DEPARTMENT OF COMMERCE
Foreign-Trade Zones Board
AGENCY: Foreign-Trade Zones Board, International Trade
Administration, Commerce.
15 CFR Part 400
Foreign-Trade Zones in the United States
[Docket No. 21222-9299]
RIN 0625-AA04
55 FR 2760
January 26, 1990
ACTION: Proposed rule.
SUMMARY: The Foreign-Trade Zones Board (the Board) invites public comment
on proposed amendments to its regulations. These amendments include further
revisions to those proposed during 1983 (48 FR 7188, February 18, 1983; 48
FR 16502, April 18, 1983) based upon the comments received in response to
the notice then given and a review of reports on foreign-trade zones
issued since then by the General Accounting Office and International Trade
Commission to the House Committee on Ways and Means (GAO/GGD-84-52,
March 2, 1984; GAO/NSIAD-89-85, February 7, 1989; USITC Publication 1496,
February 1984; USITC Publication 2059, February 1988). Also, included is
a change based upon Sec. 231 of the Trade and Tariff Act of 1984 (Pub. L.
98-573, 98th Cong., October 30 1984, 98 Stat. 2991).
The changes are comprehensive and the proposed action constiutes a
complete revision, replacing the present version of 15 CFR part 400. A new
numbering system is used based upon the current guidelines on style of
the Office of the Federal Register.
The revision involves some new rules, but most of the changes reflect
practice which has evolved through interpretations and decisions by the
Board and the Customs Service under their respective regulations. The more
significant changes include the listing of definitive criteria and
procedures for manufacturing activity and subzones. Also, the format for
applications for zones and subzones has been revised to collect
information required for analysis in fewer exhibits, and the procedure for
filing and processing such applications has been simplified.
DATE: Comments on the proposed rule must be received on or before
March 12, 1990.
ADDRESS: Comments (original and 6 copies) are to be addressed to John J.
Da Ponte, Jr., Executive Secretary, Foreign-Trade Zones Board,
International Trade Administration, U.S. Department of Commerce,
Pennsylvania Avenue and 14th Street NW., Room 2835, Washington, DC 20230.
(202) 377-2862.
FOR FURTHER INFORMATION CONTACT: Stephen J. Powell, Assistant General
Counsel for Enforcement and Compliance, Room 3622, U.S. Department of Commerce,
Pennsylvania Avenue and 14th Street NW., Washington, DC 20230.
(202) 377-8916.
TEXT: SUPPLEMENTARY INFORMATION:
Background
Foreign-Trade Zones (zones) are restricted-access sites in or near
ports of entry, which are licensed by the Board and operated under the
supervision of the Customs Service (See, 19 CFR part 146). Activated zone
areas are considered outside of U.S. Customs territory for purposes of
Customs entry procedures. Authority for establishing these facilities is
granted to qualified corporations. Applications submitted to the Board for
grants of authority must show the need for zone services and a workable
plan that includes suitable facilities and financing.
Zones are operated under public utility principles. Grantees usually
contract with private firms to operate facilities and provide services to
zone users. Zones have as their public policy objective the creation and
maintenance of employment through the encouragement of operations in the
United States which, for Customs reasons, might otherwise have been
carried on abroad. The objective is furthered particularly when zones
assist exporters and reexporters, and usually when goods arrive from
abroad in an unfinished condition for processing here rather than
overseas.
Foreign and domestic merchandise may be moved into zones for operations
not otherwise prohibited by law involving storage, exhibition, assembly,
manufacture or other processing. The usual formal Customs entry procedure
and payment of duties is not required on the foreign merchandise unless
and until it enters Customs territory for domestic consumption, in which
case the importer ordinarily has a choice of paying duties either on the
original foreign material or the finished product. Quota restrictions do
not normally apply to foreign goods stored in zones, but the Board can
limit or deny zone use in specific cases on public interest grounds.
Domestic goods moved into a zone for export may be considered exported upon
entering the zone for purposes of excise tax rebates and drawback.
"Subzones" are a special-purpose type of ancillary zone 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, is in the public
interest. Goods which are in a zone for a bona fide Customs reason are
exempt from State and local ad valorem taxes.
Since 1970 the number of ports of entry with zone projects has increased
from 10 to 158, and the value of goods entering zones and subzones has
increased from just over $100 million to over $50 billion, about 85
percent of which involves manufacturing activity. About 75 percent of the
goods currently entering zones is of domestic origin and some $7 billion
of the goods shipped from zones is exported.
The heightened interest in zones, both on the part of communities
providing zone services as part of their economic development efforts,
and firms using zone procedures to help improve their international
competitiveness, is related to the increasing importance of international
trade and investment to the domestic economy. While there has been little
public controversy concerning the establishment of general-purpose zones,
some proposals involving manufacturing have been opposed by domestic
industry.
Firms interested in using zones for manufacturing have expressed a
desire for greater access and flexibility in zone procedures to help them
compete against imports of finished goods and increase their exports.
Those opposing zone manufacturing operations have argued that zone
procedures should be more restrictive for non-export operations.
In recent years, the Board and the Customs Service have tended to
interpret their requirements to cooperate with communities in their
economic development efforts. At the same time, the Board has been
responsive to the concerns of domestic industry by adopting manufacturing
review procedures and imposing restrictions when negative economic
consequences are found.
Proposed changes are described in the following summary:
1. Section 400.1. This section on the "scope" of the regulations
contains a summary statement on zone benefits to users.
2. Section 400.2. Definitions currently in @@ 400.100-400.110 have been
consolidated under this single section, and there are some new terms. The
definition of "zone" is revised to incorporate the concept that "approved"
zone space remains a part of Customs territory until it is "activated"
with Customs approval. "Manufacturing" is defined for the first time.
3. Section 400.11. This section contains a statement of the Board's
authority, the roles of the Chairman and Alternates, and the procedure for
decision making (determinations). The new procedure does away with the
Committee of Alternates, recognizing that the Alternates act for their
principals under Departmental delegations of authority. This section
replaces current @@ 400.200; 400.1300; 400.1302-400.1304; and 400.1306.
4. Section 400.12. This section on the Executive Secretary's role is
expanded to include references to new delegations of authority regarding:
"zone-restricted" merchandise (@ 400.44), retail trade (@ 400.45(b)(2)),
subzone sponsorship (@ 400.22(d)(2)), and user-fee complaints
(@ 400.42(b)(5)).
5. Section 400.21. This section describes port of entry "entitlement"
to zones based upon the Act and the requirements for additional projects
to those approved under the "entitlement" provision replacing current
@ 400.300-400.303. It also contains new interpretative rules as to port
of entry "adjacency" requirements (@ 400.21(b)).
6. Section 400.22. This section contains state enabling legislation
requirements for corporations applying for grants of authority, replacing
current @@ 400.500-400.503. The subsection regarding the sponsorship of
subzones (@ 400.22(d)) is new. It retains the preference for sponsorship
by the closest zone, but offers a new option for possible sponsorship by
state agencies based upon public interest considerations.
7. Section 400.23. This section outlines the criteria for approving
zones and subzones, replacing @@ 400.400 through 400.403. While the
subsection regarding subzone criteria is new it reflects practice in
effect in recent years (@ 400.23(b)).
8. Section 400.24. This section revises the format for applications for
establishing zones. The number of exhibits is reduced from 13 to 5, through
consolidation. While some exhibits are described in more detail, the
section is based mainly upon current practice, as the existing provisions
have required guidance to make them relate to specific projects. The type
of information required is clarified. It replaces current @@
400.600-400.604, and 400.606.
