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. 21222-0262]
RIN 0625-AA04
55 FR 48446
November 20, 1990
ACTION: Notice of proposed rulemaking; further amendments.
SUMMARY: The Foreign-Trade Zones Board (the Board) invites public comment
on amending the notice of proposed rulemaking published in the Federal
Register on January 26, 1990 (55 FR 2760-2770). It is proposed that 15 CFR
part 400 be further amended by revising certain sections of the January 26
proposed rule and by adding certain new provisions, including a new section
providing for the collection of user fees to cover the costs of processing
zone applications. The Board is asking for additional public comments on
these proposed amendments to the proposed rule because the changes cover
the sections that received most of the comments or that are of primary
interest to the public.
DATES: Comments must be received on or before January 9, 1991.
ADDRESSES: 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 4213, Washington, DC 20230.
(202) 377-2862. FOR FURTHER INFORMATION CONTACT: Stephen J. Powell,
Chief 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
The following discussion includes a brief summary of the comments
received pursuant to the January 26, 1990, notice of proposed rulemaking
and an explanatory note regarding the sections proposed to be added or
further revised:
1. Section 400.1(c). Several comments were received. Commenters objected
to the requirement that domestic goods would have to be placed in "zone
restricted" status and be in a zone for "bona fide" Customs reasons in
order to obtain the statutory exemption from state and local ad valorem
taxes.
Revised @ 400.1(c). It is proposed that reference to the foregoing
requirements be eliminated. In the case of domestic merchandise, the
statute authorizing the exemption (Pub. L. 98-573, 10/30/84) limits the
ad valorem tax exemption to such items placed in zones for export. The
requirement that "zone restricted" status be elected in such cases would
have facilitated enforcement, but it is not necessary. The legislative
history makes it clear that the use of zones must be for bona fide Customs
reasons both with regard to foreign or domestic merchandise, so it is not
necessary to restate this requirement in the regulations.
Also, it is proposed that the first two sentences of this paragraph be
rewritten to further clarify the interrelationship of zone sites and
Customs territory.
2. Section 400.21(b). Numerous comments were received in opposition to
the proposed restriction that would limit subzones to 35 statute miles
from the outer limits of a Customs port of entry or one hour's driving
time from the nearest Customs office. The opposition was strongest from
parties in states with many communities long distances from ports of entry.
Revised @ 400.21(b). It is proposed that the subzone locational
restriction be eliminated in terms of geographic distances from ports of
entry. The revised provision takes into account the fact that subzones are
single-user facilities for which Customs supervisory procedures can be
tailored to provide reasonable Customs access (thus, "adjacency")
irrespective of distance from ports of entry.
3. [New] Section 400.26(d). It is proposed that a new paragraph (d) be
added to @ 400.26 to extend its coverage of applications to formal requests
made to the Board for revisions to grants of authority. Because many
grants now contain special restrictions, the Board has been receiving more
requests for revisions based on changed circumstances.
4. Section 400.27. A few comments were received calling for time tables
for processing cases. Many additional comments generally expressed concern
about the length of the processing time for applications.
Revised @ 400.27. It is proposed that this section be revised
extensively to provide a time schedule based on the time allocated to
various stages of the application process. The objective is to complete
all cases within one year of formal filing, and to reach decisions on
those cases not involving manufacturing within 10 months. The guidelines
are not based on statutory requirements and therefore are directive, not
mandatory, insofar as they apply to the Board.
The revision also provides more detail as to procedures at the various
stages of processing. The period for public comment will normally close
followed by a 15-day period limited to rebuttal comments. Unfavorable
examiners reports would be considered "preliminary" reports, and applicants
would be given an opportunity to submit further evidence similar to
practice under the current regulations. If new material is submitted, the
record would be reopened for further public comment.
