Federal Register: December 30, 2010 (Volume 75, Number 250)
DOCID: fr30de10-36 FR Doc 2010-32940
DEPARTMENT OF COMMERCE
Foreign-Trade Zones Board
CFR Citation: 15 CFR Part 400
Docket ID: [Docket No. 090210156-0416-01]
RIN ID: RIN 0625-AA81
NOTICE: PROPOSED RULES
DOCUMENT ACTION: Proposed rule; request for comments.
Foreign-Trade Zones in the United States
DATES: Comments on the proposed rule must be received on or before April 8, 2011.
The Foreign-Trade Zones Board (the Board) proposes to amend
its regulations, and invites public comment on these proposed
amendments. Through this action, the Board proposes to amend the
substantive and procedural rules for the authorization of ForeignTrade
Zones (FTZs or zones) and the regulation of zone activity. The purpose
of zones as stated in the ForeignTrade Zones Act (FTZ Act or the Act)
is to ``expedite and encourage foreign commerce, and other purposes.''
The regulations proposed here provide the legal framework for
accomplishing this purpose in the context of evolving U.S. economic and
trade policy, and economic factors relating to international
competition. The changes are comprehensive and the proposed action
constitutes a major revision. These revisions encompass changes related
to manufacturing and valueadded activity, as well as new rules
designed to address compliance with the Act's requirement for a grantee to
provide uniform treatment for the users of a zone. The new rules should improve flexibility for U.S.based operations, particularly for most circumstances involving exports; enhance clarity; and strengthen compliance and enforcement. The revisions would also reorganize the regulations in the interest of easeofuse and transparency.
Foreign-Trade Zones in United States
ForeignTrade Zones (FTZs or zones) are restrictedaccess sites in or near U.S. Customs and Border Protection (CBP) ports of entry. The zones are licensed by the Board and operated under the supervision of CBP (see 19 CFR part 146). Specifically, zones are physical areas into which foreign and domestic merchandise may be moved for operations involving storage, exhibition, assembly, manufacture or other processing not otherwise prohibited by law. Zone areas ``activated'' by CBP are considered outside of U.S. customs territory for purposes of CBP entry procedures. Therefore, the usual formal CBP entry procedure and payment of duties is not required on the foreign merchandise in FTZs unless and until it enters U.S. customs territory for U.S. domestic consumption. In fact, U.S. duties can be avoided on foreign merchandise reexported from a FTZ, including after incorporation into a downstream product through activity in the FTZ. 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.
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,'' a specialpurpose type of ancillary zone, are authorized by the Board, through grantees of generalpurpose zones, in situations such as when the ``adjacency'' requirement (distance/driving time) for generalpurpose zones cannot be met. Goods that are in a zone for a bona fide customs reason are exempt from State and local ad valorem taxes. Zones and subzones are operated by corporations that have met certain regulatory criteria for submitting applications to the Board to operate zones. Under the FTZ Act, zones must be operated under public utility principles, and provide uniform treatment to all that apply to use the zone. The Board reviews and approves applications for authority to establish zone locations and to conduct certain activity within zones, and oversees zone grantees' compliance with zone regulations. The Board can limit or deny zone use on a casebycase basis on public interest grounds. In response to applications, the Board can also provide the applicant with specific authority to choose whether to pay duties either on the original foreign material or on a downstream product incorporating the foreign material.
To receive approval to operate a zone, an applicant must demonstrate the need for zone services, a workable plan that includes suitable physical facilities for zone operations, and financing for the operation. Successful applicants are granted licenses to operate zones. License grantees' sponsorship of specific sites for proposed FTZ designation is based on the grantees' determinations regarding the sites' appropriateness and potential for FTZ use, and a grantee may subsequently request removal of FTZ designation from a site based on factors such as the grantee's determination that projected FTZ use has not occurred.