9. Section 400.25. This is a new section regarding the application
format for subzones, containing an outline of the special information
required. The Executive Secretary would supplement the outline with
guidelines detailing the information required for Board analysis.
10. Section 400.26. This new section describes the format for
applications and requests for expansions and other modifications to zone
projects. The format is simpler for minor changes that do not
significantly modify the project approved by the Board.
11. Section 400.27. This section delineates procedures for reviewing and
processing applications covered in @@ 400.24-400.26 for the establishment
and major modifications of zone projects. Certain procedures are modified.
The examiners committee currently appointed to investigate applications is
being replaced by a single examiner with Customs and Army Engineer
officials acting as advisors, submitting technical reports as appropriate.
The section replaces current @@ 400.1307-400.1311.
12. Section 400.28. This new section lists standard conditions relating
to grants of authority, and is intended to replace language that is
contained in grants of authority. In furtherance of the Board's policy
that zone projects should be activated within a reasonable time, a
"sunset" provision would be adopted requiring they be activated within
five years. Authority to erect buildings is covered, replacing current
@ 400.815. This condition recognizes that construction in zones is subject
to the requirements of other federal, state and local agencies; and, that
the Board's concern is not with construction per se, but rather with the
type of activity carried on in new facilities. The condition prohibiting
sale of the grant is more definitive, replacing current @ 400.701.
13. Section 400.29. This section consolidates the procedure for
revocation of grants of authority by the Board for cause currently in
@@ 400.1201-400.1203. The procedure for revoking subzone grants is new.
The provision on fines currently in @ 400.1200 has been eliminated because
it simply repeats the statutory provision (19 U.S.C. 81s).
14. Section 400.31. This is a new provision that delineates the factors
considered by the Board in its "public interest" evaluation of
manufacturing in zones as part of its review of applications or of ongoing
activity. It organizes the factors into two categories according to their
evidentiary importance in the decision process.
First listed are threshold factors which could result in the full or
partial denial of an application, or the restriction or termination of
ongoing activity. The "threshold provision" ((b)(1)) establishes a
preliminary qualifying test for manufacturing reviews, which would
precede consideration of the other more general economic factors of (b)(2).
The threshold provision would bar activity that is not consistent with
public policy and U.S. trade programs, and also calls for a determination
that the zone activity in question does not result in a net increase of
imports of items whose duty rates would be reduced under zone procedures
as a result of such a reduction (inverted tariff situations).
If the determinations as to the three threshold factors are positive,
the review would proceed to determine the net economic effect ((c)(1)).
While no specific levels or measurements are given, the listing of
factors, combined with the proposed revisions regarding application format
(@@ 400.24, 400.25), places a greater evidentiary burden on applicants
for information and evidence to support their proposals.
Subsection (c)(4) addresses situations that involve the shift of
manufacturing operations to the United States from abroad, frequently with
high initial levels of foreign sourcing. The provision places a greater
evidentiary burden on applicants for such transplant manufacturing
operations. It will assist the Board in evaluating economic effect and in
monitoring expected shifts to domestic sourcing.
Subsection (c)(5) codifies the Board's practice of giving evidentiary
weight to the effects of small zone savings whose public interest
significance is in contributing to overall cost reduction efforts.
Subsection (c)(6) places a greater evidentiary burden on subzone
applicants by requiring them to carry the burden of proof as to the public
interest with substantial evidence.
Subsection (d) adopts a new rule calling for periodic reviews of ongoing
activity under the stated public interest criteria. A negative finding
would give the Board grounds to restrict manufacturing authority and revoke
subzone grants.
15. Section 400.32. This new section describes the procedures for
reviewing requests for manufacturing authority, including situations
arising after zones or subzones have been approved in which the Commerce
Department's Assistant Secretary for Enforcement and Compliance may make
determinations.
16. Section 400.33. This new section refers to the Board's authority to
adopt restrictions to manufacturing pursuant to the Act's "public interest"
provisions, and delegates some authority to the Commerce Department's
Assistant Secretary for Enforcement and Compliance. A specific restriction
(@ 400.33(b)) provides that the effects of antidumping and countervailing
duty orders may not be avoided by product transformation in zones.
17. Section 400.42. This section replaces current @@ 400.1000-400.1013,
consolidating provisions on internal zone regulations, and schedules for
fees applicable to zone and subzone users pursuant to the Act's public
utility provisions. Paragraph (b)(5) deals with complaints relating to the
reasonableness of zone rates, which are ordinarily filed without Board
review in the absence of complaints. The Board's procedures are premised on
the basis that published, uniform rates provide a reference for comparisons
by zone users. Complaints to the Board are made when appropriate. The
factors considered in reviewing the reasonableness of rates are described,
including those applicable to subzones.
18. Section 400.43. This provision outlines the review procedure for
"public interest" issues that do not involve manufacturing.
19. Section 400.44. This new section states the criteria and procedure
for reviewing requests for permission to return "zone restricted"
merchandise into Customs territory. The 4th proviso of @ 3 of the Act
(19 U.S.C. 81c) provides the basis for the recovery of excise taxes and
drawback duties on goods held in zones for eventual export. Customs
regulations (19 CFR part 146) provided a "zone restricted" status for
such goods, which may be returned to Customs territory upon payment of
any duties or taxes recovered, if the Board finds such a return to be in
the public interest.
20. Section 400.45. This provision replaces current @ 400.808,
continuing the Act's prohibition of retail sales except as approved by
the Board, but authorizing the District Director to approve certain
limited sales and delegating certain authority to the Executive Secretary.
21. Section 400.47. This provision provides for appeals to the Board
from decisions of the Commerce Department's Assistant Secretary for Import
Administration made under delegated authority.
22. Section 400.51. This section consolidates the procedures applicable
to hearings, replacing such sections as @@ 400.1309-400.1311;
400.1315-400.1320.
23. Section 400.52. This new section contains provisions on the location
and maintenance of the official record kept on Board proceedings.
24. Section 400.53. This section consolidates and replaces the current
provisions on public and proprietary information of @@ 400.1400-400.1406.
A number of sections on Customs operational matters have been eliminated
(@@ 400.800-400.806; 400.808-400.814) because they are covered in the
regulations of Customs Service 19 CFR part 146.
Authority
This revision is proposed under the authority of section 8 of the
Foreign-Trade Zones Act of June 18, 1934 (48 Stat. 1000; 19 U.S.C. 81h).
Comments
The period for the submission of comments will close March 12, 1990. All
comments received during this period will be considered by the Board in
developing the final regulations. Submissions (original and six copies)
shall be in writing and shall not contain information of a proprietary
nature, as they will be made available for public inspection and copying,
with the exception of those submitted by other Federal agencies.
The public record concerning these regulations will be maintained in the
International Trade Administration Freedom of Information Records
Inspection Facility, Room 4104, U.S. Department of Commerce, Pennsylvania
Avenue and 14th Street NW., Washington, DC 20230. Written public comments
on file at the facility may be inspected and copied in accordance with
15 CFR part 4.
Information about the inspection and copying of records at the facility
may be obtained from Patricia L. Sears, International Trade Administration
Freedom of Information Officer, at the above address or by calling (202)
377-3031.
Regulatory Flexibility Act
The General Counsel of the Department of Commerce has certified to the
Chief Counsel for Advocacy of the Small Business Administration that an
initial regulatory flexibility analysis is not required and has not been
prepared because these regulations will not have a significant economic
impact on a substantial number of small entities pursuant to sections 603
and 604 of title 5, United States Code, added by the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.). There are some 150 zone grantees and 50 firms
operating all or parts of zone facilities for grantees. Of some 2,100
firms using zones, about 600 use them on a full time basis. It is
estimated that fewer than 100 small entities are included among the total
firms using zones. The overall impact of the proposed rules should, in any
case, be favorable because they will reduce the present regulatory burden
on these parties by clarifying and simplifying procedures.