5. [New] Section 400.30. It is proposed to add a new section which
adopts a uniform system of fees to cover the Department of Commerce's
Foreign-Trade Zones staff costs for processing applications pursuant to 31
U.S.C. 9701, which provides that federal agencies should recover, to the
extent possible, direct and indirect costs for activities which convey
special benefits to recipients above and beyond those accruing to the
public at large. Concurrence for such user fees was received by the
Department of Commerce from OMB in connection with the FY 1991 budget
package of the Department of Commerce.
The fees are based on the average staff cost attributable to the types
of applications listed. Applications account for some 80 percent of FTZ
staff time. It is anticipated that applicants will pass on the costs of
these fees to the parties involved in using zones and subzones. The
question of collecting user fees to cover expenses incurred in regard to
ongoing zone activity remains under consideration.
Checks for payment of the fees must be included with applications.
Refunds will be made on those applications which do not pass the prefiling
review and are not formally filed. The outcome of the case does not affect
the requirement for payment.
6. Section 400.31. Numerous comments were received expressing concern
that this section creates stricter standards for approval of manufacturing
activity than are statutorily required. Most commenters supported the
delineation of criteria, but many considered the provision on policy too
vague. The provision's threshold test was opposed by many, who contended
that all manufacturing proposals should have the benefit of an economic
evaluation, even where there are policy issues. Some commenters argued
that the provisions referring to inverted tariff situations do not allow
for consideration of the positive net economic effect that stems from
production moves from overseas to the United States and import shifts from
finished products to components that are encouraged under zone procedures.
Concern was also expressed that provisions relating to transplant
operations and inverted tariffs might be inconsistent with U.S. GATT
obligations and with U.S. policy relating to foreign direct investment.
The provision on burden of proof was opposed by many as creating too
great a burden by requiring applicants to establish both the positive side
of their cases and the absence of negative factors.
Concern was expressed about the effect of monitoring existing
operations without cause.
Revised @ 400.31. It is proposed that the threshold provision
(@ 400.31(b)) be revised to clarify the provisions on policy
considerations, and to expand the scope of paragraph (iii) to include
items subject to quantitative controls, and clarify the latter subsection
to indicate that import displacement of components for finished products
would be considered in evaluating whether the use of zone procedures will
create imports, the purpose of paragraph (iii) as a threshold provision
being to cover only situations where zone procedures are or would likely
be the direct cause of new imports that would not otherwise occur.
Under @ 400.31(c) on methodology and evidence, it is proposed that
paragraph (c) be revised to delete the separate headings (c)(2) "inverted
tariffs" and (c)(3) "transplant manufacturing" because the paragraphs are
subject to a construction that conflicts with the section's substantive
coverage of inverted tariff situations and activity involving foreign
investment. The clarification of the substantive provisions makes the two
paragraphs unnecessary.
The provision on burden of proof (@ 400.31(c)(5)) is proposed to be
revised to acknowledge that an applicant's evidentiary burden of proof
should be to prove its side of the case, i.e., the public benefits that
would result from approval. A distinction is made that reflects the
current practice that subzone applicants must present evidence of a
significant public benefit. All applicants are expected to submit evidence
in response to evidence of possible adverse effects.
The provision on monitoring and post-approval reviews is proposed to
be revised to eliminate the indication that the review would occur as a
public interest determination under @ 400.31. Reviews of ongoing
operations are conducted under the Board's broad "public interest"
mandate, though the factors enumerated in @ 400.31 would still apply.
7. Section 400.33. Several commenters expressed opposition because the
section precludes Board consideration of special circumstances where items
subject to AD/CVD duties could otherwise escape such duties because they
were transformed in third countries. There were also expressions of
support for the provision, and a question was raised as to whether the
provision covers items subject to affirmative preliminary determinations.
Revised @ 400.33. Paragraphs (b)(2) and (b)(3) have been consolidated
into a revised paragraph (b)(2) to clarify the fact that the new
requirement applies to items that would be subject both to AD/CVD orders
and affirmative preliminary determinations if entered for consumption.
