Compliance Tips – Public Utility and Zone Schedule Requirements

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 the requirement to operate as a public utility, with the uniform treatment requirement to be addressed in a future article.

Key take-aways:

• A grantee may charge fees to zone users provided the total fees collected generally do not exceed the level of the zone’s costs associated with the grantee function.
• A grantee may only collect a fee from users if the amount of that fee – or the formula for calculating the amount – appears in the grantee’s zone schedule submitted to the FTZ Board.
• A grantee may revise its zone schedule at any time, but the revised zone schedule must be submitted to the FTZ Board before it can go into effect.
• A grantee cannot – directly or indirectly – require zone users to use or buy a particular provider’s zone-related products or services (such as a contractor to the grantee providing detailed, technical expertise on customs compliance matters).

After an extensive public comment process, the FTZ Board in 2012 published revised regulations that included a detailed public utility provision, as well as simplified requirements for each grantee’s “zone schedule” (the document setting out the zone’s policies – and fees charged, where applicable – that the grantee must provide to the FTZ Board before the start of operations in the zone). February 28, 2014 marked the end of the two-year delayed compliance period for the public utility and zone schedule sections of the FTZ Board’s revised regulations.

Under the 2012 FTZ regulations, zones may impose fees in order to recover costs associated with the grantee function but may not collect fees that generally exceed recovery of those costs (plus reasonable return on investment, where applicable). Examples of costs associated with the grantee function include staff time, overhead, and marketing costs for the zone. It should also be noted that a grantee is not required to charge any fees and, if it does, the fees do not need to fully recover a grantee’s costs. Some grantees choose to subsidize their zones to encourage zone use and charge little or no fees.

As long as the level of fees collected does not exceed cost recovery, a grantee generally has broad discretion in how it chooses to set fee amounts for different categories of users. For example, a grantee may charge different fees to zone users based on the size of the company, the amount of zone space used by the company or the industry in which the company operates – as long as those fee amounts are set and defined in the zone schedule. A grantee may not base fees on users’ levels of FTZ savings.

Each grantee is free to revise its zone schedule, including its fees, at any time. Once a zone schedule has been revised, it must be sent to the FTZ Board for it to go into effect. For the most part, a grantee should not need to reassess its fees each year. However, if there has been a significant change in the number of users of the zone, or in a grantee’s costs, then it may be time for a grantee to examine whether its fee structure needs to be updated.

Finally, in response to public comments, the 2012 regulations bar grantees from requiring zone users to use or pay an additional cost for “a particular provider's zone-related products or services.” This prohibition covers both direct payments and indirect payments, such as through a mandatory fee in the zone schedule. Therefore, a grantee may not require zone users to pay for a grantee’s contractor to provide “technical expertise” (involving the application of detailed knowledge of processes, procedures or requirements, such as pertaining to details of customs compliance) – in contrast to a general facilitative role that grantee organizations commonly undertake.

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