Executive Order 12291
This proposed rulemaking is not a major rule as defined in section 1(b)
of E.O. 12291, because it involves changes to existing regulations that
are likely to result in (1) an annual effect on the economy of $100
million or more; (2) a major increase in costs or prices for consumers,
individual industries, federal, state, or local government agencies, or
geographic regions: or (3) significant adverse effects on competition,
employment, investment, productivity, innovation or on the ability of
U.S.-based enterprises to compete with foreign-based enterprises in
domestic or export markets.
Executive Order 12612
This proposed rule does not contain policies with Federalism
implications sufficient to warrant preparation of a Federalism assessment
under Executive Order 12612.
Paperwork Reduction Act
This rule contains information collection activities subject to the
Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.). It will impose
no additional reporting or record keeping burden on the public. Existing
requirements for zone applicants, grantees, operators, and users, are
simplified and there is an overall reduction of the burden on these
parties, which are the ones mainly affected (OMB Control Nos. 0625-0139
and 0625-0109).
List of Subjects in 15 CFR Part 400
Administrative practice and procedure, Confidential business
information,Customs duties and inspection, Foreign-trade zones, Harbors,
Imports, Reporting and recordkeeping requirements.
For the reasons set out in the preamble, it is proposed to revise 15
CFR part 400 as follows:
PART 400 -- REGULATIONS OF THE FOREIGN-TRADE ZONES BOARD
Subpart A -- Scope and Definitions
Sec.
400.1 Scope.
400.2 Definitions.
Subpart B -- Foreign-Trade Zones Board
400.11 Authority of the Board.
400.12 Authority of the Executive Secretary.
400.13 Board headquarters.
Subpart C -- Establishment and Modification of Zone Projects
400.21 Number and location of zones and subzones.
400.22 Eligible applicants.
400.23 Criteria for grants of authority for zones and subzones.
400.24 Application for zone.
400.25 Application for subzone.
400.26 Application for expansion or other modification to zone project.
400.27 Procedure for reviewing and processing application.
400.28 Conditions, prohibitions and restrictions applicable to grants of
authority.
400.29 Revocation of grants of authority.
Subpart D -- Criteria for Reviewing Manufacturing
400.31 Manufacturing operations; criteria.
400.32 Procedure for submission and review of request for approval of
manufacturing.
400.33 Restrictions on manufacturing activity.
Subpart E -- Zone Operations and Administrative Requirements
400.41 Zone operations; general.
400.42 Requirements for commencement of operations in zone project.
400.43 Restriction and prohibition of certain zone operations.
400.44 Zone-restricted merchandise.
400.45 Retail trade.
400.46 Accounts, records and reports.
400.47 Appeals to the Board from decisions of the Assistant Secretary for
Enforcement and Compliance and the Executive Secretary.
Subpart F -- Hearings, Record and Information
400.51 Hearings.
400.52 Official record; public access.
400.53 Information.
Authority: Foreign-Trade Zones Act of June 18, 1934 (Pub. L. 397, 73rd
Congress; 48 Stat. 998-1003; 19 U.S.C. 81a-81u), as amended by Pub. L.
566, 81st Congress, approved June 17, 1950 (64 Stat. 246); Pub. L. 791,
85th Congress, approved August 28, 1958 (72 Stat. 945); Pub. L. 98-573,
98th Cong., Sec. 231, approved October 30, 1984 (98 Stat. 2991); and, Pub.
L. 99-386, 99th Congress, approved August 22, 1986.
Subpart A -- Scope and Definitions
@ 400.1 Scope.
(a) This part sets forth the regulations and rules of practice and
procedure of the Foreign-Trade Zones Board with regard to foreign-trade
zones in the United States pursuant to the Foreign-Trade Zones Act of
1934, as amended (19 U.S.C. 81a-u).
(b) Part 146 of the regulations of the United States Customs Service
(19 CFR part 146) governs zone operations, including the admission of
merchandise into a zone, its storage, manipulation, manufacture, or
exhibition in a zone, and its exportation or transfer from a zone.
(c) To the extent "activated" under Customs procedures in 19 CFR part
146, zone projects are considered outside the Customs territory of the
United States. Under zone procedures, foreign and domestic merchandise may
be admitted into zones for operations such as storage, exhibition,
assembly, manufacture and processing, without being subject to formal
Customs entry procedures and payment of duties, unless and until the
foreign merchandise enters Customs territory for domestic consumption. At
that time, the importer ordinarily has a choice of paying duties either at
the rate applicable to the foreign material in its condition as admitted
into a zone, or if used in manufacture or processed, to the finished
product. Quota restrictions do not normally apply to foreign goods in
zones, but the Board can limit or deny zone use in specific cases on
public interest grounds. Merchandise moved into zones for export (zone-
restricted status) may be considered exported for purposes such as federal
excise tax rebates and drawback upon admission to the zone. Foreign
merchandise (tangible personal property) and merchandise in zone-
restricted status, in activated zone space for bona fide customs reasons,
are exempt from state and local ad valorem taxes.
@ 400.2 Definitions.
(a) Act means the Foreign-Trade Zones Act of 1934, as amended.
(b) Board means the Foreign-Trade Zones Board, which consists of the
Secretary of the Department of Commerce (chairman), the Secretary of the
Treasury, and the Secretary of the Army, or their designated alternates.
(c) Customs Service means the United States Customs Service of the
Department of the Treasury.
(d) District Director is the director of Customs for the Customs
district in which a zone or proposed zone is located.
(e) District Engineer is the engineer of the Department of the Army in
whose district a zone or proposed zone is located.
(f) Executive Secretary is the Executive Secretary of the Foreign-Trade
Zones Board.
(g) Foreign-trade zone is a restricted-access site, in or adjacent to a
Customs port of entry, operated pursuant to public utility principles under
the sponsorship of a corporation granted authority by the Board and under
supervision of the Customs Service. Only those portions of a zone that
are "activated" under Customs procedures are considered to be outside the
Customs territory of the United States.
(h) Grant of Authority is a document issued by the Board which
authorizes a zone grantee to establish, operate and maintain a zone
project, consistent with limitations and conditions specified in this part
and in 19 CFR part 146. The authority to establish a zone includes the
authority to operate and the responsibility to maintain it.
(i) Manufacturing, as used in this part, means any activity involving
foreign merchandise admitted into a zone which results in a change in its
Customs classification or in its eligibility for entry for consumption.
(j) Port of entry means a port of entry in the United States, as defined
by part 101 of the regulations of the Customs Service (19 CFR part 101), or
a user fee airport authorized under 19 U.S.C. 58b and listed in part 122
of the regulations of the Customs Service (19 CFR part 122).
(k) Private corporation means any corporation, other than a public
corporation, which is organized for the purpose of establishing a zone
project and which is chartered for this purpose under a law of the state
in which the zone is located.
(l) Public corporation means a state, a political subdivision (including
a municipality) or public agency thereof, or a corporate municipal
instrumentality of one or more states.
(m) Regional Commissioner is the Regional Commissioner of Customs for
the Customs region in which the zone is located.
(n) State includes any state of the United States, the District of
Columbia, and Puerto Rico.
(o) Subzone means a special-purpose zone established as an adjunct to a
zone project for a limited purpose.
(p) Zone means a foreign-trade zone established under the provisions of
the Act and these regulations. Where used in this part, the term also
includes subzones, unless the context indicates otherwise.