8. Section 400.51. There were a few comments on this section on the
need for more public hearings, particularly when U.S. industries might be
affected by zone proposals.
Revised @ 400.51. A new paragraph (b) has been proposed to provide for
requests from interested parties for hearings.
Comments
The period for the submission of comments will close January 9, 1991.
All comments received during this period will be considered by the Board
together with the comments submitted in response to the January 26, 1990,
notice 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 160 zone grantees
and some 60 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 not 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 recordkeeping 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 that the notice
of proposed rulemaking revising 15 CFR part 400 that appeared on January
26, 1990 (55 FR 2760-2770) be amended as follows:
PART 400 -- REGULATIONS OF THE FOREIGN-TRADE ZONES BOARD
1. The authority citation continues to read as follows:
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.
2. Section 400.1, as proposed January 26, 1990 (55 FR 2763) is further
amended by revising paragraph (c) to read as follows:
@ 400.1 Scope.
* * * * *
(c) To the extent "activated" under Customs procedures in 19 CFR part
146, and only for the limited purposes specified in the Act (19 U.S.C.
81(c)), zones are treated for purposes of the tariff laws and Customs
entry procedures as being outside the Customs territory of the United
States. Articles admitted into zones for purposes not specified in the
Act, including articles consumed within zones, shall be subject to the
tariff laws and regular entry procedures, including the payment of
applicable duties, taxes, and fees (see, Nissan Motor Mfg. Corp. v.
United States, 884 F. 2d. 1375 (CAFC 1989). 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 manufacturing or
processing, to the emerging 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 Customs drawback. Foreign
merchandise (tangible personal property) admitted to a zone and domestic
merchandise held in a zone for exportation are exempt from state and
local ad valorem taxes (19 U.S.C. 810(e).
3. Section 400.21, as proposed January 26, 1990 (55 FR 2764), is
further amended by revising paragraphs (b) to read as follows:
@ 400.21 Number and location of zones and subzones.
* * * * *
(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 general-purpose zone is located within 35 statute miles from
the outer limits of a port of entry.
(ii) A subzone meets the following requirements relating to Customs
supervision:
(A) Proper Customs oversight can be accomplished with physical and
electronic means; and,
(B) All electronically produced records are maintained in a machine-
sensible format for the duration of the record period; and,
(C) The grantee/operator agrees to present merchandise for examination
at a Customs site selected by Customs when requested, and further agrees to
present all necessary documents directly to the Customs oversight office.
4. Section 400.26, as proposed January 26, 1990 (55 FR 2766), is further
amended by adding a new paragraph (d) to read as follows:
@ 400.26 Application for expansion or other modification to zone
project.
* * * * *
(d) Applications for other revisions to grants of authority.
Applications or requests for revisions to grants of authority, such as
restriction modifications, shall be submitted in letter form with
information and documentation necessary for analysis, as determined by the
Executive Secretary. If the change involves removal or significant
modification of a restriction included by the Board in a grant of
authority, the review procedures of @ 400.32 shall apply. If not, the
procedure set forth in @ 400.27(f) shall apply.
5. Section 400.27, as proposed January 26, 1990 (55 FR 2766), is
revised to read as follows:
@ 400.27 Procedure for reviewing and processing applications.
(a) In general. This section outlines the procedure followed in
processing applications submitted under @@ 400.24-400.26. In addition, it
sets forth the time schedules which will normally be applied in processing
applications. The schedules will provide guidance to applicants with
respect to the time frames for each of the procedural steps involved in
the Board's review. Under these schedules, applications involving
manufacturing would be processed within 1 year, and those not involving
manufacturing, within 10 months. While the schedules will normally be
adhered to, the Board may determine that special circumstances may warrant
additional time, such as when the public comment period must be reopened
pursuant to paragraphs (d)(2)(v)(B) and (d)(3)(vi)(B) of this section.
