146.32 and 146.66, respectively.
(c) Forwarding of merchandise history; documentation. When merchandise
is transferred under the provisions of this section, the operator of the
removal zone shall provide the operator of the destination zone with the
documented history of the merchandise being transferred.
(1) The following documentation must accompany merchandise maintained
under a lot inventory control system:
(i) A copy of the original Customs Form(s) 214 with accompanying
invoices for admission of the merchandise and all components thereof;
(ii) A copy of any Customs Form 214 filed subsequent to admission to
change the status of the merchandise or its components; and
(iii) A copy of any Customs Form 216 to manipulate or manufacture the
merchandise.
(2) The following documentation must accompany merchandise not under
a lot system, and not manufactured in a zone:
(i) A copy of the original Customs Form(s) 214 with accompanying
invoices for admission of the merchandise as attributed under the
particular zone inventory method;
(ii) A copy of any Customs Form 214 filed subsequent to admission to
change the status of the merchandise as attributed under the particular
zone inventory method; and
(iii) A copy of any Customs Form 216 to manipulate the merchandise as
attributed under the particular zone inventory method.
(3) If the documents specified in paragraph (c)(2) of this section,
are not presented, the operator of the removal zone shall submit the
following:
(i) A statement of the zone value, dutiable value, quantity,
description, unique identifier, and zone status (showing any changes of
status after admission and whether the merchandise was manipulated so as
to change its tariff classification) of all the merchandise in the
shipment covered by the transportation entry; and
(ii) A certification that the statement in paragraph (c)(3)(i) of this
section, is true and that the information contained therein is contained
in the inventory control and recordkeeping system of the removal zone.
(4) The following documentation must accompany merchandise not under
a lot system, but manufactured in a zone:
(i) A statement by the removal zone operator of the zone value,
dutiable value, quantity, description, unique identifier, and zone status
of all the merchandise (and components thereof, where applicable)
covered by the transportation entry with a certification by the operator
that the information is true and is reflected in the inventory control
and recordkeeping system of the removal zone. The statment will also
show any change in zone status in the removal zone, and whether the
merchandise has been manufactured or manipulated in the zone so as to
change its tariff classification; and
(ii) A certification by the operator of the removal zone that the
statement in paragraph (c)(4)(i) of this section, is true and the
information therein is contained in the inventory control and
recordkeeping system of the zone.
(5) The operator of the removal zone shall transmit the
historical documentation of the merchandise within 2 working days after
it has been delivered to the bonded carrier for transportation. The
documentation will be referenced to the I.T. number covering the
merchandise.
(d) Arrival at destination zone. Upon arrival of the merchandise at
the destination zone, it will be admitted under the procedure provided
for in @ 146.32, except that no invoice or Customs examination will be
required. When the historical documentation is received, the operator
of the destination zone shall associate it with the Customs Form 214 for
admission of the merchandise, and incorporate that information into the
zone inventory control and recordkeeping system.
@ 146.68 Removal for exportation.
(a) Direct exportation. Any merchandise in a zone may be exported
directly therefrom (without transfer into Customs territory) upon
compliance with the procedures of this section, except as provided in
@ 146.72.
(1) Application. The operator shall sign and submit to the district
director, in triplicate, an application for direct exportation which must
include:
(i) The proposed date of exportation;
(ii) The identification of the carrier;
(iii) The destination of the shipment; and
(iv) Identification of the merchandise by zone storage location, lot
number or unique identifier, marks and numbers of packages, description,
quantity, and zone status. If a form of tally, prepared and signed by
the operator for its own purposes contains the required information, it
may be accepted by the district director in lieu of the application
provided for in this paragraph.
(2) Permit of exportation. If the district director approves the
application, the original will be stamped to serve as a permit of
exportation. The original and one copy will be returned to the operator.
No document other than the permit of exportation will be required to
release the merchandise to the operator for lading aboard the exporting
carrier.
(b) Immediate exportation. Each transfer of merchandise other than
domestic status merchandise, to the Customs territory for exportation at
the port where the zone is located, will be made under an entry for
immediate exportation on Customs Form 7512. The entry must describe the
merchandise as foreign-trade zone merchandise, specify the zone status,
and bear any special notation required in @@ 146.66 and 146.71. The
person filing the export entry shall obtain an export bond on Customs
Form 301 containing the bond conditions provided for in @113.62 of this
chapter.
(c) Transportation and exportation. Each transfer of merchandise
other than domestic, to the Customs territory for transportation to and
exportation from a different port, will be made under an entry for
transportation and exportation on Customs Form 7512, and must bear the
notations as required in @@ 146.66 and 146.71. No exportation bond will
be required of the person who files the transportation and exportation
entry. The bonded carrier will be responsible for exportation of the
merchandise in accordance with law and regulation.
(d) Export declaration. Every exporter of merchandise of any zone
status shall submit a Shipper's Export Declaration as required by the
regulations of the Bureau of the Census, Department of Commerce
(see 15 CFR Part 30).
(e) Merchandise produced or manufactured in a zone returned to Customs
territory after exportation. Merchandise produced or manufactured in a
zone and exported without having been transferred to Customs territory
other than for exportation or for transportation and exportation will be
subject, on its return to Customs territory, to the duties and taxes
applicable to like articles of wholly foreign origin, unless it is
conclusively established that it was produced or manufactured exclusively
with the use of domestic merchandise. The identity of the domestic
merchandise must have been maintained in accordance with the provisions
of this part, in which case that merchandise will be subject to the
provisions of Schedule 8, Part 1, Tariff Schedules of the United States
(19 U.S.C. 1202).
@ 146.69 Removal for transportation or exportation; subzone or
noncontiguous zone site.
(a) Weekly permit. The district director may allow a person with the
right to make entry at a subzone or noncontiguous zone site, with an
application for special procedures approved under @ 146.13, to file an
application for a weekly permit to enter and release merchandise during
a calendar week for exportation, transportation, or transportation and
exportation. The application will be on Customs Form 7512 stating at the
top the words "Application for Weekly Zone Permit," and will be filed
with the district director. The application must be accompanied by a pro
forma invoice or schedule like that required in @ 146.63(b)(2). If actual
removals will exceed the estimate for the week, the person with the right
to make entry shall file a supplemental Customs Form 7512 to cover the
additional merchandise to be removed from the subzone or zone site. No
merchandise covered by the weekly permit may be removed before approval
of the application by the district director.
(b) Individual entires. After approval of the application for a weekly
permit by the district director, the person with the right to make entry
will be authorized to execute individual Customs Forms 7512 for
exportation, transportation, or transportation and exportation of the
merchandise covered by permit. Upon removal of the merchandise, the
operator shall obtain a receipt from the carrier to assure its assumption
of liability under the carrier's or cartman's bond. Customs will consider
the time of entry to be when the removing carrier signs the receipt for
the merchandise. The operator shall give the bonded carrier a copy of the
individual Customs Form 7512 and the destination copy (Customs Form
7512-C), as provided for in @ 18.2(c) of this chapter. The operator also
shall ensure that the district director receives a copy of the Customs
Form 7512 and the origin copy (Customs Form 7512-C) by the end of the
next working day after the carrier has receipted for the merchandise.
(c) Statement of merchandise entered. The person with right to enter
merchandise under an approved weekly permit shall file with the district
director, by the close of business on the second working day of the
week following the week designated on the permit, a statement of the
merchandise entered under that permit. The statement must list each
Customs Form 7512 by its unique I.T. number, and will provide a
reconciliation of the quantities on the weekly permit with the manifested
quantities on the individual customs Forms 7512 submitted to Customs, as
well as an explanation of any discrepancy.