(q) Zone grantee is the corporate recipient of a grant of authority for
a zone project. Where used in this part, the term "grantee" means "zone
grantee" unless otherwise indicated.
(r) Zone operator is a corporation, partnership, or person that operates
a zone or subzone under the terms of an agreement with the zone grantee or
an intermediary entity, with the concurrence of the District Director.
(s) Zone project means the zone plan, including all of the zone and
subzone sites that the Board authorizes a single grantee to establish.
(t) Zone site means the physical location of a zone or subzone.
(u) Zone user is a party using a zone under agreement with the zone
grantee or operator.
Subpart B -- Foreign-Trade Zones Board
@ 400.11 Authority of the Board.
(a) In general. In accordance with the Act and procedures of this part,
the Board has authority to:
(1) Prescribe rules and regulations concerning zones;
(2) Issue grants of authority for zones and subzones, and approve
modifications to the original zone project;
(3) Approve manufacturing activity in zones and subzones as described
in subpart D of this part;
(4) Make determinations on matters requiring Board decisions under this
part;
(5) Decide appeals of decisions of the Executive Secretary;
(6) Inspect the premises, operations and accounts of zone grantees and
operators;
(7) Require zone grantees to report on zone operations and finances;
(8) Report annually to the Congress on zone operations;
(9) Restrict or prohibit zone operations;
(10) Impose fines for violations of the Act and the regulations;
(11) Revoke grants of authority for cause; and,
(12) Determine, as appropriate, whether specific zone operations are or
would be detrimental to the public interest.
(b) Authority of the Chairman of the Board. The Chairman of the Board
(Secretary of the Department of Commerce) has the authority to:
(1) Appoint the Executive Secretary of the Board;
(2) Call meetings of the Board, with reasonable notice given to each
member; and
(3) Submit to the Congress the Board's annual report as prepared by the
Executive Secretary.
(c) Alternates. Each member of the Board will designate an alternate
with authority to act in an official capacity for that member.
(d) Determinations of the Board. (1) The determinations of the Board
will be based on the majority vote of the members (or alternate members)
of the Board, provided that a quorum, composed of the Secretaries of the
Departments of Commerce and Treasury (or their alternates), is voting.
(2) All votes will be recorded.
(3) The Board will issue its determination in proceedings under the
regulations in the form of a Board order.
@ 400.12 Authority of the Executive Secretary.
The Executive Secretary has authority to:
(a) Represent the Board in administrative, regulatory, operational,
and public affairs matters;
(b) Serve as director of the Commerce Department's Foreign-Trade Zones
staff;
(c) Execute and implement orders of the Board;
(d) Arrange meetings and circulation of action documents for the Board;
(e) Maintain custody of the seal, records, files and correspondence of
the Board, with disposition subject to the regulations of the Department
of Commerce;
(f) Authorize the return of "zone-restricted merchandise" valued at
less than 100,000 dollars for entry into Customs territory under @ 400.44;
(g) Authorize minor modifications to zone projects under @ 400.27(c);
(h) Prohibit or restrict activity found to be detrimental to the public
interest under @ 400.43;
(i) Authorize certain duty-paid retail trade as provided in @ 400.45;
(j) Determine subzone sponsorship questions as provided in @ 400.22(d);
(k) Accept rate schedules and determine their reasonableness as
provided in @ 400.42(b);
(l) Determine the format for the annual reports of zone grantees to the
Board;
(m) Prepare an annual report for the Board's submission to the
Congress based upon the reports of zone grantees;
(n) Arrange with other sections of the Department of Commerce, Board
agencies and other governmental agencies for studies and comments on zone
issues and proposals; and
(o) Designate an acting Executive Secretary.
@ 400.13 Board Headquarters.
The headquarters of the Board is located within the U.S. Department of
Commerce (Herbert C. Hoover Building), Pennsylvania Avenue and 14th Street,
NW., Washington, DC 20230, as part of the office of the Foreign-Trade
Zones staff.
Subpart C -- Establishment and Modification of Zone Projects
@ 400.21 Number and location of zones and subzones.
(a) Number of zone projects -- Port of entry entitlement. (1) Provided
that the other requirements of this subpart are met:
(i) Each port of entry is entitled to at least one zone project;
(ii) If a port of entry is located in more than one state, each of the
states in which the port of entry is located is entitled to a zone
project; and,
(iii) If a port of entry is defined to include more than one city
separated by a navigable waterway, each of the cities is entitled to a
zone project.
(2) Zone projects in addition to those approved under the entitlement
provision of paragraph (a)(1) of this section may be authorized by the
Board if it determines that existing project(s) will not adequately serve
the public interest (convenience of commerce).
(b) Location of zones and subzones -- port of entry adjacency
requirements. (1) The Act provides that the Board may approve "zones in
or adjacent to ports of entry" (19 U.S.C. 81b).
(2) The "adjacency" requirement is satisfied if:
(i) A zone or subzone is located within 35 statute miles from the outer
limits of a port of entry; or,
(ii) A zone or subzone can be reached within one hour's driving time
from the nearest Customs office.
@ 400.22 Eligible applicants.
(a) In general. Subject to the other provisions of this section,
public or private corporations may apply for a grant of authority to
establish a zone project. The Board will give preference to public
corporations.
(b) Public and non-profit corporations. The eligibility of public and
non-profit corporations to apply for a grant of authority shall be
supported by enabling legislation of the legislature of the state in which
the zone is to be located, indicating that the corporation, individually
or as part of a class, is authorized to so apply.
(c) Private for-profit corporations. The eligibility of private for-
profit corporations to apply for a grant of authority shall be supported
by a special act of the state legislature naming the applicant corporation
and by evidence indicating that the corporation is chartered for the
purpose of establishing a zone.
(d) Applicants for subzones -- (1) Eligibility. The following
corporations are eligible to apply for a grant of authority to establish
a subzone:
(i) The zone grantee of the closest zone project in the same state;
(ii) The zone grantee of another zone in the same state, which is a
public corporation, if the Board, or the Executive Secretary, finds that
such sponsorship better serves the public interest; or,
(iii) A state agency specifically authorized to submit such an
application by an act of the state legislature.
(2) Complaints. If an application is submitted under paragraph (d)(1)
(ii) or (d)(1)(iii) of this section, the Executive Secretary will:
(i) Notify, in writing, the grantee specified in paragraph (d)(1)(i)
of this section, who may, within 30 days, object to such sponsorship, in
writing, with supporting information as to why the public interest would
be better served by its acting as sponsor.
(ii) Review such objections prior to filing the application to
determine whether the proposed sponsorship is in the public interest,
taking into account:
(A) The complaining zone's structure and operation;
(B) The views of state and local public agencies; and,
(C) The views of the proposed subzone operator.
(iii) Notify the applicant and complainants in writing of the Executive
Secretary's determination.
(iv) The application will be filed if the Executive Secretary determines
that the proposed sponsorship is in the public interest.
@ 400.23 Criteria for grants of authority for zones and subzones.
(a) Zones. The Board will consider the following factors in determining
whether to issue a grant of authority for a zone project:
(1) The need for zone services in the port of entry area, taking into
account existing as well as projected international trade related
activities and employment impact;
(2) The adequacy of the operational and financial plans and the
suitability of the proposed sites and facilities, with justification for
duplicative sites;
(3) The extent of state and local government support, as indicated by
the compatibility of the zone project with the community's master plan or
stated goals for economic development and the views of state and local
public officials involved in economic development. Such officials shall
avoid commitments that anticipate outcome of Board decisions;
(4) The views of persons and firms likely to be affected by proposed
zone activity; and,
(5) If the proposal involves manufacturing, the criteria in @ 400.31(b).