Through this proposed action, the Board intends to update and
modify the rules for FTZs. Continued interest in zones, on the part of
both communities providing zone access as part of their economic
development efforts and firms using zone procedures to help improve
their international competitiveness, demonstrates zones' importance to
international trade and to investment in the domestic economy. Since
the issuance of the Board's current regulations (last revised
substantively in 1991), several issues or trends have emerged which
necessitate fresh approaches in the regulations, as detailed below. Key
revisions in the proposed regulations pertain to activity in zones in
which an imported component is combined with one or more other
components to create a different finished product. The current
regulations divide such activity into two categories``manufacturing''
or ``processing,'' depending on whether the activity involves
``substantial transformation'' of the componentand apply procedures
that can differ between the two categories. The proposed regulations
would simplify use of the FTZ program through application of a unified
concept``production'' as defined in Sec. 400.2(l)and provide a
single set of procedures pertaining to that type of activity. All
changes to rules pertaining to production activity have been carefully [[Page 82342]]
balanced, including through adoption of certain additional constraints and safeguards such as enhanced authority to conduct reviews and restrict activity that is determined not to be in the public interest.
The proposed regulations would eliminate the general requirement for advance approval from the FTZ Board for all manufacturing (i.e., substantial transformation) activity. The proposed regulations would only require advance approval for production activity under specific circumstances (e.g., if a lower U.S. duty rate will be applied to the component through its incorporation into a downstream product in the FTZ) (see Sec. 400.14(a)). This and other changes related to production activity respond to trends such as dramatically shorter timeframes for companies' decisionmaking on production locations (U.S. versus offshore), and the growth in contract manufacturing in which U.S. manufacturers compete with foreignbased alternatives for contracts under deadlines that are often incompatible with existing regulatory timeframes for obtaining authority from the FTZ Board.
In circumstances where advance approval is required for specific production activity, the proposed rule would delegate authority to the Commerce Department's Assistant Secretary for Import Administration to approve the activity on an interim basis pending completion of the full FTZ Board's review of the request, which would significantly decrease the time a company must wait for approval (see Sec. 400.14(d)(3)). This new provision would replace and is significantly more flexible than the temporary/interim manufacturing (T/IM) procedure adopted by the FTZ Board in 2004 (and modified in 2006), and which had not yet been the subject of specific regulations. The T/IM procedure was limited to activity similar to that approved by the FTZ Board in the preceding five years. The new provision for interim approvals contains no requirement for similarity to recently approved activity.
The proposed regulations also provide improved flexibility to accommodate changes in production at previously approved FTZ operations through retrospective notifications to the FTZ Board (see Sec. Sec. 400.14(e)(1) and 400.37). The current regulations allow grantees or zone operators to notify the FTZ Board of new components but require advance approval for any new finished products. The proposed regulations would allow grantees or zone operators to notify the Board of new finished products as well as new components. However, in order to preserve the public process long associated with FTZ Board evaluation of new ``manufacturing'' activity, the proposed regulations would also require that a production operation obtain advance FTZ Board approvalafter a public comment period on the proposalfor the list of broad categories of components or finished products within which specific new components or finished products would be notified. In addition, the proposed regulations would provide for a public comment period on all notifications submitted to the FTZ Board, as well as procedures to review any such notifications and to impose restrictions on notified changes when warranted.
Two other significant areas of change in the proposed regulations pertain to the statutory requirements that each zone be operated as a public utility and provide uniform treatment to all that apply to use the zone. The current regulations do not provide grantees guidance on the practical implementation of these requirements. The proposed regulations would provide such guidance and would establish specific standards for compliance with those requirements (see Sec. Sec. 400.42 and 400.43). For example, regarding the public utility requirement, they would tie the fees that a grantee charges zone users to the costs that the grantee incurs. With respect to the uniform treatment requirement, they would preclude certain conflicts of interest that could otherwise lead to nonuniform treatment of actual or potential zone users by private firms that assist zone grantees in zone management. Explicit standards regarding uniform treatment would help to ensure that the broadest range of U.S.based operations can use zones to maximize their global competitiveness.
Additionally, the proposed regulations would implement the statutory authority to issue fines for violations of the FTZ Act or the Board's regulations through specific provisions targeting certain types of violations (see Sec. 400.62). The current regulations contain no provisions pertaining to the statutory fining authority. The fining provisions are supplemented by provisions through which the Board or the Commerce Department's Assistant Secretary for Import Administration may order the suspension of the activated status of a zone operation in response to a violation. The proposed regulations' fining and suspensionofactivation provisions would help to ensure compliance with the statutory or regulatory requirements that zones submit annual reports to the FTZ Board, obtain advance approval (or submit notification) for certain production activity, and avoid certain conflicts of interest inconsistent with the statutory uniform treatment requirement.