(b) Prefiling review. Applications shall be accompanied with a check in
accordance with @ 400.30, and will be dated upon receipt at the
headquarters of the Board. The Executive Secretary will determine whether
the application satisfies the requirements of @@ 400.24, 400.25, or
400.26 and other applicable provisions of this part.
(1) If the application is deficient, the Executive Secretary will
notify the applicant within 20 days of receipt of the application,
specifying the deficiencies. The applicant shall correct the deficiencies
and submit the corrected application within 30 days of notification.
Otherwise the application (original) will be returned.
(2) If the application is sufficient, the Executive Secretary will
within 45 days of receipt of the application:
(i) Formally file the application, thereby initiating the proceeding
or review;
(ii) Assign a case docket number in cases requiring a Board order; and
(iii) Notify the applicant.
(c) Procedure -- Executive Secretary responsibilities. After initiating
a proceeding based on an application under @@ 400.24, 400.25, or
400.26(b), the Executive Secretary within 15 days 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 formal filing of
the application and initiation of the review which includes the name of
the applicant, a description of the zone project, information as to any
hearing scheduled at the outset, and an invitation for public comment,
including a time period during which the public may submit evidence,
factual information, and written arguments. Normally, the comment period
will close 60 days after the date the notice appears, except that if a
hearing is held (see, @ 400.51) the period shall not close prior to 15
days after the date of the hearing. The closing date for general comment
will ordinarily be followed by an additional 15-day period for
rebuttal comments;
(3) Send copies of the filing and initiation notice and the
application to:
(i) The Commissioner of Customs and the Regional Commissioner, or a
designee; and
(ii) The Resident Member, Board of Engineers for Rivers and Harbors,
Department of the Army, and the District Engineer;
(4) Arrange for hearings, as appropriate;
(5) Transmit the reports and recommendations of the examiner and of the
officials identified in paragraph (c)(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.
(d) Case reviews -- procedure and time schedule -- (1) Customs and army
engineer review. The Regional Commissioner (Customs), or a designee, and
the District Engineer (Army), in accordance with the regulations and
directives of their respective agencies, will submit their technical
reports to the Executive Secretary within 45 days of the conclusion of
the public comment period described in paragraph (c)(2) of this section.
(2) Examiners reviews -- non-manufacturing. Examiners assigned to cases
not involving manufacturing activity shall conduct a review taking into
account the factors enumerated in @ 400.23 and other appropriate sections
of this part, which shall include:
(i) Conducting or participating in necessary hearings scheduled by the
Executive Secretary;
(ii) Reviewing case records, including public comments;
(iii) Requesting information and evidence from parties of record;
(iv) Developing information and evidence necessary for evaluation and
analysis of the application in accordance with the criteria of the Act
and regulations;
(v) Preparing a report with recommendations to the Board and
submitting it to the Executive Secretary within 120 days of the close of
the period for public comment (see, paragraph (c)(2) of this section).
(A) If the report is unfavorable to the applicant, it shall be
considered a preliminary report and the applicant shall be notified within
5 days (in writing or by phone) and given 30 days from the date of
notification in which to respond to the report and submit additional
evidence.
(B) If the response contains new evidence on which there has not been
an opportunity for public comment, the Executive Secretary will publish
notice in the Federal Register within 10 days after completion of the
review of the response. The new material will be made available for
public inspection and the Federal Register notice will invite further
public comment for 30 days, with an additional 15-day period for rebuttal
comments.
(C) The Customs and District Engineer (Army) advisers shall be notified
when necessary for their further comments, which shall be submitted within
45 days after their notification.
(D) The examiners report in situations under paragraph (d)(2)(v)(A) of
this section shall be completed and submitted to the Executive Secretary
within 30 days after receipt of additional evidence or notice from the
applicant that there will be none; except that, if paragraph (d)(2)(v)(B)
of this section applies, the report will be submitted within 30 days of
the close of the period for public comment.