(b) Subzones. In reviewing proposals for subzones the Board will also
consider:
(1) Whether the operation could be located in or otherwise accommodated
by the multi-purpose facilities of the zone project serving the area;
(2) The specific zone benefits sought, and whether other more
appropriate means or remedies are available; and,
(3) Whether the proposed activity is in the public interest, taking
into account the criteria in @ 400.31(b).
@ 400.24 Application for zone.
(a) In general. An application for a grant of authority to establish
a zone project shall consist of a transmittal letter, an executive summary
and five exhibits.
(b) Letter of transmittal. The transmittal letter shall be currently
dated and signed by an authorized officer of the corporation and bear the
corporate seal.
(c) Executive summary. The executive summary shall describe:
(1) The corporation's legal authority to apply;
(2) The type of authority requested from the Board;
(3) The proposed zone site and facilities and the larger project of
which the zone is a part;
(4) The project background, including surveys and studies;
(5) The relationship of the project to the community's and state's
overall economic development plans and objectives;
(6) The plans for operating and financing the project; and,
(7) Any additional pertinent information needed for a complete summary
description of the proposal.
(d) Exhibits.
(1) Exhibit One (Legal Authority for the Application) shall consist of:
(i) A certified copy of the state enabling legislation described in
@ 400.22;
(ii) A copy of pertinent sections of the applicant's charter or
organization papers; and,
(iii) A certified copy of the resolution of the governing body of the
corporation authorizing the official signing the application.
(2) Exhibit Two (Site Description) shall consist of:
(i) A detailed description of the zone site, including size, location,
address, and a legal description of the area proposed for approval; a
table with site designations shall be included when more than one site is
involved;
(ii) A summary description of the larger project of which the zone is
a part, including type, size, location and address;
(iii) A statement as to whether the zone is within or adjacent to a
customs port of entry;
(iv) A description of zone facilities and services, including
dimensions and types of existing and proposed structures;
(v) A description of existing or proposed site qualifications
including: land-use zoning, relationship to flood-plain, infrastructure,
utilities, security, and access to transportation services;
(vi) A description of current activities carried on in or contiguous
to the project;
(vii) If part of a port facility, a summary of port and transportation
services and facilities; if not, a description of transportation systems
indicating connections from local and regional points of arrival to the
zone; and,
(viii) A statement as to the possibilities and plans for zone expansion.
(3) Exhibit Three (Operation and Financing) shall consist of:
(i) A statement as to site ownership; if not owned by the applicant or
proposed operator, evidence as to their legal right to use the site;
(ii) A discussion of the operational plan; if the zone or a portion
thereof is to be operated by other than the grantee, a summary of the
selection process used or to be used, the type of operation agreement and,
if available, the name and qualifications of the proposed operator;
(iii) A brief explanation of the plans for providing facilities,
physical security, and for satisfying the requirements for Customs
automated systems;
(iv) A summary of the plans for financing capital and operating costs,
including a statement as to the source and use of funds;
(v) The estimated time schedule for construction and activation; and,
(vi) A summary of anticipated cash flow projections on an annual basis
for the first three years of operation.
(4) Exhibit Four (Economic Justification) shall include:
(i) A statement of the community's overall economic goals and
strategies in relation to those of the region and state;
(ii) A reference to the plan or plans on which the goals are based
and how they relate to the zone project;
(iii) An economic profile of the community including identification and
discussion of dominant sectors in terms of percentage of employment or
income, area resources and problems, economic imbalances, unemployment
rates, area foreign trade statistics, and area port facilities and
transportation networks;
(iv) A statement as to the role and objective of the zone project, and
a justification for each of the proposed sites;
(v) A discussion of the anticipated economic impact, direct and
indirect, of the zone project, including references to public costs and
benefits, employment, the U.S. balance of trade, and environmental impact;
(vi) A statement as to the need for zone services in the community,
with information on surveys of business, and specific expressions of
interest from proposed zone users, with letters of intent from those
firms that are considered prime prospects; and,
(vii) A description of proposed manufacturing and processing
operations, if applicable, with information covering the factors described
in @ 400.31(b), including the nature and scope of the operation and
production process, materials and components used, items to be foreign
sourced with relevant tariff information, zone benefits anticipated and
how they will affect the firm's plans, and the economic impact of the
operation on the community and on affected domestic industries.
(5) Exhibit Five (Maps) shall consist of:
(i) State and county maps showing the general location of the zone in
terms of the area's transportation network;
(ii) A U.S. Geodetic Survey map or the equivalent showing in red the
location of the proposed zone; and,
(iii) A detailed blueprint of the zone or subzone area showing zone
boundaries in red, with dimensions and metes and bounds, or other legal
description, and showing existing and proposed structures.
(e) Additional information. The Board or the Executive Secretary may
require additional information needed to adequately evaluate a proposal.
(f) Amendment of application. The Board or the Executive Secretary may
allow amendment of the application.
(g) Drafts. Applicants may submit a draft application to the Executive
Secretary for review.
(h) Format and number of copies. Unless the Executive Secretary alters
the requirements of this paragraph, submit an original and 12 copies of
the application on 8" X 11" paper. Exhibit Five of the original
application shall contain full-sized maps, and copies shall contain
letter-sized reductions.
(i) Where to file. Address and mail the application to the Secretary of
Commerce, Attention: Executive Secretary, Foreign-Trade Zones Board, U.S.
Department of Commerce, Pennsylvania Avenue and 14th Street, NW.,
Washington, DC 20230.
(Approved by the Office of Management and Budget under control number
0625-0139)
@ 400.25 Application for subzone.
(a) In general. An application to establish a subzone as part of a
proposed or existing zone shall be submitted in accordance with the format
in @ 400.24, except that the focus of the information provided in Exhibit
Four shall be on the specific activity involved and its net economic
effect. The information submitted in Exhibit Four shall include:
(1) A summary as to the reasons for the subzone and an explanation of
its anticipated economic effects;
(2) Identity of the subzone user and its corporate affiliation;
(3) Description of the proposed activity, including:
(i) Products;
(ii) Materials and Components;
(iii) Sourcing plans (domestic/foreign);
(iv) Tariff rates and other import requirements or restrictions;
(v) Information to assist the Board in making a determination under
@ 400.31(b)(1)(iii);
(vi)Benefits to subzone user;
(vii) Which other procedures or means have been considered to obtain the
benefits sought;
(viii) Information as to industry involved and extent of international
competition; and,
(ix) Economic impact of the operation on the area.
(4) Reason operation cannot be conducted within a general-purpose zone;
(5) Statement as to environmental impact; and,
(6) Additional information requested by the Board or the Executive
Secretary if needed to conduct the review. Executive Secretary may issue
guidelines to assist applicants in providing foregoing information.
(b) Burden of proof. An applicant for a subzone must demonstrate to
the Board that the proposed operation satisfies the criteria in @
400.23(b). (Approved by the Office of Management and Budget under control
number 0625-0139)
@ 400.26 Application for expansion or other modification to zone
project.
(a) In general. (1) A grantee may apply to the Board for authority to
expand or otherwise modify its zone project.
(2) The Executive Secretary, in consultation with the District
Director, will determine whether the proposed modification involves a
major change in the zone plan and is thus subject to paragraph (b) of
this section, or is minor and subject to paragraph (C) of this section.
In making this determination the Executive Secretary will consider the
extent to which the proposed modification would:
(i) Substantially modify the plan originally approved by the Board;
and,
(ii) Expand the physical dimensions of the approved zone area as
related to the scope of operations envisioned in the original plan.
