Compliance Tips – Uniform Treatment (incl. FTZ “Administration” by any non-grantee organization)

Under the FTZ Act (law), each grantee generally has a monopoly on FTZ access in its region and, therefore, is required to operate its zone “as a public utility” and provide “uniform treatment under like conditions” for zone users. This article focuses on provisions of the FTZ Board’s regulations pertaining to the uniform treatment requirement.

Key take-aways:

• The FTZ regulations bar an entity that offers/provides a zone-related product/service to or represents a user in a zone from undertaking any of three listed “key functions” for the zone’s grantee.
• That bar applies to any entity (whether private or public, for profit or non-profit) that is not the zone’s grantee and that offers/provides a zone-related product/service to or represents an actual or potential user of the zone.
• Upon request, the FTZ Board staff can make determinations on whether a particular arrangement is (or would be) consistent with the uniform treatment regulation.
• Violations of the uniform treatment regulation are subject to a penalty of up to $ 1,000 per day for each day the violation continues.

After an extensive public comment process, the FTZ Board in February 2012 published revised regulations that included a provision specific to ensuring that zone users are afforded uniform treatment (as required by the FTZ Act). In particular, the uniform treatment regulation bars an individual or entity that offers/provides a zone-related product/service to or represents users of a zone from undertaking for the grantee of the zone any of the three “key functions” listed below (with a delayed compliance date of February 28, 2014 for pre-existing arrangements to be brought into compliance).

The uniform treatment regulation addresses any entity that is not the zone’s grantee and that offers/provides a zone-related product/service to or represents actual or potential users of the zone, as well as any party related to the entity or that stands to gain financially through the entity. Therefore, any non-grantee entity that assists in some manner in “administering” a zone should assess its activities to determine whether it (or a party to which it is related or through which it stands to gain) offers/provides a zone-related product/service to or represents actual or potential zone users. An example of such a zone-related product/service would be assisting potential zone users with the preparation of requests to the FTZ Board for site designation or production authority. If a non-grantee entity (or a party to which it is related or through which it stands to gain) does offer/provide a zone-related product/service to or represents users of a zone, that entity may not undertake any of the following key functions:

1. Taking action on behalf of the grantee, or making recommendations to the grantee, regarding the disposition of proposals or requests by zone participants pertaining to FTZ authority or activity (including activation by CBP). [Note: A third party’s professional advice and assistance to a grantee on applications would not fall under this key function if the ultimate recommendation or action on disposition of the applications is made within the grantee organization, rather than by the third party.]
2. Approving, or being a party to, a zone participant's agreement with the grantee (or person acting on behalf of the grantee) pertaining to FTZ authority or activity (including activation by CBP).
3. Overseeing zone participants' operations on behalf of the grantee. [Note: This key function can encompass activities in which a third party conducts checks on operators’ activities on behalf of a grantee, for example.]

The exception to the bar on such an entity undertaking a key function for a particular grantee is if the FTZ Board has approved a waiver for the entity in question specific to that grantee and the key function at issue. Any waiver requests would use the standard format available on the FTZ Board’s website and present the entity’s specific circumstances for the FTZ Board to evaluate in making a decision regarding the requested waiver.

Parties may have questions about the extent to which particular activities conducted by an entity fall within the scope of the uniform treatment regulation (i.e., constitute offering/providing a zone-related product/service or representation, or constitute undertaking one of the three key functions). A party may request a determination from the FTZ Board’s Executive Secretary about the applicability of the regulation to particular circumstances. Finally, the importance of compliance with the public utility regulation – and of contacting the FTZ Board with any questions or uncertainty about whether the regulation applies to particular circumstances – is underscored by the potential penalties applicable to violations of the regulation: Up to $ 1,000 per day for each day the violation continues.

The FTZ Board staff welcomes any questions about the uniform treatment requirements of the FTZ Act and the FTZ Board’s regulations. The staff is reachable via (202) 482-2862 or ftz@trade.gov.