Finally, the proposed regulations contain a new provision allowing for the ``prior disclosure'' of violations of the FTZ Act or the Board's regulations (see Sec. 400.63). Disclosure of a violation to the FTZ Board prior to its discovery by the Board would generally result in the potential total fine for the violation (or series of offenses stemming from a continuing violation) being reduced to 1,000 dollars.
Thus, the proposed regulations would generally simplify and clarify requirements pertaining to FTZ use, while also helping to ensure compliance with specific statutory and regulatory requirements. The proposed regulations are intended to improve access and flexibility for U.S. manufacturing and valueadded operationsparticularly in most circumstances related to exportsand to enhance safeguards in order to avoid negative economic consequences from certain zone activity.
Proposed changes are described in the following summary:
1. Section 400.1. This section on the ``scope'' of the regulations contains a summary statement of zone benefits to users and is essentially unaltered.
2. Section 400.2. A small number of new terms or refinements to existing terms have been added to this definitions section. The definitions of ``manufacturing'' and ``processing'' have been eliminated in favor of a new definition of ``production'' activity, for which advance approval (or notification) under specific circumstances and reporting to the Board would be required.
3. Section 400.3. This section adopts with minimal alterations the contents of current Sec. 400.11. The section contains a statement of the Board's authority, the roles of the Chairman and Alternates, and the procedure for decision making (determinations).
4. Section 400.4. This section on the Executive Secretary's role is modified from current Sec. 400.12 to reflect responsibilities involving application formats, termination of reviews under certain circumstances, production changes, fining, suspension of activated status, and retail trade.
5. Section 400.5. This section is unchanged in substance from current Sec. 400.43.
6. Section 400.6. This section is unchanged in substance from current Sec. 400.13.
7. Section 400.11. This section closely parallels current Sec. 400.21.
8. Section 400.12. This section closely parallels current Sec. 400.22.
9. Section 400.13. This section primarily incorporates existing restrictions and conditions from Sec. 400.28. Specifically, Sec. Sec. 400.13(a)(1) through (a)(5) plus (a)(7) mirror current Sec. Sec. 400.28(a)(1) and 400.28(a)(4)(a)(7) and the first sentence of current Sec. 400.28(a)(8) regarding preconditions for actual use of FTZ designated sites, the lapse of authority for unused zones, authority to construct buildings in the zone, allowing federal and local officials to have access to the zone, and the sale or transfer of a grant of authority. In combination with Sec. 400.14(a), Sec. 400.13(a)(6) parallels the general effect of current Sec. 400.28(a)(2) regarding requirements specific to manufacturing. Section 400.13(a)(8) incorporates the language of all but the first sentence of current Sec. 400.28(a)(8), and also adds a statutorilyderived sentence regarding no vested right to zone designation approved for privately owned land or facilities. Section 400.13(b) parallels existing Sec. Sec. 400.31(a) and 400.33(a) regarding the authority to prohibit or restrict zone activity. Section 400.13(c) is unchanged from current Sec. 400.28(b) regarding authority to impose additional conditions or restrictions on grants of authority.
10. Section 400.14. This section addresses a series of general
provisions and restrictions that relate to production activity in FTZs.
Section 400.14(a) parallels the general effect of current Sec.
400.28(a)(2), but focuses on the types of production activity that have
raised public interest concerns in certain circumstances in the past,
or that appear to have significant potential to raise such concerns in
the future (e.g., duty reduction on foreign components, avoidance of
antidumping or countervailing duties, avoidance of orders of the
International Trade Commission under 19 U.S.C. 1337). Section 400.14(b)
is new and makes explicit in regulation an existing practice of
requiring all activity involving production in zones to be reported
annually to the Board. Section 400.14(c) addresses the limits
associated with the scope of approved production authority, and
parallels to some degree a portion of current Sec. 400.28(a)(2).
Section 400.14(d)(1) is the same in substance as current Sec.
400.32(b)(1)(iv), while Sec. Sec. 400.14(d)(2) and (d)(3) are new.
Section 400.14(d)(2) delegates authority to the Commerce Department's
Assistant Secretary for Import Administration to approve production
authority where the sole zone benefit requiring advance approval from
the Board is for scrap or waste resulting from the production activity.