(b) Major modification to zone project. An application for a major
modification to an approved zone project shall be submitted in accordance
with the format in @ 400.24, except that:
(1) Reference may be made to current information in an application from
the same applicant on file with the Board; and,
(2) The content of Exhibit Four shall relate specifically to the
proposed change.
(c) Minor modification to zone project. Other applications or requests
under this subpart, including those for minor revisions of zone boundaries,
grant of authority transfers, or time extensions, shall be submitted in
letter form with information and documentation necessary for analysis, as
determined by the Executive Secretary, who shall determine whether the
proposed change is a minor one subject to this paragraph (c) rather than
paragraph (b) of this section.
(Approved by the Office of Management and Budget under control number
0625-0139)
@ 400.27 Procedure for reviewing and processing application.
(a) Sufficiency of application. The Executive Secretary will determine
whether an application submitted under @@ 400.24-400.26 satisfies the
requirements of those sections.
(1) If the application is deficient, the Executive Secretary will
inform the applicant.
(2) If the application is sufficient, the Executive Secretary will:
(i) File the application, thus initiating a proceeding or review;
(ii) Assign a case docket number in cases requiring a Board order; and,
(iii) Notify the applicant.
(b) Procedure -- in general. Upon initiating a proceeding based on an
application under @@ 400.24-400.26(b) the Executive Secretary will:
(1) Designate an examiner to conduct a review and prepare a report with
recommendations for the Board;
(2) Publish in the Federal Register a notice of the application which
includes the name of the applicant, a description of the zone project, and
an invitation for public comment, including a time limit for the public
to submit factual information and written arguments;
(3) Send a copy of the notice and application to:
(i) The Regional Commissioner (Customs), or a designee; and,
(ii) The District Engineer (Army).
(4) Arrange, as appropriate, a public hearing in the community in which
the zone project is located and any other public or closed hearing that
the Board deems appropriate. Comments from interested parties may include
requests for a public hearing if one has not been scheduled;
(5) Transmit the reports and recommendations of the examiner and of the
officials identified in paragraph (b)(3) of this section to the Board for
appropriate action; and,
(6) Notify the applicant in writing and publish notice in the Federal
Register of the Board's determination.
(c) Customs and army engineer review. The Regional Commissioner
(Customs), or designee, and the District Engineer (Army) shall submit
their reports to the Executive Secretary within 45 days of the conclusion
of the period described in paragraph (b)(2) of this section.
(d) Procedure -- Application for minor modification of zone project.
(1) The Executive Secretary will make a determination in cases under
@ 400.26(c) involving minor changes to zone projects that do not require
a Board order, such as boundary modifications, including certain
relocations, and will notify the applicant in writing of the decision.
(2) The concurrence of the District Director is required for approvals
under paragraph (d)(1) of this section.
@ 400.28 Conditions, prohibitions and restrictions applicable to grants
of authority.
(a) In general. Grants of authority issued by the Board for the
establishment of zones or subzones, including those already issued, are
subject to the Act and this part and the following general conditions or
limitations:
(1) Approvals from the grantee and the District Director, pursuant to
19 CFR Part 146, are required prior to the activation of any portion of
an approved zone project.
(2) Approval of the Board or the Commerce Department's Assistant
Secretary for Enforcement and Compliance pursuant to subpart D of this part
is required prior to the commencement of manufacturing operations not
approved as part of the application, and before approved zone
manufacturing activity is changed to include new foreign articles subject
to tariffs higher than those on the product in which they are incorporated.
(3) Prior to activation of a zone, the zone grantee or operator shall
obtain all necessary permits from federal, state and local authorities,
and except as otherwise specified in the Act or this part, shall comply
with the requirements of those authorities.
(4) A grant of authority shall lapse unless the zone project is
activated, pursuant to 19 CFR Part 146, and in operation not later than
five year from:
(i) A Board order issued after the effective date of this final rule;
or,
(ii) The effective date of this final rule.
(5) A grant of authority approved under this subpart includes
authority for the grantee to permit the erection of buildings necessary
to carry out the approved zone project subject to concurrence of the
District Director.
(6) Zone grantee, operators, and users shall permit federal government
officials acting in an official capacity to have access to the zone project
and records during normal business hours and under other reasonable
circumstances.
(7) A grant of authority may not be sold, conveyed, transferred, set
over, or assigned. Private ownership of zone land and facilities is
permitted provided the zone grantee retains the control necessary to
implement the approved zone project. Should title to land or facilities
be transferred after a grant of authority is issued, the zone grantee
must retain, by agreement with the new owner, a level of control which
allows the grantee to carry out its responsibilities as grantee. The sale
of a zone site or facility for more than its fair market value without
zone status shall be considered a transfer in violation of the Act.
(8) A grant of authority will not be construed to make the zone grantee
automatically liable for violations by operators, users, or other parties.
(b) Additional conditions, prohibitions and restrictions. Other
requirements, conditions or restrictions under federal, state or local
law may apply to the grant of authority.
@ 400.29 Revocation of grants of authority.
(a) In general. As provided in this section, the Board can revoke in
whole or in part a grant of authority for a general-purpose zone whenever
it determines that the zone grantee has violated, repeatedly and
willfully, the provisions of the Act.
(b) Procedure. When the Board has reason to believe that the conditions
for revocation, as described in paragraph (a) of this section, are met,
the Board will:
(1) Notify the zone grantee in writing stating the nature of the alleged
violations, and provide the zone grantee an opportunity to request a
hearing on the proposed revocation;
(2) Conduct a hearing, if requested or otherwise if appropriate;
(3) Make a determination on the record of the proceeding not earlier
than 4 months after providing notice to the zone grantee under paragraph
(b)(1) of this section; and,
(4) If the Board's determination is affirmative, publish notice of
revocation of the grant of authority in the Federal Register.
(c) As provided in section 18 of the Act (19 U.S.C. 81r(c)), the zone
grantee may appeal an order of the Board revoking the grant of authority.
(d) Subzones. The Board can revoke in whole or in part the grant of
authority for a subzone upon finding that any special condition of the
grant, or the Board order issued on the grant, has not been met. The
grantee will be given 30 days notice and an opportunity to submit
evidence and comments prior to a final decision by the Board in these
cases.
Subpart D -- Criteria for Reviewing Manufacturing
@ 400.31 Manufacturing operations; criteria.
(a) In general. Pursuant to section 15(c) of the Act (19 U.S.C.
81o(c)), the Board has authority to restrict or prohibit zone activity
"that in its judgment is detrimental to the public interest." In
evaluating zone and subzone manufacturing activity, either as proposed in
an application or as part of a review of an ongoing operation, the Board
shall determine whether the activity in question is in the public interest
by reviewing the evaluation criteria contained in paragraph (b) of this
section. Such a review involves consideration of whether the activity is
consistent with trade policy and programs, and whether its net economic
effect is positive.
(b) Evaluation criteria -- (1) Threshold factors. It is the policy of
the Board to authorize zone activity only when it is consistent with
public policy and does not encourage imports. Thus, before authorizing
proposed manufacturing activity or in its review of ongoing manufacturing,
the Board shall determine that there is no significant evidence that:
(i) The activity is not consistent with U.S. trade and tariff policy;
(ii) The use of zone procedures would likely diminish the effectiveness
of a U.S. international trade program; and,
(iii) If the activity involves items subject to inverted tariffs, that
there is or will be a net increase of imports of items on which the duty
rate would be reduced under zone procedures as a result of such a
reduction.