@ 146.70 Supplies, equipment, and repair material for vessels or
aircraft.
(a) Applicability. Any merchandise which may be withdrawn duty and
tax-free in Customs territory under section 309 or 317 of the Tariff Act
of 1930, as amended (19 U.S.C. 1309, 1317), and @@10.59 through 10.65 of
this chapter may similarily be withdrawn from a zone, regardless of its
zone status, under those statutes and regulations. Domestic merchandise
is not subject to the provisions of this section and may be withdrawn
from a zone in accordance with the provisions of @ 146.72.
(b) Merchandise for delivery within zone. The withdrawal of
merchandise provided for in paragraph (a) of this section, for delivery
within the zone where withdrawn to a qualified vessel or aircraft, or
as ground equipment of a qualified aircraft, will be on Customs Form 7512
(see @ 10.60 of this chapter).
(1) Who may make entry to withdraw. The entry to withdraw merchandise
under this section will be made by the person specified in @ 146.62,
except when the withdrawal is made under the provisions of @ 10.60 (b)
and (c) of this chapter.
(2) Supporting documents. The entry must be supported by an
application for lading in the same form as the application in @ 146.68(a)
(1), and a bond on Customs Form 301 containing the bond conditions
provided for in @ 113.64 of the chapter.
(3) Release of articles. Upon acceptance of the application and bond,
the district director shall release the merchandise to the operator for
delivery to the qualified vessel or aircraft for lading in the zone.
(c) Merchandise for delivery outside zone. The withdrawal of
merchandise provided for in paragraph (a) of this section, for delivery
at a place outside the zone in the same or at a different port to a
qualified vessel or aircraft, or as ground equipment of a qualified
aircraft, will be on Customs Form 7512 (See @ 10.60 of this chapter).
The withdrawal must contain the notations required in @@ 146.66 and
146.71.
(1) The person making the withdrawal and the procedure to be followed
are described in paragraph (b), except that no application for lading
need accompany the Customs Form 7512.
(2) Upon acceptance of the withdrawal, the district director shall
release the merchandise to the operator for delivery to the bonded
cartman, lighterman, or carrier, for transportation through the Customs
territory to the qualified lading vessel or aircraft.
@ 146.71 Transfer of zone-restricted merchandise into Customs territory
(a) Type of entry. Zone-restricted merchandise may be removed to
Customs territory only for entry for exportation, for entry for
transportation and exportation, for warehousing pending exportation, for
destruction (except destruction of distilled spirits, wines and fermented
malt liquors), for transfer from one zone to another, or for delivery to
a qualified vessel or aircraft or as ground equipment of a qualified
aircraft under section 309 or 317 of the Tariff Act of 1930, as amended
(19 U.S.C. 1309, 1317), unless the Board has ruled that the return of
the merchandise to Customs territory for domestic consumption is in the
public interest. With Board approval, that merchandise may be entered
for comsumption, for warehousing, for immediate transportation without
appraisement, or under any other provision of the Customs laws, unless
the Board has speified the form of entry to be made.
(b) Removal to Customs territory for consumption. If the return of
zone-restricted merchandise to Customs territory for consumption has been
ruled by the Board to be in the public interest, the entry shall be
endorsed by the district director to show the authority under which it
was made, and that the merchandise is subject to the provisions of
Schedule 8, Part 1, Tariff Schedules of the United States (19 U.S.C. 1202)
(c) Removal to Customs territory for warehousing. Zone-restricted
merchandise may be transferred from a foreign-trade zone to a Customs
bonded warehouse for storage pending exportation. The warehouse entry,
Customs Form 7502, shall be endorsed by the district director to show
that the merchandise may not he withdrawn for consumption. In the case
of zone-restricted merchandise transported in bond to another port for
warehousing and exportation, Customs Form 7512 shall be endorsed by the
district director to show that the merchandise is foreign-trade zone
merchandise in zone-restricted status, which shall be entered for
warehouse, with proper endorsement on Customs Form 7502, and which may
not be withdrawn for consumption. Zone-restricted merchandise transferred
from a foreign-trade zone to a Customs bonded warehouse may not be
manipulated, except for packing or unpacking incidental to exportation.
Pursuant to section 557, Tariff Act of 1930, as amended (19 U.S.C. 1557),
any merchandise placed in a Customs bonded warehouse may not remain in
the warehouse after 5 years from the date of importation and no
merchandise may be placed in a Customs bonded warehouse after 5 years
from the date of importation.
(d) Removal from zone for other purposes. Upon acceptance of an entry
or withdrawal for zone-restricted merchandise for any purpose other than
that described in a Board order, the entry shall be endorsed by the
person making entry to show that actual exportation of the merchandise
is required by the fourth proviso to section 3 of the Act, as emended,
or the entry endorsed to require delivery to a qualified vessel or
aircraft, under section 309 or 317 of the Tariff Act of 1930, as amended
(19 U.S.C. 1309, 1317), in addition to the notations required in @ 146.66.
@ 146.72 Transfer of domestic merchandise into Customs Territory.
(a) Description of transaction. Except as provided for in paragraph
(d), when domestic merchandise which has not been mixed, combined or
repacked in a zone with merchandise having a different zone status is to
be transferred from the zone to Customs territory, the operator shall
sign and submit to the district director, in triplicate, a description
of the proposed transaction which must include:
(1) The proposed date of transfer;
(2) The identification of the carrier;
(3) The destination of the shipment; and
(4) Identification of the merchandise by zone storage location, lot
number or unique identifier, marks and numbers of packages, description,
quantity, and zone status. If a form of tally prepared and signed by the
operator for its own purposes contains the necessary information, it may
be accepted in lieu of the description required in this paragraph.
(b) Permit of delivery. If the transfer is approved by the district
director, the original of the description will be so stamped to serve as
a permit of delivery. The original and one copy will be returned to the
operator. No document other than the permit of delivery will be required
to release the merchandise to the operator and authorize its transfer into
Customs territory.
(c) Blanket submission. The district director may accept from the
operator a blanket submission describing all domestic merchandise
transferred to the Customs territory in one day by the same zone tenant,
on the next working day after the merchandise was physically removed from
the zone. If the merchandise is subsequently found to be, or to include,
merchandise in another zone status, the district director may demand
redelivery of the merchandise to the zone and assess liquidated damages
and penalties as provided for in law and regulation.
(d) When no permit required. Merchandise in domestic status which has
been admitted under @ 146.14, and which has not been mixed or combined with
merchandise of another status, may be removed from the zone without Customs
permit using prudent business procedures.
@ 146.73 Release and removal of merchandise from zone.
(a) In general. Except as provided for in @ 146.72 (c) or (d), no
merchandise will be removed from a zone without a Customs permit on the
appropriate entry or withdrawal form or other document as required in
this part. The district director may authorize a removal under a permit
without physical supervision of or examination by a Customs officer. Upon
issuance of a permit, the district director will authorize delivery of
the merchandise only to the operator, who then may release the
merchandise to the importer or carrier.
(b) Liability for discrepancy. When a removal is not physically
supervised by a Customs officer, the operator will be relieved of
responsibility only for the merchandise in a zone in the condition any
quantity as shown on the entry, withdrawal, or other appropriate form.