The new interim authority in Sec. 400.14(d)(3) replaces the temporary/
interim manufacturing (T/IM) authority adopted by the Board in 2004,
but is potentially applicable to many applications involving production
authority, while eliminating the complex comparison(s) to previously
approved authority that had been required to establish eligibility for
T/IM. Section 400.14(e)(1) parallels to some degree current Sec. Sec.
400.28(a)(3)(ii) and (iii), but broadens the current notification
provision for changes in ``sourcing'' to encompass ``production''
changes (now defined as new finished products or new foreign
components/inputs), and it also imposes certain key limitations on the
production change procedure. Section 400.14(e)(2) is new and defines a
procedure for notification of increases in production capacity. Section 400.14(e)(3) to some degree parallels current Sec.
400.28(a)(3)(iii)(B), and delineates authority to impose prohibitions or restrictions in response to productionchange and capacityincrease notifications. Section 400.14(f) on ``scope determinations'' largely mirrors the content of current Sec. 400.32(c). Section 400.14(g) mirrors current Sec. 400.33(b).
11. Section 400.15 is new, and reflects a statutory change (Pub. L. 104295, Sec. 31(a), 110 Stat. 3536 (1996), codified at 19 U.S.C. 81c(e)) regarding ``production equipment.'' Specifically, this statutory change allows the reduction and deferral of duty payment on equipment assembled in a zone for use in production activity. The language of this section reflects the statute, the legislative history and Board practice.
12. Section 400.16 relates to state and local ad valorem taxes and expands upon existing Sec. 400.1(c) by adopting language regarding this topic from the conference report on the 1984 legislation (Pub. L. 98573, title II, Sec. 231(a)(2), 98 Stat. 2990 (1984), codified at 19 U.S.C. 81o(e)).
13. Section 400.21 is very similar in substance to current Sec. 400.24, but eliminates the current format of five ``exhibits,'' and instead provides for the requirements of the section to be addressed in guidelines/formats or related documents established by the Executive Secretary and published in the Federal Register.
14. Section 400.22 indicates the requirements for production and subzone applications. The section is similar in many ways to current Sec. 400.25, but makes a clearer distinction between production requirements and subzone requirements to reflect the increasing prevalence of production activity in nonsubzone environments and the increasing number of subzone applications involving only distribution related activity.
15. Section 400.23 is very similar in substance to current Sec. 400.26, with the exception of the elimination of Sec. 400.26(b)(1), which allowed reference to information in applications already on file with the Board, and which has proven problematic in practice.
16. Section 400.24 is generally similar to current Sec. 400.23, but replaces one existing criterion encompassing the adequacy of operational and financial plans and the suitability and justification for a new zone site with a new criterion specific to the suitability of a new zone site and a new criterion specific to the justification for a new zone site.
17. Section 400.25 sets forth criteria for evaluating production and subzone applications. The first paragraph of the section parallels current Sec. 400.27(d)(3)(v))(B). Sections 400.25(a)(1) and (2) are substantively unaltered from current Sec. Sec. 400.31(b)(1) and (2). Sections 400.25(b) and (c) essentially parallel current Sec. 400.23(b), but distinguish more clearly between production authority and subzone designation, and require all applications for production authority to meet the significant public benefit standard because of the increasing incidence of production activity in generalpurpose zone environments rather than in subzones.
18. Section 400.26 parallels current Sec. 400.31(c)(3), but includes standards for all applications.
19. Section 400.27 is substantively identical to current Sec. 400.29.
20. Sections 400.31 through 400.36 delineate the procedural steps for processing applications, and are generally the same in content as current Sec. 400.27, but also incorporate the content of current Sec. 400.31(c). However, the new sections provide greater easeofuse for the applicants by limiting each section to a particular caseprocessing stage. Section 400.31 parallels current Sec. Sec. 400.27(a) and 400.27(b)(1). Section 400.32 parallels current Sec. Sec. 400.27(b)(2), 400.27(c), and 400.27(d)(1). Section 400.33 parallels current Sec. 400.27(d)(2). Section 400.34(a) parallels current Sec. 400.27(d)(3) while Sec. 400.34(b) parallels current Sec. 400.31(c). Section 400.35 parallels current Sec. 400.27(e). Section 400.36 parallels current Sec. 400.27(f).