(2) Economic factors. After its review of threshold factors, if there
is a basis for further consideration, the Board shall consider the
following economic factors:
(i) Overall employment impact;
(ii) Exports and reexports;
(iii) Retention or creation of manufacturing activity;
(iv) Extent of increased value-added activity on imports;
(v) Overall effect on import levels of relevant products;
(vi) Extent and nature of foreign competition in relevant products;
(vii) Impact on related domestic industry; and,
(viii) Other relevant information relating to net economic impact.
(c) Methodology and evidence -- (1) Two-tier review. Reviews
generally entail a two-step process.
(i) Threshold phase. The first phase (@ 400.31(b)(1)) involves
consideration of threshold factors. If an examiner makes a negative
finding on any of the factors in @ 400.31(b)(1) in the course of a
review, the applicant shall be informed and have an opportunity to amend
its application within 30 days. If the Board determines any of the
@ 400.31(b)(1) factors in the negative, it shall deny or restrict
authority for the proposed or ongoing activity.
(ii) Economic effect/perspective. In reviewing the economic factors
during the second phase, the Board considers the net economic effect from
both a local/regional and national/global perspective, that includes
consideration of the overall effect on related domestic industries
(finished products, components, materials) and U.S. employment.
(2) Inverted tariffs. In reviewing factors involving items subject to
inverted tariffs a major consideration is whether the choice of lower
tariff rates would likely prolong or increase imports of components (@
400.31(b)(1)(iii)); and, if such a casual effect is found, the Board
shall prohibit or restrict the proposed activity accordingly.
(3) Transplant manufacturing. When proposed activity involves a shift
of production from abroad to the United States, the review shall consider
sourcing plans for components and materials, to include short- and long-
term projections on all components subject to inverted tariffs.
(4) Contributory effect. In assessing the significance of zone
operations, the Board shall consider the contributory effect zone savings
have as an incremental part of cost effectiveness programs adopted by
companies to improve their international competitiveness.
(5) Burden of proof. Applicants for subzones and for clearance for
manufacturing activity not having a precedent in Board decisions shall
have the burden of proof of establishing with substantial evidence that
the operation is in the public interest under this section. All interested
parties are encouraged to submit substantive evidence relating to any of
the threshold factors, particularly in regard to @ 400.31(b)(1)(iii).
(d) Monitoring and post-approval reviews. (1) Approved manufacturing
activity remains subject to review under this section at any time.
(2) Reviews may be initiated by the Board, or they may be undertaken in
response to requests from interested parties showing good cause.
(3) Upon review, if the Board finds that zone activity is no longer in
the public interest under this section, it may suspend subzone status, or
terminate or restrict the activity in question.
@ 400.32 Procedure for submission and review of request for approval of
manufacturing.
(a) Request as part of application for grant of authority. A request for
approval of a proposed manufacturing operation may be submitted as part
of an application under @@ 400.24-400.26(a). The Board will review the
request taking into account the criteria in @ 400.31(b).
(b) Request for manufacturing in approved zone or subzone. Prior to
the commencement of a manufacturing operation not approved as part of
the application for the zone or subzone in which the activity is to be
located, zone grantees or operators shall request the approvals described
in @ 400.31(a) by submitting a request in writing to the Executive
Secretary. Requests for such approval shall contain the information
required by @ 400.24(d)(4)(vii).
(1) The Commerce Department's Assistant Secretary for Import
Administration may make determinations under @ 400.31(a) based upon a
review by the FTZ staff, when:
(i) The proposed activity is similar to activity recently approved
by the Board in terms of merchandise and circumstances; or,
(ii) The activity is for export only; or,
(iii) The zone benefits sought are limited to duty deferral.
(2) When the informal procedure in paragraph (b)(1) of this section is
not appropriate,
(i) The Executive Secretary will:
(A) Assign a case docket number and give notice in the Federal Register
inviting public comment;
(B) Arrange a public hearing, if appropriate;
(C) Appoint an examiner, if appropriate, to conduct a review and
prepare a report with recommendations for the Board; and,
(D) Prepare and transmit a report with recommendations, or transmit the
examiners report, to the Board for appropriate action; and,
(ii) The Board will make a determination on the requests, and the
Executive Secretary will notify the grantee in writing of the Board's
determination, and will publish notice of the determination in the
Federal Register.
@ 400.33 Restrictions on manufacturing activity.
(a) In general. In approving manufacturing activity for a zone or
subzone the Board may adopt restrictions to protect the public interest,
health, or safety. The Commerce Department's Assistant Secretary for
Enforcement and Compliance may similarly adopt restrictions in exercising
authority under @ 400.32(b)(1).
(b) Restrictions on items subject to antidumping and countervailing
duty actions -- (1) Board policy. Zone procedures shall not be used to
circumvent antidumping (AD) and countervailing duty (CVD) actions under
19 CFR Parts 353 and 355.
(2) Admission of items subject to AD/CVD actions. Items subject to
AD/CVD orders or suspension of liquidation under AD/CVD procedures shall
be placed in privileged foreign status (19 CFR @ 146.41) upon admission
to a zone or subzone.
(3) Entry for consumption. Any such items entered for consumption into
the Customs territory of the United States (either in their original or
in an altered condition) shall be subject to duties under AD/CVD orders
or to suspensions of liquidation if applicable under 19 CFR parts 353 and
355 at the time of such entry.
Subpart E -- Zone Operations and Administrative Requirements
@ 400.41 Zone operations; general.
Zones shall be operated by or under the contractual oversight of zone
grantees, subject to the requirements of the Act and this part, as well
as those of other federal, state and local agencies having jurisdiction
over the site and operation. Zone grantees shall ensure that the
reasonable zone needs of the business community are served by their zone
projects. The District Director represents the Board with regard to the
zone projects in the district and is responsible for enforcement,
including physical security and access requirements, as provided in 19
CFR part 146.
@ 400.42 Requirements for commencement of operations in zone project.
(a) In general. The following actions are required before operations
in a zone may commence:
(1) Approval by the District Director of an application for activation
is required as provided in 19 CFR part 146; and,
(2) The Executive Secretary will review proposed manufacturing,
pursuant to @ 400.32, and zone schedule as provided in this section.
(b) Zone schedule. (1) The zone grantee shall submit to the Executive
Secretary and to the District Director a zone schedule which sets forth:
(i) Internal rules and regulations for the zone; and,
(ii) A statement of the rates and charges (fees) applicable to zone
users.
(2) A zone schedule shall consist of typed, loose-leaf, numbered,
letter-sized pages, enclosed in covers, and shall contain:
(i) A title page, with information to include:
(A) The name of the zone grantee and operator(s);
(B) Schedule identification;
(C) Site description;
(D) Date of original schedule; and,
(E) Name of the preparer;
(ii) A table of contents;
(iii) Administrative information;
(iv) A statement of zone operating policy, rules and regulations,
including uniform procedures regarding the construction of buildings
and facilities; and,
(v) A section listing rates and charges for zones and subzones with
information sufficient for the Board or the Executive Secretary to
determine whether the rates and charges are reasonable based on other
like operations in the port of entry area, and whether there is uniform
treatment under like circumstances among zone users.
(3) The Executive Secretary will review the schedule to determine
whether it contains sufficient information for users concerning the
operation of the facility and a statement of rates and charges as provided
in paragraph (b)(2) of this section. If the Executive Secretary determines
that the schedule satisfies these requirements, the Executive Secretary
will notify the zone grantee, unless there is a basis for review under
paragraph (b)(5) of this section. A copy of the schedule shall be
available for public inspection at the offices of the zone grantee and
operator. The zone grantee shall send a copy of the District Director,
who may submit comments to the Executive Secretary.