The operator will be relieved of responsibility only if it receives the
signed receipt on the removal document of the importer or the carrier
named in that document. The responsibility of the operator may be
adjusted by any discrepancy report made jointly by the operator and the
bonded cartman, lighterman, or carrier, or the importer, and signed by
the above or an authorized representative within 15 days after removal
of the merchandise from the zone. Any adjustment must be noted on the
permit copy of the entry, withdrawal, or other removal document. A copy
of any joint report of discrepancy must be submitted to the district
director within 2 working days of signing by the parties.
(c) Time limit for removal. Merchandise for which a Customs permit
for removal has been issued, if not retained in or readmitted to a zone
under paragraph (d) of this section, must be removed from the zone
within 5 working days of issuance of the permit. The district director,
upon request of the operator, may extend that period for good cause.
Merchandise awaiting removal within the required time limit will not be
further manipulated or manufactured in the zone, but will be segregated
or otherwise identified by the operator as merchandise that has been
constructively transferred to the Customs territory. The district
director shall order merchandise not removed from the zone in the
allotted time, to be carried away by a Government cartman to a location
designated by the district director at the risk and expense of the
importer named in the entry, withdrawal, or other removal document as
required in this part.
(d) Retention in zone of merchandise entered for consumption. (1)
Merchandise which has been entered for consumption may be retained in
the same zone, without physical removal therefrom, in domestic status
upon application to and permit granted by the district director for
admission. The application must be filed within 5 working days after the
entry of the merchandise, under the procedure set forth in @ 146.39(b).
An application for multiple entries will be submitted within 5 working
days of the date of the earliest entry of merchandise covered by the
application. The application will clearly identify the merchandise to
be retained and state that the merchandise was entered from the same
zone as that of retention, and list the entry number(s) and date(s).
Merchandise which has undergone a change from a foreign status to
domestic status in a zone, whether or not physically removed from that
same zone to effect the change, will not be further processed in the
zone. "Further processing," for the purposes of this section, includes
machining, grinding, drilling, threading, punching, forming, plating,
bolting, welding, painting, assemblying, and like operations.
(2) A component of merchandise which has been entered, but not
physically removed from a zone will be restored to its last zone status,
provided the district director determines that the component was included
in the entry through clerical error, mistake of fact, or other
inadvertance not amounting to an error in the construction of the law.
Such an error, including that in appraisement of any entry or
liquidation due to the above circumstances, may be corrected pursuant
to section 520(c)(1), Tariff Act of 1930, as amended (19 U.S.C. 1520(c)
(1)), in accordance with the procedures described in Part 173 of this
chapter. If the district director decides there has been no error,
mistake, or inadvertance, or that the information was not timely
provided, the component will be considered as overage and subject
to the provisions of @ 146.55(d).
Subpart G -- Liquidated Damages; Penalties; Suspension; Revocation
@ 146.81 Liquidated damages.
(a) Compliance with law and regulation. The principal named on Customs
Form 301 shall comply with:
(1) The law and regulations relating to admission, zone status,
storage, exhibition, manipulation, manufacture, destruction, and removal
of merchandise to, in, or from a zone; and
(2) The regulations contained in this part concerning inventory
control and recordkeeping systems, and their maintenance, covering
merchandise in a zone.
(b) Payment of duty and tax. The principal and surety shall pay
liquidated damages equal to one time the value determined by Customs) of
merchandise other than domestic merchandise for which no permit for
admission is required (three times the value for restricted and alcoholic
merchandise), which is discovered to be missing from a zone or cannot be
accounted for in a zone. Such liquidated damages will be in addition to
the full amount of any duties, taxes, and/or charges due, or estimated
to be due, on the merchandise. The duty, tax, and/or charge in question
will be determined solely by Customs.
(c) Default not relating to merchandise. If the principal defaults
with respect to any of the terms or conditions of the Customs Form 301
provided for in @ 113.73 of this chapter or the regulations in this
part, not relating to merchandise, the principal and surety shall pay as
liquidated damages an amount to be determined by the district director,
but not to exceed $200 for each and every default, subject to guidelines
and advice from Customs Headquarters.
(d) If the principal defaults on payment of the annual fee when due,
the principal and surety agree to pay on demand by the district director
as liquidated damages an amount equal to the annual fee due but not paid,
and an amount equal to one percent of the annual fee for each day of the
first 7 days the annual fee is in arrears, two percent of the annual fee
for each of the succeeding 7 days the annual fee is in arrears, and
three percent of the annual fee for each day thereafter in which the
annual fee is in arrears.
(e) Other agreement. The principal and surety shall:
(1) Exonerate the United States and its officers from any risk, loss,
or expense arising from the operation of a zone; and
(2) Pay the compensation and expenses of any Customs officer, as
required by law or regulation.
@ 146.82 Penalties.
(a) Amount. Upon violation of the Act, or any regulation issued under
the Act, by the grantee, or any officer, agent, or employee thereof, the
person responsible for or permitting the violation shall be subject to a
fine of not more than $1,000. Each day during which a violation continues
will constitute a separate offense. Liquidated damages, where applicable,
will be imposed in addition to the fine (19 U.S.C. 81s).
(b) Review. All fines assessed by the district director under this
section will be reviewed by the Director, Entry Procedures and Penalties
Division, Headquarters, to determine whether further action against the
grantee or operator, such as suspension or a recommendation for
revocation of the grant, is warranted.
@ 146.83 Suspension.
(a) For cause. The district director may suspend for cause the
activated status of a zone or a zone site, or the privilege to receive,
manufacture, manipulate, exhibit, destroy, or remove merchandise, at a
zone for a period not to exceed 30 days, except that the district director
may continue the suspension in any case where the operator fails to
rectify, or fails to make a good faith effort to rectify the cause of
the suspension. An action to suspend will be taken in accordance with the
procedure set forth in paragraph (b) of this section if:
(1) The approval of the application to bond the zone was obtained
through fraud or the misstatment of a material fact;
(2) The operator neglects or refuses to obey any proper order of a
Customs officer or any Customs order, rule, or regulation relating to
the operation or administration of a zone;
(3) The operator, or any officer of a corporation which has been
granted the right to operate a zone, is convicted of or has committed
an act that would constitute a felony, or would constitute a misdemeanor
involving theft, smuggling, or a theft-connected crime.
(4) The operator fails to furnish a current list of names, addresses,
or other information as required by @ 146.7;
(5) The operator does not provide a secure facility or properly
safeguard merchandise within a zone;
(6) The operator fails to pay within 30 days after the due date all
annual fees associated with the operation of a zone;
(7) The bond required by @ 146.6(b) is determined to be insufficient
in amount or lacking sufficient surety, and a satisfactory new bond with
good and sufficient surety is not furnished within a reasonable time;
(8) The operator, or any officer, agent, or employee of the operator,
discloses to an unauthorized person proprietary information on a Customs
form or contained in the inventory control and recordkeeping system; or
(9) The inventory control and recordkeeping system is impaired to the
point where the identity of merchandise in zone status has been lost and
cannot be reestablished without a suspension of zone operations.
(b) Procedure -- (1) Notice. The district director may at any time
serve notice in writing upon an operator to show cause why its right to
continue operation of a zone should not be suspended as provided for in
paragraph (a) of this section. The notice will advise the operator of
the grounds for the proposed action and will afford the operator an
opportunity to respond in writing within 15 days after receipt of the
notice. Thereafter, the district director shall consider the allegations
and any response made by the operator and issue a decision, unless the
operator requests a hearing in the matter.