21. Section 400.37, which establishes procedures for authority and
notification related to production changes, parallels to some degree
current Sec. Sec. 400.28(a)(3)(ii) and (iii). However, the section is
significantly expanded, with additional elements intended to make the procedure more
useful and also ensure the proper balance between flexibility and program oversight.
22. Section 400.38 generally parallels current Sec. 400.31(d) in both substance and structure.
23. Section 400.41 is substantively unchanged from the current section of the same number.
24. Section 400.42 provides new guidance and requirements related to the statutory mandate for operation of a zone as a public utility (referred to in current Sec. 400.2(e)). This section also contains a provision allowing a delayed compliance date.
25. Section 400.43 provides new guidance and requirements to implement the statutory mandate for a grantee's uniform treatment of zone users (referred to in current Sec. 400.42(b)(2)(v)). This section also contains a provision allowing a delayed compliance date.
26. Section 400.44 groups together requirements from current Sec. Sec. 400.42(a)(1), 400.28(a)(4) and 400.42(b)(1).
27. Section 400.45 generally parallels current Sec. 400.42 regarding requirements for a grantee's zone schedule, but adds specificity to the documentation requirements for a zone's policies and the standard contractual provisions the zone offers. This section also contains a provision allowing a delayed compliance date.
28. Section 400.46 substantially modifies current Sec. 400.42(b)(5), which dealt with complaints about fees, by adding in Sec. 400.46(a) general procedures for complaints by zone participants regarding compliance with the uniform treatment requirement of the FTZ Act. Section 400.46(b), which addresses complaints about fees, adds new specificity.
29. Section 400.47 is based on current Sec. 400.28(a)(9) regarding ordinary limitations on grantee liability, and provides further explanation concerning the bases for those limitations by adding language largely derived from the Board position in response to comments on Sec. 400.41 in the October 1991 final rule document for the current regulations. This section also adds a final sentence stating specific circumstances in which a grantee's actions could undermine the limitations on its liability.
30. Section 400.48 parallels current Sec. 400.45, but shifts responsibility for determinations from the Port Director (with the Executive Secretary's concurrence) to the Executive Secretary (with the Port Director's concurrence).
31. Section 400.49 is substantively unchanged from current Sec. 400.44.
32. Section 400.51 is largely unchanged from current Sec. 400.46, with minimal nonsubstantive additional language.
33. Section 400.52 parallels current Sec. 400.51.
34. Section 400.53 is unchanged in substance from current Sec. 400.52.
35. Section 400.54 is largely unchanged from current Sec. 400.53, with the exception of an added sentence on the public nature of information submitted pursuant to certain regulatory sections.
36. Section 400.61 closely parallels current Sec. 400.28(c), with language added regarding the subzone operator.
37. Section 400.62 is new and establishes procedures related to the imposition, mitigation, and assessment of fines as authorized by the FTZ Act (this authority is reflected in current Sec. 400.11(a)(10)), as well as for instructing CBP to suspend activated status in certain circumstances.
38. Section 400.63 is new and establishes procedures for ``prior disclosure'' of information to the Board regarding violations of the FTZ Act or the Board's regulations.
39. Section 400.64 is unchanged in substance from current Sec. 400.47.
This revision is proposed under the authority of section 8 of the ForeignTrade Zones Act of June 18, 1934, as amended (19 U.S.C. 81h). Executive Order 12866
This proposed rule has been determined to be significant for purposes of Executive Order 12866.
Regulatory Flexibility Act
The Acting Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration that this proposed rule, if adopted, would not have a significant economic impact on a substantial number of small entities. (5 U.S.C. 605(b)). In this rule, which is consistent with 19 USC 81a1u, the Foreign Trade Zones Board proposes to simplify and expedite access to FTZ benefits for U.S. manufacturers, particularly for exportoriented activity. In addition, the revised regulations would provide increased transparency, guidance and enforcement of the public utility and uniform treatment aspects of the program.