(3) Examiners reviews -- cases involving manufacturing. Examiners shall
conduct a review taking into account the factors enumerated in @ 400.23,
@ 400.31, and other appropriate sections of this part, which shall include:
(i) Conducting or participating in hearings scheduled by the Executive
Secretary;
(ii) Reviewing case records, including public comments;
(iii) Requesting information and evidence from parties of record;
(iv) Developing information and evidence necessary for analysis of the
threshold factors and the economic factors enumerated in @ 400.31;
(v) Conducting an analysis to include:
(A) An evaluation of policy considerations pursuant to @@ 400.31(b)(1)
(i)and 400.31(b)(1)(ii);
(B) An evaluation of the economic factors enumerated in @@
400.31(b)(1)(iii) and 400.31(b)(2), which shall include: An evaluation of
the economic impact on domestic industry, which includes both producers
of like products and producers of components/materials used in the
manufacture and assembly of the products. The evaluation will take into
account such factors as market conditions, price sensitivity, degree and
nature of foreign competition, effect on exports and imports, and the net
effect on U.S. employment;
(vi) Conducting appropriate industry surveys, using questionnaires when
necessary; and
(vii) Preparing a report with recommendations to the Board and
submitting it to the Executive Secretary within 150 days of the close of
the period for public comment:
(A) If the report is unfavorable to the applicant, it shall be
considered a preliminary report and the applicant shall be notified within
5 days (in writing or by phone) and given 45 days from the date of
notification in which to respond to the report and submit additional
evidence.
(B) If the response contains new evidence on which there has not been an
opportunity for public comment, the Executive Secretary will publish notice
in the Federal Register within 10 days after completion of the review of
the response. The new material will be made available for public
inspection and the Federal Register notice will invite further public
comment for 30 days, with an additional 15-day period for rebuttal
comments.
(e) Procedure -- Completion of review. (1) After the examiners report
with recommendations is completed and submitted to the Executive Secretary,
within 15 days, the latter will circulate the report to Board members for
their review and votes (by resolution).
(2) The Treasury and Army Board members will return their votes to the
Executive Secretary within 30 days, unless a formal meeting is requested
(see, @ 400.11(d)).
(3) The Commerce Department will complete the decision process within 15
days of receiving the votes of both other Board members, and the Executive
Secretary will publish the Board decision.
(f) 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
within 30 days of the determination that the application or request can
be processed under @ 400.26(c).
(2) The concurrence of the District Director is required for approvals
under paragraph (d)(1) of this section, and the District Director shall
provide his decision within 20 days after being notified of the request
or application.
6. Subpart C, as proposed January 26, 1990 (55 FR 2764), is further
amended by adding a new @ 400.30 to read as follows:
Subpart C -- Establishment and Modification of Zone Projects
@ 400.30 Application fees.
(a) In general. This section sets forth a uniform system of charges in
the form of fees to cover the direct and indirect costs incurred by the
Foreign-Trade Zones staff of the Department of Commerce for processing
applications under this part. The legal authority for the fees is 31
U.S.C. 9701, which provides for the collection of user fees by agencies of
the Federal Government.
(b) Uniform system of user fee charges. The following graduated fee
schedule establishes fees for various types of applications and requests
for authority based on their average processing time. Applications
combining requests for more than one type of approval are subject to the
fee for each category.
(1) New general-purpose zones:
(i) First zone in POE area (@ 400.24; @ 400.21(a)(1)(i)) . . . $2,850
(ii) Additional zones (@ 400.24; @ 400.21(a)(2)) . . . $3,240
(2) Special-purpose subzones (@ 400.25) . . . $6,510
(3) Expansions (@ 400.26(b)) . . . $1,630
(4) Manufacturing reviews:
(i) Formal (@ 400.32) . . . $4,670
(ii) Administrative (@ 400.32(b)(1)) . . . $1,230
(5) Boundary modifications (@ 400.26(c)) . . . $330
(c) Applications submitted to the Board shall include a check drawn on
a national or state bank or trust company of the United States or Puerto
Rico in the amount called for in paragraph (b) of this section.