(2) Hearing. If the operator requests a hearing, it will be held
before a hearing officer designated by the Comissioner of Customs or
his designee within 30 days following the operator's request. The
operator may be represented by counsel at the hearing, and any evidence
and testimony of witnesses in the proceeding, including substantiation
of the allegations and the response thereto will be presented, with
the right of cross-examination to both parties. A stenographic record
of the proceeding will be made and a copy will be delivered to the
operator. At the conclusion of the hearing, the hearing officer shall
transmit promptly all papers and the stenographic record of the hearing
to the regional commissioner of the region in which the zone is located,
together with a recommendation for final action.
(3) Decision of regional commissioner. Within 10 calendar days after
delivery to the operator of a copy of the stenographic record of the
hearing, the operator may submit to the regional commissioner in writing
any additional views or arguments. The regional commissioner thereafter
shall render a decision in writing, stating reasons therefore. That
decision will be served on the operator and will be considered the final
Customs administrative action in the case.
@146.84 Revocation of zone grant.
(a) Recommendation of district director. The district director may at
any time recommend to the Board that the privilege of establishing,
operating, and maintaining a zone or subzone under Customs jurisdiction
be revoked for willful and repeated violations of the Act (19 U.S.C.
81r). If the district director believes that a substantial question of
law exists as to whether willful and repeated violations of the Act
have occurred, that officer should request internal advice under the
provisions of Part 177 of this chapter from the Director, Carriers,
Drawback and Bonds Division, Headquarters. A recommendation to the Board
that a zone or subzone grant be revoked does not preclude, and may be in
addition to, any liquidated damages, penalty, or suspension for cause.
(b) Decision of the Board. The procedure for revocation of a grant,
the decision of the Board, and appeal, is covered by the provisions of
the Act and Title 15, Chapter IV, Part 400, Code of Federal Regulations.
Conforming Amendments
Parts 18, 24, 112, 141, 144, and 191
To conform the Customs Regulations to the changes made by the proposed
revision of Part 146, Customs Regulations, it is proposed to amend Parts
18, 24, 112, 141, 144, and 191 in the following manner:
PART 18 -- TRANSPORTATION IN BOND AND MERCHANDISE IN TRANSIT
It is proposed to amend @ 18.2, Customs Regulations, in the following
manner:
1. By revising the heading to paragraph (a)(1) to read "Merchandise
other than from warehouse or foreign-trade zone delivered to bonded
carrier."
2. By removing the words "subparagraph (2)" in the first sentence of
paragraph (a)(1) and inserting, in their place, the words "paragraphs
(a)(2) and (a)(3) of this section."
3. By adding a new paragraph (a)(3) to read as follows:
@18.2 Receipt by carrier; manifest.
(a) * * *
(3) Merchandise delivered from foreign trade zone. When merchandise is
delivered from a foreign-trade zone to a bonded carrier for transportation
in bond, supervision of lading will be accomplished in accordance with
the procedure set forth in @ 146.73(a) of this chapter.
* * * * *
PART 24 -- CUSTOMS FINANCIAL AND ACCOUNTING PROCEDURE
@ 24.13 [Amended]
It is proposed to amend the first sentence of paragraphs (c) and (f)
of @ 24.13, Custom Regulations, to insert the words "a foreign-trade zone
operator," before the words "and bonded warehouse proprietors" and "a
Customs bonded warehouse proprietor," respectively.
PART 112 -- CARRIERS, CARTMEN, AND LIGHTERMEN
It is proposed to revise the last sentence of @ 112.12(b)(3), Customs
Regulations, to read as follows:
112.12 Application for authorization.
* * * * *
(b) Special requirements.
* * * * *
(3) Private carriers. * * * If the private carrier is the proprietor
of one or more Customs bonded warehouses or bonded container stations,
or the operator of a foreign-trade zone, to which imported merchandise
will be transported, he shall accompany the bond and copies of the bond
by a statement showing the location of each warehouse and container
station, or zone.
* * * * *
PART 141 -- ENTRY OF MERCHANDISE
It is proposed to revise @ 141.111(d), Customs Regulations, to read
as follows:
@ 141.111 Carrier's release order.
* * * * *
(d) Qualified release order. In the case of merchandise which is
entered for warehousing, for transportation in bond, for exportation, or
is to be admitted to a foreign-trade zone, the release order may be
qualified as follows:
(1) "For transfer to the bonded warehouse designated in the warehouse
entry," if the merchandise is entered for warehousing;
(2) "For transfer to the bonded carrier designated in the
transportation entry," if the merchandise is entered for transportation
in bond;
(3) "For transfer to the carrier designated in the export entry," if
the merchandise is entered for exportation; or
(4) "For transfer to the foreign-trade zone designated in Customs Form
214," if the merchandise is to be admitted to a foreign-trade zone.
PART 144 -- WAREHOUSE AND REWAREHOUSE ENTRIES AND WITHDRAWALS
1. It is proposed to revise @ 144.36(g), Customs Regulations, to read
as follows:
@ 144.36 Withdrawal for transportation.
* * * * *
(g) Procedure at destination. Upon arrival at destination, the
merchandise may be:
(1) Entered for rewarehouse in accordance with @ 144.41;
(2) Entered for combined rewarehouse and withdrawal for consumption in
accordance with @ 144.42;
(3) Exported in accordance with paragraph (h) of this section;
(4) Forwarded to another port or returned to the port of origin in
accordance with @ 18.5 (c) or (d) of this chapter; or
(5) Admitted to a foreign-trade zone as provided in @ 146.32 of this
chapter.
* * * * *
2. It is proposed to amend @ 144.37, Customs Regulations, by adding a
new paragraph (g), to read as follows:
@ 144.37 Withdrawal for exportation.
* * * * *
(g) Exportation at a foreign-trade zone. Merchandise may be withdrawn
for exportation at a foreign-trade zone in the same or at a different
port. The merchandise will be considered exported upon admission to a
zone in zone-restricted status, as provided in @ 146.44(c) of this
chapter.
PART 191 -- DRAWBACK
1. It is proposed to amend @ 191.162, Customs Regulations, by removing
reference to "@ 146.25," and inserting, in its place reference to
"@ 146.44."
2. It is proposed to revise @ 191.163 (c) and (d), Customs Regulations,
to read as follows:
@ 191.163 Articles manufactured or produced in the United States.
* * * * *
(c) Action of the district director on the notice of transfer. The
district director shall assign a number to each notice of transfer,
return one copy to the transferor and forward another copy to the zone
operator at the foreign-trade zone.
(d) Action of foreign-trade zone operator. After articles have been
received in the zone, the zone operator at the zone shall certify on a
copy of the notice of transfer the receipt of the articles (see @
191.164(d)(2)) and forward the notice to the transferor or the person
designated by the transferor. The transferor shall verify that the notice
has been certified before filing it with the drawback entry.
* * * * *
3. It is proposed to revise paragraphs (b) and (c) of @ 191.164,
Customs Regulations, to read as follows:
@ 191.164 Merchandise transferred from continuous Customs custody.
* * * * *
(b) Drawback entry. Before the transfer of merchandise from continuous
Customs custody to a foreign trade zone, the importer or a person
designated in writing by the importer for that purpose shall file with
the district director a direct export entry on Customs Form 7512 in
duplicate. The district director shall forward one copy of Customs Form
7512 to the zone operator at the zone.
(c) Certification by zone operator. After the merchandise has been
received in the zone, the zone operator at the zone shall certify on the
copy of Customs Form 7512 the receipt of the merchandise (see paragraph
(d)(2) of this section) and forward the form to the transferor or the
person designated by the transferor. After executing the certifications
provided for in paragraph (d)(3) of this section, the transferor shall
resubmit Customs Form 7512 to the district director in place of the bill
of lading required by @ 191.136.