(4) Amendments to the schedule shall be prepared and submitted in the
manner described in paragraphs (b)(1) through (b)(3) of this section, and
listed in the concluding section of the schedule, with dates.
(5) A zone user or prospective user having a bona fide interest in
using a zone may object to the zone or subzone fee on the basis that it
is not reasonable, fair and uniform, by submitting to the Executive
Secretary a complaint in writing with supporting information. The
Executive Secretary will review the complaint and issue a report and
decision, which will be final unless appealed to the Board within 30 days.
The Board or the Executive Secretary may otherwise initiate a review for
cause. The factors considered in reviewing reasonableness and fairness,
will include:
(i) The going-rates and charges for like operations in the area and the
extra costs of operating a zone, including return on investment; and,
(ii) In the case of subzones, the value of actual services rendered by
the zone grantee or operator, and reasonable out-of-pocket expenses.
@ 400.43 Restriction and prohibition of certain zone operations.
(a) In general. After review, the Board or the Executive Secretary, as
appropriate, may restrict or prohibit any admission of merchandise into a
zone project or operation in a zone project when it determines that such
activity is detrimental to the public interest, health or safety.
(b) Initiation of review. The Board may conduct a proceeding, or the
Executive Secretary a review, to consider a restriction or prohibition
under paragraph (a) of this section either self-initiated, or on a
complaint made to the Board by an adversely affected party.
@ 400.44 Zone-restricted merchandise.
(a) In general. Merchandise which has been given export status by
Customs officials ("zone-restricted merchandise", 19 CFR part 146) may be
returned to the Customs Territory of the United States only when the
Board determines that the return would be in the public interest.
(b) Criteria. In making the determination described in paragraph (a)
of this section, the Board will consider:
(1) The intent of the parties;
(2) Why the goods cannot be exported;
(3) The public benefit involved in allowing their return; and,
(4) The recommendation of the District Director.
(c) Procedure. (1) A request for authority to return "zone-restricted"
merchandise into Customs territory shall be made to the Executive Secretary
in letter form by the zone grantee or operator of the zone in which the
merchandise is located, with supporting information and documentation.
(2) The Executive Secretary will investigate the request and prepare a
report for the Board.
(3) The Executive Secretary may act for the Board under this section in
cases involving merchandise valued at less than 100,000 dollars, provided
approvals have the concurrence of the District Director.
@ 400.45 Retail trade.
(a) In general. Retail trade is prohibited in zones, except that sales
or other commercial activity involving domestic, duty-paid, and duty-free
goods may be conducted within an activated zone project under permits
issued by the zone grantee and approved by the Board. The District
Director will determine whether an activity is retail trade.
(b) Procedure. (1) The District Director or a representative is
authorized to approve sales involving domestic, duty-paid or duty-free
food products sold within the zone or subzone for consumption on premises
by persons working therein.
(2) Other requests for Board approval under this section shall be
submitted in letter form, with supporting documentation, to the Executive
Secretary, who is authorized to act for the Board in these cases.
(c) Criteria. In evaluating requests for approval under this section
the Executive Secretary will consider:
(1) Whether any public benefits would result from approval; and,
(2) The economic effect such activity would have on the retail trade
outside the zone in the port of entry area.
@ 400.46 Accounts, records and reports.
(a) Zone accounts. Zone accounts shall be maintained in accordance with
generally accepted standards of accounting, and in compliance with the
requirements of federal, state or local agencies having jurisdiction over
the site or operation.
(b) Records and forms. Zone records and forms shall be prepared and
maintained in accordance with the requirements of the Customs Service and
the Board.
(c) Maps and drawings. Zone grantees or operators, and District
Directors, shall keep current layout drawings of approved sites as
described in @ 400.24(d)(5), showing activated portions, and a file
showing required approvals. The zone grantee shall furnish necessary maps
to the District Director.
(d) Annual reports. (1) Zone grantees shall submit annual reports to
the Board at the time and in the format prescribed by the Executive
Secretary, for use by the Executive Secretary in the preparation of the
Board's annual report to the Congress.
(2) The Board shall submit an annual report to the Congress. (Approved
by the Office of Management and Budget under control number 0625-0109)
@ 400.47 Appeals to the Board from decisions of the Assistant Secretary
for Enforcement and Compliance and the Executive Secretary.
(a) In general. Decisions of the Assistant Secretary for Import
Administration and the Executive Secretary made pursuant to @@ 400.32(b)
(1), 400.33, 400.45(b)(2), and 400.22(d)(2)(ii) may be appealed to the
Board by adversely affected parties.
(b) Procedure. Parties appealing a decision under paragraph (a) of
this section shall submit a request for review to the Board in writing,
stating the basis for the request, and attaching a copy of the Executive
Secretary's decision, as well as supporting information and documentation.
After a review, the Board will notify the complaining party of its
decision in writing.
Subpart F -- Hearings, Record and Information
@ 400.51 Hearings.
(a) In general. The Board or the Executive Secretary, as appropriate,
may hold a public or closed hearing during any proceedings or reviews
conducted under this part whenever necessary or appropriate.
(b) Procedure for public hearings. The Board will publish notice in
the Federal Register of the date, time and location of the hearing. All
participants shall have the opportunity to make a presentation. Applicants
and their witnesses shall ordinarily appear first. The presiding officer
may adopt time limits for individual presentations.
@ 400.52 Official record; public access.
(a) Content. The Executive Secretary will maintain at the location
stated in @ 400.53(d) an official record of each proceeding within the
Board's jurisdiction. The Executive Secretary will include in the official
record all factual information, written argument, and other material
developed by, presented to, or obtained by the Board in connection with
the proceeding. The official record will contain material that is public,
business proprietary, privileged, and classified. While there is no
requirement that a verbatim record be kept of public hearings, the
proceedings of such hearings shall ordinarily be recorded and transcribed
when significant opposition is involved.
(b) Opening and closing of official record. The official record opens
on the date the Executive Secretary files an application or receives a
request that satisfies the applicable requirements of this part and
closes on the date of the Board's or the Executive Secretary's final
determination in the proceeding or review, as applicable. If the final
determination is published in the FEDERAL REGISTER, the record will close
on the date of publication.
(c) Protection of the official record. Unless otherwise ordered in a
particular case by the Executive Secretary, the official record will not
be removed from the Department of Commerce. A certified copy of the
record will be made available to any court before which any aspect of a
proceeding is under review, with appropriate safeguards to prevent
disclosure of proprietary or privileged information.
@ 400.53 Information.
(a) Request for information. The Board may request submission of any
information, including business proprietary information, and written
argument necessary or appropriate to the proceeding.
(b) Public information. Except as provided in paragraph (c) of this
section, the Board will consider all information submitted in a
proceeding to be public information. If the person submitting the
information does not agree to its public disclosure, the Board will
return the information and not consider it in the proceeding.
(c) Business proprietary information. Persons submitting business
proprietary information shall mark the top of each page "business
proprietary" if such information appears on that page and request Board
protection from public disclosure.
(d) Disclosure of submitted information. Disclosure of information
will be governed by 15 CFR part 4. Public information in the official
record will be available for inspection and copying at the Office of the
Executive Secretary, Foreign-Trade Zones Board, U.S. Department of
Commerce Building, Pennsylvania Avenue and 14th Street NW., Washington,
DC 20230.
Dated: January 19, 1990.
Eric I. Garfinkel,
Assistant Secretary for Enforcement and Compliance, Chairman,
Committee of Alternates,
Foreign-Trade Zones Board.
[FR Doc. 90-1688 Filed 1-25-90; 8:45 am]
BILLING CODE 3510-DS-M