The FTZ Board's current regulations date to 1991. The proposed rule would eliminate the general advance approval requirement for most export manufacturing. This approval process generally took between 6 and 12 months. Instead, the proposed rule would require advance approval for export manufacturing only in certain relatively rare circumstances (such as when an imported component used in the manufacturing process is subject to an antidumping or countervailing duty). For manufacturing in FTZs for goods that are destined for the U.S. market, which generally is conducted in competition with factories overseas, the proposed rule would eliminate the FTZ Board's general advance approval requirement and instead limit the advance approval process to the specific types of FTZ benefits that could potentially impact other domestic manufacturers. These amendments should dramatically reduce the economic burden on large and small businesses involved in FTZ export manufacturing by reducing and streamlining the regulatory process for such manufacturing.
The second area of focus for the proposed rule involves circumstances in which the organization licensed by the FTZ Board to serve a particular region is not complying with the FTZ Act's requirements to operate the zone as a public utility and provide uniform treatment to all users. Use of the FTZ program provides certain cost savings that are designed to enhance the competitiveness of U.S. facilities in competition with sites abroad. Improved access to FTZs and simplification of the rules and procedures regarding FTZ activity should therefore generally have a net positive effect for all potential users of the program regardless of size.
To determine which entities using the FTZ program qualify as
``small'' entities, pursuant to 13 CFR 121.201, the FTZ staff used the
Small Business Administration (SBA) size standards identified by North
American Industry Classification System (NAICS) codes. Major users of
the FTZ program include ocean freight companies and manufacturers of
various products. Under the SBA size standards, ocean freight companies
are considered small entities if they have fewer than 500 employees.
The size standards for manufacturing operations vary by the NAICS code
of the product manufactured. Manufacturing in FTZs involves a wide
variety of industries and products, and the NAICS codes for all zone
users are not always known by the FTZ staff. Therefore, to assess the
potential impact from this rule, FTZ manufacturing operations were
categorized as ``miscellaneous manufacturing'' which, under the SBA
size standards, are considered small entities if they have fewer than 500
employees. With these size standards, potentially impacted companies operating in FTZs were considered small entities if they had fewer than 500 employees. Use of the 500 employee standard also appears consistent with what has been done in other circumstances that involve a large variety of industries. For example, under the Small Business Size Regulations, entities are considered small for the purpose of reduced patent fees if the number of employees does not exceed 500 (13 CFR 121.802), and a similar standard applies for entities to qualify for small business setasides or 8(a) contracts under 13 CFR 121.406.
To determine the number of small entities involved, the FTZ Board staff analyzed data on activity within the zones in 2009 from annual reports submitted by each FTZ. The information submitted included the number and types of companies using each FTZ. Research was then conducted to determine whether each company would be considered a small entity. Based on the research and analysis conducted, it is anticipated that the rule would impact approximately 200 business entities that have fewer than 500 employees, i.e., small entities under 13 CFR 121.201. The proposed revisions would apply equally to all companies and organizations involved in the FTZ program. However, simplified procedures for zone applicants and for access to zone use are expected to provide the greatest benefit to small entities, particularly those with more limited resources, because they would reduce administrative and application costs for these companies. These changes would allow program use by more small entities that are currently underserved in the program. The changes proposed in this rule also could increase the number of small entities using the program. Such an increase would result from the simplified procedures proposed and would extend the cost savings achieved through the program to additional small entities that had been unable to access those benefits in the past.
The proposed rule would also reduce the number of applications for FTZ authority that need to be submitted for export manufacturing, thereby reducing the submission and recordkeeping burden on companies using the program for such activity. The reduction in burden is expected to increase the use of the program for this activity. In the past, the FTZ staff has received informal comments from companies that the application required was difficult to prepare, and that the process itself was burdensome and time consuming. The proposed rule is intended to address those concerns to the extent possible. Moreover, many changes in nonexport related FTZ activity that currently require advance approval (through a 6 to 12 month application process) would be eligible under the proposed rule for a dramatically simpler process that allows a company to notify the FTZ Board that a change has occurred in activity. This proposed change is in addition to the general elimination of advance approval for export manufacturing. As a result of this significantly reduced burden, use of the FTZ program should be much more accessible to all companies and, in particular, to small entities.
The proposal to simplify procedures and reduce the number of applications submitted was the result of analysis and extensive discussion concerning the most effective means of improving the program while maintaining the appropriate balance and safeguards. The application structure for manufacturing in the current regulations is intended to ensure that other domestic companies are not negatively impacted if a company benefits from the savings available in the FTZ program. As a result, certain information and procedures are necessary in the review process, and the application process cannot be completely eliminated. At the same time, the FTZ Board recognizes that certain activity, such as manufacturing for export markets, generally does not have such an impact on other domestic companies.