* * * * *
4. It is proposed to revise paragraphs (b) and (c) of @ 191.165,
Customs Regulations, to read as follows:
@ 191.165 Same condition drawback merchandise and merchandise not
conforming to sample or specifications or shipped without the consent of
the consignee.
* * * * *
(b) Drawback entry. Before transfer of the merchandise to a foreign-
trade zone, the importer or a person designated in writing by the
importer for that purpose shall file with the district director an entry
on Customs Form 7539 in duplicate. The district director shall forward
one copy of Customs Form 7539 to the zone operator at the zone.
(c) Certification by zone operator. After the merchandise has been
received in the zone, the zone operator at the zone shall certify on the
copy of Customs Form 7539 the receipt of the merchandise and forward the
form to the transferor or the person designated by the transferor. After
executing the certifications provided for in paragraph (d)(3) of this
section, the transferor shall resubmit Customs Form 7539 to the district
director in place of the bill of lading required by @ 191.136.
* * * * *
Alfred R. De Angelus,
Acting Commissioner of Customs.
Approved: June 29, 1984.
John M. Walker, Jr.,
Assistant Secretary of the Treasury.
Parallel Reference Table
[This table shows the relationship of sections in revised Part 146 to
superseded Part 146]
Revised section Superseded section
146.0 146.0.
146.1(a) 146.1(a).
146.1(b) New.
146.1(c) New.
146.1(d) 146.1(b).
146.1(e) 146.1(c).
146.1(f) New.
146.1(g) 146.1(d).
146.1(h)(1), (2) 146.1(e)(1), (2).
146.1(h)(3), (4) New.
146.1(i) New.
146.1(j) New.
146.1(k) New.
146.1(l) 146.1(f).
146.2 146.2.
146.3(a) 146.3.
146.3(b) New.
146.4 New.
146.5 146.4.
146.6 New.
146.7 New.
146.8 New.
146.9 146.5.
146.10 146.6.
146.11(a), (b), (c) 146.7(a), (b), (c).
146.11(d) New.
146.12 146.8.
146.13 New.
146.14 New.
146.15 New.
146.16 New.
146.17 New.
146.21 New.
146.22 New.
146.23 New.
146.24 New.
146.25 New.
146.26 New.
146.31 146.11.
146.32(a) 146.12(a).
146.32(b)(1) New.
146.32(b)(2) 146.12(b)(1)(ii).
146.32(b)(3) 146.12(b)(1)(i).
146.33 146.13.
146.34 146.14.
146.35 New.
146.36 New.
146.37 New.
146.38 146.15.
146.39 New.
146.40 New.
146.41(a), (b), (c) 146.21(a), (b), (c)(1)(2).
146.41(d) 146.21(c)(3)(i), (v).
146.41(e) 146.21(c)(3)(iv).
146.41(f) 146.21(d).
146.42 146.23.
146.43 146.22, 146.24.
146.44(a), (b), (c)(d) 146.25(a), (b), (c)(d).
146.51 146.31(a), (b).
146.52(a)(1) 146.32(a).
146.52(a)(2) New.
146.52(b)(1) 146.32(b).
146.52(b)(2) 146.21(f).
146.52(c) 146.32(c).
146.52(d)(1) 146.32(d)(1).
146.52(d)(2) New.
146.53(a), (b) 146.33(a), (b).
146.53(c) New.
146.54 New.
146.55(a)(1), (3), (4), and (b) 146.31(c).
146.55(a)(2), (c), (d), and (e) New.
146.61 146.48(b).
146.62 146.45(b)(2), (c)(2).
146.63(a)(1) 146.45(a).
146.63(a)(2) 146.46(a).
146.63(a)(3) 146.48(a)(1).
146.63(a)(4) 146.48(a)(2).
146.63(a)(5) 146.48(a)(3).
146.45(b)(1), 146.46(b)(1),146.48(c)
146.63(b)(1) (d).
146.63(b)(2) New.
146.63(c) New.
146.63(d) New.
146.63(e)(1) 146.45(c)(1), 146.46(c).
146.63(e)(2) 146.46(b)(2).
146.63(e)(3) 146.45(c)(4).
146.63(e)(4) 146.45(c)(2).
146.64(a) 146.48(c).
146.64(b) 146.47(e)(4).
146.64(c) New.
146.65(a) New.
146.65(b)(1) 146.21(c)(3)(i),146.45(b)(4),(c)(6)
146.65(b)(2) 146.(e)(1).
146.65(c) 146.48(e)(2).
146.67(b)(2) 146.43(b)(1).
146.67(c) 146.43(b)(2).
146.67(d) New.
146.68(a) 146.41.
146.68(b), (c) 146.45(d), 146.46(d).
146.68(d) New.
146.68(e) 146.46(e).
146.69 New.
146.70 146.42.
146.71(a) 146.47(a).
146.71(b) 146.47(e)(3).
146.71(c) 146.47(e)(4).
146.71(d) 146.47(e)(3).
146.72(a)(b) 146.44(a), (b).
146.72(c) New.
146.72(d) New.
146.73 New.
146.81 New.
146.82 New.
146.83 New.
146.84 New.
Parallel Reference Table [This table shows
the relationship of sections in superseded Part 146 to revised Part 146]
Old section New section
146.0 146.0.
146.1(a) 146.1(a).
146.1(b) 146.1(d).
146.1(c) 146.1(e).
146.1(d) 146.1(g).
146.1(e) (1) and (2) 146.1(h) (1) and (2).
146.1(f) 146.1(l).
146.2 146.2.
146.3 146.3(a).
146.4 146.5.
146.5 146.9.
146.6 146.10.
146.7 (a), (b), and (c) 146.11 (a), (b), and (c).
146.8 146.12.
146.11 146.31.
146.12(a) 146.32(a).
146.12(b)(1)(i) 146.32(b)(3).
146.12(b)(1)(ii) 146.32(b)(2).
146.12(b)(2) 146.32(b)(4).
146.12(c) (1), (2), and (3) 146.32(c) (1), (2), and (4).
146.13 146.33.
146.14 146.34.
146.15 146.38.
146.21 (a), (b), and (c)(1)(2) 146.41 (a), (b), and (c).
146.21(c)(3) (i) and (v) 146.41(d); 146.65(b)(1).
146.22 146.43.
146.23 146.42.
146.24 146.43.
146.25 146.44.
146.31(a)(b) 146.51.
146.31(c) 146.55(a) (1), (3), (4), and (b).
146.32(a) 146.52(a)(1).
146.32(b) 146.52(b)(1).
146.32(c) 146.52(c).
146.32(d)(1) 146.52(d)(1).
146.32(d)(2) Removed.
146.33 146.53 (a) and (b).
146.41 146.68(a).
146.42 146.70.
146.43(a) 146.67(a).
146.43(b)(1) 146.67(b)(2).
146.43(b)(2) 146.67(c).
146.44 146.72 (a) and (b).
146.45(a) 146.63(a)(1).
146.45(b)(1) 146.63(b)(1).
146.45(b)(2) 146.62.
146.45(b)(3) Removed.
146.45(b)(4) 146.65(b)(1).
146.45(b)(5) Removed.
146.45(c)(1) 146.63(e)(1).
146.45(c)(2) 146.62; 146.63(e)(4).
146.45(c)(3) Removed.
146.45(c)(4) 146.63(e)(3).