Uncertified checks must be acceptable for deposit by a Federal Reserve
bank or branch.
(d) Applicants shall make their checks payable to the U.S. Department
of Commerce ITA. The checks will be deposited by ITA into the Treasury
receipts account. If applications are found deficient under @ 400.27(b)(1),
or withdrawn by applicants prior to formal filing, refunds will be made.
7. Section 400.31, as proposed January 26, 1990 (55 FR 2767), is
revised to read as follows:
@ 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 net imports. Thus, before authorizing
proposed manufacturing activity or in its review of ongoing manufacturing,
the Board shall determine that:
(i) The activity is not inconsistent with U.S. trade and tariff law, or
policy which has been formally adopted by the Executive branch;
(ii) The use of zone procedures would not likely diminish the
effectiveness of a U.S. international trade policy initiative or program;
and
(iii) If the activity involves items subject to quantitative import
controls or inverted tariffs, that the use of zone procedures would not
or has not directly resulted in imports that, but for the use of zone
procedures, would not likely otherwise have occurred, taking into account
imports both as individual items and as components of imported products.
(2) Economic factors. After its review of threshold factors, if there
is a basis for further consideration, the Board shall consider the
following factors in determining the net economic effect of the activity
or proposed activity:
(i) Overall employment impact;
(ii) Exports and reexports;
(iii) Retention or creation of manufacturing activity;
(iv) Extent of value-added activity;
(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, taking into account market
conditions; and
(viii) Other relevant information relating to net economic impact and
public interest considerations.
(c) Methodology and evidence -- (1) 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.
(2) Contributory effect. In assessing the significance of zone
operations as part of the consideration of economic factors, the Board
may consider the contributory effect zone savings have as an incremental
part of cost effectiveness programs adopted by companies to improve their
international competitiveness.
(3) Burden of proof. Applicants for subzones shall have the burden of
proof of establishing that the activity does or would result in a
significant public benefit. Applicants for approval of manufacturing in
general-purpose zones shall submit evidence regarding the positive
economic effects that would result from activity within the zone. Both
types of applicants are expected to submit evidence in response to
evidence of adverse economic effects during the public comment period.
(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, it may suspend subzone status or restrict the
activity in question.
8. Section 400.33, as proposed January 26, 1990 (55 FR 2768), is further
amended by revising paragraph (b) to read as follows:
@ 400.33 Restrictions on manufacturing activity.
(a) * * *
(b) Restriction 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 items which would be subject to suspension of liquidation
under AD/CVD procedures, if they entered U.S. Customs territory, shall be
placed in privileged foreign status (19 CFR 146.41) upon admission to a
zone or subzone. Upon entry for consumption, such items shall be subject
to duties under AD/CVD orders or to suspension of liquidation, as
appropriate, under 19 CFR parts 353 and 355.
9. Section 400.51, as proposed January 26, 1990 (55 FR 2770), is
revised to read as follows:
@ 400.51 Hearings.
(a) In general. The Board, the Secretary, or the Executive Secretary,
as appropriate, may schedule and/or hold hearings during any proceedings or
reviews conducted under this part whenever necessary or appropriate.
(b) Requests for hearings -- (1) An interested party may request a
hearing during a proceeding or review.
(2) The request must be made within 30 days of the beginning of the
period for public comment (see @ 400.27) and must be accompanied by
information establishing the need for the hearing and the basis for the
requesting party's interest in the matter.
(3) A determination as to the need for the hearing will be made by
the Assistant Secretary within 15 days after the receipt of such a request.
(c) Procedure for public hearings. The Board will publish notice in the
Federal Register of the date, time and location of a 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.
Dated: October 9, 1990.
Eric I. Garfinkel,
Assistant Secretary for Enforcement and Compliance, Chairman, Committee of
Alternates, Foreign-Trade Zones Board.
[FR Doc. 90-27210 Filed 11-19-90; 8:45 am]
BILLING CODE 3510-DS-M