The preparation of the proposed rule involved an assessment of the
areas where procedures could be simplified or reduced to decrease the
burden on companies while maintaining those procedures that are
necessary to ensure that the program is not misused. One alternative analyzed was to simplify the procedures pertaining to FTZ
manufacturing, without eliminating the requirement for the submission of applications for certain manufacturing (particularly for most export activity). While this option would reduce the burden on all companies using the program, the net positive impact would be less than what is being proposed. In addition, the elimination of advance approval for most export manufacturing is expected to provide the greatest benefit to small entities using or seeking to use the program. The second alternative was to maintain the current application procedures. Under this alternative, there would be no impact on small entities using the program, but it would continue to discourage certain export activity as well as new companies, particularly small entities, from entering the program. This proposed rule would both eliminate the need for certain applications and simplify manufacturingrelated procedures as a whole, resulting in the largest possible reduction in burden of the options considered.
The FTZ Act and current regulations require the submission of an annual report from each zone to the FTZ Board. This reporting would not be impacted by the revised rule, and no increased burden would result.
Most fundamentally, all businesses and organizations, whether small or not, have access to the use of FTZs. The proposed rule simply lays out the procedures that the FTZ Board would follow when businesses or organizations apply to establish FTZs or engage in certain activities in FTZs, and they delineate certain rights and responsibilities of zone grantees, operators and users that have decided to make use of the FTZ program. The procedures, rights and responsibilities apply equally, whether the affected party is a small or large entity. The FTZ Act of 1934 and the FTZ program are tools of economic development, and when entities use the FTZ program, it can be assumed they do so because it is in their economic interest. Accordingly, this proposed rule, which is designed to improve access to the FTZ program, should only further the economic interests of current and future zone users, including small entities.
Because this rule results in reduced burden for many types of FTZ activity, with a net positive impact to entities involved in the FTZ program, this rule will not have a significant economic impact on a substantial number of small entities. Accordingly, an IRFA is not required, and none has been prepared.
Executive Order 13132
This proposed rule does not contain policies with Federalism implications sufficient to warrant preparation of a Federalism assessment under Executive Order 13132.
Paperwork Reduction Act
This rule contains information collection activities subject to the
Paperwork Reduction Act. It would impose no additional reporting or
record keeping burden on the public and there would be no impact on the
collection that falls under the Office of Management and Budget (OMB)
Control No. 06250109 (Annual Report to ForeignTrade Zones Board).
This proposed rule would amend the collection under OMB Control No.
06250139 (Application to ForeignTrade Zones Board). Under this proposed rule, the application
requirements associated with the latter collection for zone applicants, grantees, operators, and users would be simplified, and there is an overall reduction of the burden on those parties. The amended requirement would be submitted to OMB for approval.
The changes proposed in this rule are expected to decrease the annual number of future production (manufacturing) applications submitted to the FTZ Board from 27 to 20. The reduction in the total number of applications would result, in part, from the elimination of the requirement for advance approval for certain export production activity. Moreover, many changes in nonexport related FTZ activity that currently require advance approval (through a 6 to 12 month application process) would be eligible under the proposed rule for a dramatically simpler process that allows a company to notify the FTZ Board that a change has occurred in activity. These changes are expected to reduce the total annual burden associated with applications for production authority from 1,026 to 680 hours. As a result of this significantly reduced burden, use of the FTZ program should be much more accessible to all companies involved in production activity.
In addition to changes pertaining directly to production activity, the rule also specifically adopts the alternative site framework (ASF) authorized by the FTZ Board in December 2008. The ASF procedures reduce the time and complexity involved in designating FTZ sites for many companies. As use of the ASF becomes more widespread, the need for expansion and subzone applications will be reduced. As a result, with increased use of the ASF by zones, there is expected to be a decline in the number of expansion applications as well as a shift from the submission of more complex subzone applications to applications for production authority. The combined effect of the changes pertaining to production activity and to the ASF is expected to result in an even more significant reduction in application burden. The annual number of expansion applications should decline by half, from 20 to 10, reducing the annual burden from 2,100 to 1,050 hours. While the overall number of production applications is anticipated to increase (from 27 to 29 per year) despite the elimination of the need for advance approval in certain circumstances, this largely reflects the shift from subzone to production applications, and the number of complex subzone applications is expected to decline. The application for production authority is a simpler process and involves notably fewer burden hours than a subzone application. As a result, the combined annual burden for subzone and production requests is expected to decline from 4,098 to 2,681 hours. In total, the annual FTZ application burden through the provisions proposed in this rule would be reduced from 6,651 to 4,184 hours.