146.45(c)(5) Removed.
146.45(c)(6) 146.65(b)(1).
146.45(d) 146.68(b).
146.46(a) 146.63(a)(2).
146.46(b)(1) 146.63(b)(1).
146.46(b)(2) 146.63(e)(2).
146.46(c) 146.63(e)(1).
146.46(d) 146.68(c).
146.46(e) 146.68(e).
146.47(a) 146.71(a).146.47(b),(c),(d),(e),
(1) and (2) Removed.
146.47(e)(3) 146.71 (b) and (d).
146.47(e)(4) 146.64(b); 146.71(c).
146.47(f) Removed.
146.48(a)(1) 146.63(a)(3).
146.48(a)(2) 146.63(a)(4).
146.48(a)(3) 146.63(a)(5).
146.48(b) 146.61.
146.48 (c) and (d) 146.63(b)(1); 146.64(a).
146.48(e)(1) 146.65(b)(2).
146.48(e)(2) 146.65(c).
146.48(f) 146.65(d)(1).
[FR Doc. 84-18734 Filed 7-16-84; 8:45 am]
BILLING CODE 4820-02-M
Appendix A -- Calculation of Foreign Trade Zone Activation and
Alteration Fees
Note. -- The following appendix will not appear in the Code of Federal
Regulations.
A. Activation and Alteration Process
Before an application for a foreign trade zone, noncontiguous zone
site with an operator different from already-activated site(s), or a
subzone is approved by the District Director, the following tasks must
be accomplished:
1. Determine that the application is in proper form;
2. Survey the premises to determine if all physical requirements are
met;
3. Perform a background investigation of the applicant and the
applicant's officers and employees;
4. Prepare a report of the survey and investigation; and
5. Review the application, survey and investigation reports, and other
pertinent information, and prepare a response to the applicant.
Customs must also preform a background investigation of any new
operator selected for an operating agreement with the grantee, after
initial activation, and assumes that a new operator is selected on the
average of every seven years.
Tasks similar to those for activation must be accomplished when an
application for alteration is filed with the District Director, except
that no background investigation is required.
B. Activation Fee for General-Purpose Zones
The following cost elements are included in the activation fee for
general-purpose zones. The costs of the tasks performed by a Customs
Special Agent have been increased by one-seventh to cover the cost of
subsequent background investigations of new zone operators, rather than
charge a separate fee upon application for approval of new operators.
Element Title Average grade Average Hourly
hours rate
Initial application review Clerk (GS-5/5) (1) ($8.81)
Premises survey Inspector (GS-11/5) (15) (18.28)
Background investigation Agent (GS-12/5) (27) (21.92)
Typing reports and response Clerk (GS-5/5) (4) (8.81)
Final review Administrator (GS-13/5) (3) (26.07)
Travel -- 3 round trips X 40 miles X 20 cents per mile ($24).
The fee is rounded off to the nearest $10 ($1,020).
C. Activation Fee for Subzones and Certain Noncontiguous Zone Sites
The following cost elements are included in the activation fee for
subzones and for noncontiguous zone sites having a different operator than
the already-activated site(s). Normally, the operator of a noncontiguous
zone site with an operator different from other sites is a manager of a
single enterprise that occupies the entire site, and is treated, for
activation purposes, as a subzone operator.
Element Title Average grade Average Hourly
hours rate
Initial application review Clerk (GS-5/5) (2) ($8.81)
Premises survey Inspector (GS-11/5) (18) (18.28)
Background investigation Agent (GS-12/5) (66) (21.92)
Typing reports and response Clerk (GS-5/5) (6) (8.81)
Final review Administrator (GS-13/5) (4) (26.07)
Travel -- 3 round trips X 60 miles X 20 cents per mile ($36).
The fee is rounded off to the nearest $10 ($1,960).
D. Alteration Fee for Zones and Subzones
The following cost elements are included in the alteration fee for all
zones, zone sites, and subzones. No background investigation is made upon
alteration, so no cost for that element is included.
Element Title Average grade Average Hourly
hours rate
Initial application review Clerk (GS-5/5) (1) ($8.81)
Premises survey Inspector (GS-11/5) (14) (18.28)
Typing reports and response Clerk (GS-5/5) (3) (8.81)
Final review Administrator (GS-13/5) (2) (26.07)
Travel -- 2 round trips X 40 miles X 20 cents per mile ($16).
The fee is rounded off to the nearest $10 ($360).
E. Administration of Fees
The above amounts in parentheses indicate cost estimates for Customs
for Calendar Year 1983 and 1984. The fee will be adjusted annually to
take into account changes in Customs employee pay scales, and adjusted
periodically for changes in investigation and survey practices and other
factors that affect the way applications for activation and alteration
are processed. On December 1 of each year, the fee will be announced to
the public for collection during the coming calendar year.
The hourly rate listed for Customs employees includes an amount (37
percent) added for fringe benefits. The fringe benefit amount is
calculated according to @ 24.17(d), Customs Regulations.
The activation fee covers all sites of a zone or subzone at the time
of the original activation. The alteration fee is separate for each site
in respect to which an alteration takes place.
Example: If an already activated zone wishes to activate two new
noncontiguous sites under the same operator, the fee is 2 X $360 or $720.
The fee is payable with the applications for activation or alteration.
The District Director will provide a receipt for the fee to applicants
on Customs Form 5104, Cash Receipt.
Appendix B -- Calculation of Annual Fees
Note. -- The following appendix will not appear in the Code of Federal
Regulations.
A. Distinction Between Small and Large General-Purpose Zones
Small zones are those with less than $10,000,000 worth of combined
receipts and deliveries of merchandise, foreign and domestic, for the
latest reporting year. Large zones are those with more than $10,000,000
of receipts and deliveries. The dollar volume is the amount reported to
the Foreign Trade Zones Board for the latest year in which they are
available to the District Director. New general-purpose zones for which
no amount has yet been reported are assumed to be small zones. Subzones to
which the special subzone fee (see B. of this appendix) does not apply
will have the same fee as a general-purpose zone of a corresponding
dollar value of receipts and deliveries.
B. Fee for Small General-Purpose Zones
The annual fee for small general-purpose zones will be computed from
the following annual Customs cost elements:
Element Average Title Average Hourly
hours grade rate
($
Merchandise examination (6) Inspector (GS-9/5) 15.12)
Spot check inspections (16) Sr. Inspector (GS-11/1) (16.17)
Audits (67) Auditor (GS-12/1) (19.35)
Clerical support (10) Clerk/typist (GS-5/1) (8.81)
Management and supervision (5) Supervisor (GS-14/1) (27.18)
Plus travel and per diem costs, mostly for audits ($691).
Fee will be rounded off to nearest $100 ($2,600).
The amounts above in parentheses represent estimates for Calendar Year
1983 and 1984.
C. Fee for Large General-Purpose Zones
The annual fee for large general-purpose zones will be computed from
the following annual Customs cost elements:
Clerical support 15 Clerk/typist GS-5/1 8.81
Management and supervision 7 Supervisor GS-14/1 27.18
Plus travel and per diem, mostly for audits ($1,084).
Fee rounded off to nearest $100 ($7,600).
D. Fee for Subzones and Noncontiguous Zone Sites
The annual fee for subzones and noncontiguous zone sites will be
tailored according to the characteristics of the particular zone
situation. Customs costs will be estimated by the Regional Commissioner
in November of each year for the following calendar year and reported to
each affected subzone and zone site operator in the region not later than
December 1 of each year. For new subzones and noncontiguous zone sites
the estimated costs will be those incurred by Customs between approval of
the application for activation and the end of the current calendar year,
and reported to the subzone or zone site operator before approval of the
application.
The costs will be calculated by the Regional Commissioner according to
the following guidelines:
1. Merchandise examinations
Number of examinations per year X avarage time for examination X
hourly rate plus 37 percent of average grade level of officers who
perform examinations. Examination costs for covered subzones and zone
sites should be low because the nature of these sites precludes
examination of most merchandise.
2. Spot check inspections
Number of spot checks per year X number of officers per spot check X
average time per spot check, including tactical planning X hourly rate
plus 37 percent of average grade level of officers who conduct spot checks.
3. Audits
Number of staff-hours per audit divided by frequency of audit X hourly
rate plus 37 percent of average grade level of officers who conduct audit.
4. Clerical support
Number of staff-hours for filing Customs Form 214 for spot check
planning, typing and filing spot check reports, typing and filing audit
reports, typing and filing liquidated damages notices, preparing work
schedules, and performing miscellaneous clerical support tasks related to
individual subzone or noncontiguous zone site X hourly rate plus 37
percent of average grade level of employees who provide clerical
support.
5. Management and supervision
Number of staff-hours for planning spot check and audit programs,
reviewing spot check and audit reports, supervising spot check and audit
personnel, reviewing liquidated damages notices and petitions, meeting
with operators concerning results of spot checks and audits, and
providing Headquarters and regional operational program support X hourly
rate plus 37 percent of average grade level of supervisors and managers
who perform these tasks in relation to the subzone or zone site.
6. Travel and per diem
a.Spot checks. Number of spot checks per year X round trip mileage to
site X current mileage reimbursement rate (or number of spot checks X
common carrier passenger fare), plus other reimbursable costs to officer
(tolls, parking, per diem or actual expenses), where applicable.
b. Audits. Round trip common carrier passenger fare (or round trip
mileage to site X current mileage reimbursement rate), plus per diem or
actual expenses as fixed by the U.S. Government, plus other reimbursable
costs (rental vehicle, tolls, parking, etc.), all of the foregoing
divided by the frequency of the audit, i.e., the number of years from
one audit to the next.
E. General Information About Fees
1. The estimates for general-purpose zones will be adjusted annually
to reflect U.S. employee pay changes and periodically to reflect changes
in average grade levels for the tasks and time consumed in the activity
element. All elements for subzones and covered non-contiguous zone sites
will be adjusted annually. All fees will be rounded off the nearest $100.
2. The hourly rates will be at the current General Schedule pay levels
as of December 1 of each year, plus 37 percent for fringe benefits,
calculated as noted in @ 24.17(d), Customs Regulations.
3. All costs are estimates for the calendar year and will remain the
same for the zone regardless how much time is consumed or how many
employees are actually involved in zone supervision activities. The
amount of Customs staff-hours actually spent in a zone in a given year
is not necessarily indicative of Customs estimated costs for the
following year.
4. Audit costs are prorated over the number of years anticipated from
one audit to the next.
5. Costs for general purpose zones are prorated over the number of
zones in the same large or small size category.
6. The annual fees will be recalculated each year and announced on
December 1 for the coming calendar year. They will be announced by the
District Director for the zones within his or her jurisdiction.
7. The fees are due and payable upon approval of the application for
activation and on January 1 of each subsequent calendar year. The annual
fee paid upon approval of the application shall be prorated by the
District Director over the full and partial months remaining in the
calendar year.
8. The fees shall be paid within 14 calendar days of the due date. If
not timely paid, liquidated damages shall be assessed under the bond
rider. Action may be taken to suspend activation when payment of the fee
is in arrears more than 30 days. There shall be no refund of any annual
fees paid to the District Director because of deactivation or suspension
of activation of a zone, or termination of activation.
9. The fees cover all of the sites of a zone or subzone operated by
the same operator within the jurisdiction of the same port.
10. Payment of the fees shall be made according to the procedures in
@ 24.1, Customs Regulations. The District Director shall provide a
receipt on Customs Form 5104, Cash Receipt.
Appendix C -- Initial Regulatory Flexibility Analysis on Proposed
Customs Regulations Amendments Relating to Foreign Trade Zones
Note. -- The following appendix will not appear in the Code of Federal
Regulations.
Introduction
The economic impact review below constitutes the Customs Service
initial regulatory flexibility analysis in compliance with the
requirements of section 3 of the Regulatory Flexibility Act (5 U.S.C.
603). The Act requires that regulatory effects be analyzed so as to
determine and quantify, if possible, the economic effects of proposals
on small business operations. The Act's key concepts revolve around
identifying "significant economic impacts on a substantial number of
small entities." The initial analysis will be modified as necessary into
a final regulatory flexibility analysis upon receipt and review of public
comments resulting from Federal Register publication of this notice of
proposed rulemaking.
Rationale
The number of Foreign Trade Zones, complexity of operations and volume
of trade passing through zones has increased significantly in recent
years. From less than 20 zones in the early 1970's, activated zones and
sub-zones at the end of 1982 numbered 65, with 22 pending applications
for new zones and 19 approved but not activated zones.
Meanwhile, Customs inspection and supervision of zone activity has
changed little in practice. Secular reductions in agency resources have
combined with unchanged practices to produce (1) operational hardships
on zone grantees and tenants and (2) uncertain inspection and control
of zone activity.
The proposed revisions to 19 CFR Parts 18, 24, 112, 141, 144 and 146
(relating to Customs administration of foreign trade zones) and 191 is
an administrative attempt to update zone supervision in accordance with
current business practices. Objectives
The proposal is intended to bring about three fundamental changes:
(1) The method of accountability of merchandise admitted stored,
manipulated, exhibited, manufactured and removed from zones;
(2) The method of enforcement of Customs laws through audits and
spot checks instead of more costly physical presence of inspectional
resources; and
(3) The method of reimbursing Customs for its zone-related operational
expenses.
Legal Basis for Proposal
This regulatory project is initiated under the authority of R.S. 251,
as amended, sections 1-21, 48 Stat. 998, 999, as amended, 1000, 1002, as
amended, 1003, 77A Stat. 14, section 624, 46 Stat. 759 (19 U.S.C. 66,
81a-81u, 1202 (General Headnote 11), 1624).
Estimated Number of Small Entities Affected
Tallies of zone activity in Customs regions indicate that approximately
1,500 tenants occupy space in zones and carry out the range of permitted
manipulation, manufacturing and storage activities. Of these, 600 operate
on a full-time, year-round basis. The remaining 900 operate on a part-
time basis. These estimates do not include tenants in foreign trade sub-
zones. Sub-zone tenants tend to be large (oftentimes multinational)
corporations and thus do not fit within the purview of the requirements
of the Regulatory Flexibility Act which concentrate on small business
concerns.
Economic Effects of Compliance With the Proposal
After review of the proposal's work plan, we have identified within the
proposal the following six procedural/administrative and fee-related
changes likely to affect economic concerns of small business:
A. Procedural administrative changes
1. Inventory, record keeping and control system
2. Operators' control over admission and removal of goods.
3. Elimination of Customs forms 7502/7505/215
4. Mandatory bonding
B. Fee changes
1. Elimination of present form of reimbursement to Customs
2. Annual fee covering audits and spot checks
3. Zone activation and boundary alteration fee.
A. Procedural/Administrative Changes
Inventory record keeping and control system. An inventory record
keeping and control system with Customs prescribed data will result
from this proposal. A similar system (Alternative Inventory Control
System) has been in effect since 1976 and currently operates at 7
general purpose zones. Data required for the new system will consist
of standard business data currently collected and tabulated for small
tenants by each zone's operator/grantee. We do not anticipate a
significant net reporting burden on tenants or operators as a result of
this segment of the proposal.
Operators' control over admission and removal of goods. Under present
Customs supervision, a Customs officer must be present to clear
admissions of merchandise to and removals of merchandise from a zone,
thus limiting these transactions to the availability of a Customs officer.
Under the present proposal, an operator will be able to admit and remove
merchandise without a Customs officer being present, after receiving
Customs approval. However, Customs approval for admission will require an
invoice in support of the application for admission on CF 214 and that the
merchandise be retained for Customs examination at the place of unlading,
the zone, or other locations designated by the district director.
Presentation of an invoice and merchandise examination prior to admission
are not currently required and will represent an additional paperwork
requirement and possible delay in the arrival of merchandise at the zone.
Customs approval for removals will be simplified by a reduction in
paperwork as outlined in the next section. In total, the additional
admission requirements will be offset by the simplified removal procedure
and the enhanced business flexibility derived from being able to admit
or remove merchandise freely into and out of the zone after Customs
approval has been received.
Forms elimination -- Customs Forms 7502/7505/215. Under present
practice, Customs forms 7502 and 214 are required to obtain privileged
foreign status. Removal of privileged foreign status merchandise from a
zone requires filing CF 7505 for consumption. CF 215 is required to
remove all zone status merchandise, except merchandise in privileged
status or wholly composed of merchandise in privileged status. The
estimated number of forms filed in FY 1982 appear in Table 1 below.
Table 1Form:
7502 10,000
7505 20,000
215 40,000
Under a provision of this proposal, a request for privileged foreign
status would require a CF 214 and invoice (as before) but would eliminate
the CF 7502. Upon removal of privileged foreign status goods from a zone,
the applicable entry form would replace the 7505 (no net gain or loss).
Further, the CF 215 will be eliminated under this proposal. Current
clerical, data base management and brokerage costs for an estimated
50,000 forms 7502/215 would be eliminated, giving small businesses a net
gain on the order of $550,000 yearly from this procedural change.
Mandatory bonding. One of the major proposed changes in zone
administration is to involve the operator/grantee in data keeping and
reporting. A new mandatory bond at a minimum level of $50,000 would be
required in another provision of the proposal, with the goal of
encouraging operator/grantee accuracy in compliance with his new
responsibilities. The new bond would cover non-compliance with these
proposed regulations as well as losses of merchandise. In terms of
practical effects of this provision on small businesses, we anticipate
no net appreciable added burden or cost. Most activated zones currently
have bonds which meet or exceed the proposed minimum level.
B. Fee Changes
Elimination of present form of customs reimbursement. Under present
practices, operators/grantees reimburse Customs for inspectional
services rendered at zones. In fiscal year 1982, payments to Customs
totaled an estimated $1.6 million, of which $1.2 million pertain to
operations at general purpose zones. Assuming operators charge tenants
flat fees to recover these payments, then each small tenant pays an
average of $800 per year for these present Customs services. The proposed
revisions would eliminate this $1.2 million present fee, substituting in
its place (see below) tiered fees which would cover Customs costs in
carrying out audits and spot checks.
A particular concern is underscored at this point, concerning the
distribution of this $1.2 million benefit (eliminated Customs
reimbursement). The 52 general purpose zones at the end of FY 1982 are
widely distributed around the country. A small business interested in
participating in a foreign trade zone generally finds itself limited to
one and only one zone provider in its operating area. The offering of
foreign trade zone services could thus be regarded as a monopolistic
market condition. Significant administrative and application costs in
seeking approval and setting up a zone essentially prevents access by
(especially small) businesses. In essence, then they must generally
contract with the sole established zone operator in that geographic area.
In economic theory, the pricing practices of a good/service provided
under monopolistic conditions are oriented towards extracting a maximum
profit for the unique provider, and, in practice, the level of fees
charged by some zone operators/grantees is a known concern of the
Commerce Department's Foreign Trade Zone Board.
As stated above, average savings per tenant from elimination of Customs
reimbursement is expected to approximate $800 per year. Based on actual
trade zone market conditions, however, real actual savings to tenants
may total well below the average $800/year. We expect that zone operator/
grantees will pass through to small tenants only a portion (quite
possibly small) of the total $1.2 million estimated benefit of this
provision of the proposed regulation. Data submitted on this subject
during the period of public comments would be especially valued in either
firming up or altering our estimate of this provision's benefit to small
business concerns.
Annual fee. Calendar years 1983 and 1984 based fee schedule is tiered.
"Small" general purpose zones are defined as those whose receipts and
deliveries total $10 million or less per year; "large" zones, greater
than $10 million. At the end of FY 1982, about 35 of the 52 active
general purpose zones were "small" for the purposes of this proposal.
Small zones are to be charged an annual fee of $2,600; large zones,
$7,600. Fees for sub-zones and single-purpose zones are to be determined
locally by the appropriate Customs regional commissioner. Since sub-zone
tenants are generally large companies, the effects of fees on them do not
fall within the purview of the RFA and this analysis and thus will not be
considered in this economic review. While these fees are subject to annual
revision and adjustments in order to insure recovery of Customs costs,
prospects of federal pay and benefit restraint act to limit prospective
fee increase to modest levels. The net burden on small business from
this fee schedule (yielding $224,000/yr.) would be minimal, approximating
$150 per tenant per year. Elimination of the current reimbursement method,
even under the caveats noted above, would more than cover these new
audit-approach fees.
New zone activation and boundary alteration fees. Under present
procedures, zone applicants are not billed for necessary Customs
preparatory work prior to a zone's activation or alteration. The proposed
revisions contain a provision allowing Customs to recover its costs for
such tasks, among others, as site surveys, background investigations,
zone approval processing, inventory systems review and associated clerical
costs. These fees would be applicable to zones which are activated,
reactivated (in certain situations) or altered on or after the effective
date of final rulemaking.
Prospective fees are currently estimated at the following:
(a) $1,020 for general purpose zone activation/reactivation;
(b) $1,960 for sub-zone activation/reactivation; and
(c) $360 for zone and sub-zone alterations.
Concerning effects on small businesses, we expect average added cost
pass-throughs from this source to be insignificant.
Overlapping Rules
None identifiable.
Alternative Proposals
None feasible. The Status Quo becomes more untenable as complex zone
manufacturing operations increase in number while Customs resources
diminish.
Summary of Economic Effects
Based on present available data, the proposed revisions would appear
to provide net yearly benefits to zone operators and tenants of $1.5-
$1.6 million, as summarized below:
[Quantified cost (-)/benefits (+)]
Document reduction +$550,000
Current reimbursement eliminated +1,200,000
New annual fees for audit approach -224,000
Non-qualified factors
Added New Neutral
benefit
costs s effect
Admission of goods X
Removal of goods X
Inventory control and record keeping system X
Mandatory bonding X
E.O. 12291
Executive Order 12291 relates to regulatory changes which are
classified as "major rules", that is, proposals which will have (1) an
aggregate economic cost factor of $100 million or more, (2) a major
increase in prices or costs or (3) a significant adverse effect on
competition. Under those criteria, we do not consider this proposal to
be a "major rule", and thus the agency does not intend to perform an
initial regulatory impact analysis that would be required by the Order.