Public comment is sought regarding: Whether this proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; the accuracy of the burden estimate; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the collection of information, including through the use of automated collection techniques or other forms of information technology. Send comments on these or any other aspects of the collection of information to the contact listed in ADDRESSES above, and email to Wendy Liberante (Wendy_L._Liberante@omb.eop.gov).
Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number.
List of Subjects in 15 CFR Part 400
Administrative practice and procedure, Confidential business information, Customs duties and inspection, Foreigntrade 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 400REGULATIONS OF THE FOREIGNTRADE ZONES BOARD
Subpart AScope, Definitions and Authority
400.3 Authority of the Board.
400.4 Authority and responsibilities of the Executive Secretary. 400.5 Authority to restrict or prohibit certain zone operations. 400.6 Board headquarters.
Subpart BAbility To Establish Zone; Limitations and Restrictions on Authority Granted
400.11 Number and location of zones and subzones.
400.12 Eligible applicants.
400.13 General conditions, prohibitions and restrictions applicable to grants of authority.
400.14 Productionactivity requiring approval or reporting; restrictions.
400.15 Production equipment.
400.16 Exemption from state and local ad valorem taxation of tangible personal property.
Subpart CApplications To Establish and Modify Authority
400.21 Application for zone.
400.22 Application for production or subzone authority.
400.23 Application for expansion or other modification to zone project.
400.24 Criteria for evaluation of zone proposals or expansion or other modifications to zone projects.
400.25 Criteria for evaluation of production and subzone proposals. 400.26 Burden of proof.
400.27 Application fees.
Subpart DProcedures for Application Evaluation and Reviews
400.31 General application provisions and predocketing review. 400.32 Procedure for docketing application and commencement of case review.
400.33 Examiner's reviewcase not involving production activity. 400.34 Examiner's reviewcase involving production activity. 400.35 Completion of case review.
400.36 Procedure for application for minor modification of zone project.
400.37 Procedure for notification and review of production changes. 400.38 Monitoring and reviews of zone operations and activity. Subpart EOperation of Zones and Administrative Requirements 400.41 Operation of zones; general.
400.42 Operation as public utility.
400.43 Uniform treatment.
400.44 Requirements for commencement of operations in a zone project.
400.45 Zone schedule.
400.46 Complaints related to public utility and uniform treatment. 400.47 Grantee liability.
400.48 Retail trade.
400.49 Zonerestricted merchandise.
Subpart FRecords, Reports, Notice, Hearings and Information 400.51 Accounts, records and reports.
400.52 Notice and hearings.
400.53 Official record; public access.
Subpart GPenalties, Prior Disclosure and Appeals to the Board 400.61 Revocation of grants of authority.
400.62 Fines, penalties and instructions to suspend activated status.
400.63 Prior disclosure.
400.64 Appeals to the Board of decisions of the Assistant Secretary for Import Administration and the Executive Secretary.
Authority: ForeignTrade Zones Act of June 18, 1934, as amended (Pub. L. 397, 73rd
Congress, 48 Stat. 9981003 (19 U.S.C. 81a81u)).
Subpart AScope, Definitions and Authority
Sec. 400.1 Scope.
(a) This part sets forth the regulations, including the rules of practice and procedure, of the ForeignTrade Zones Board with regard to foreigntrade zones (FTZs or zones) in the United States pursuant to the ForeignTrade Zones Act of 1934, as amended (19 U.S.C. 81a81u). It includes the substantive and procedural rules for the authorization of zones and the regulation of zone activity. The purpose of zones as stated in the Act is to ``expedite and encourage foreign commerce, and other purposes.'' The regulations provide the legal framework for accomplishing this purpose in the context of evolving U.S. economic and trade policy, and economic factors relating to international competition.
(b) Part 146 of the customs regulations (19 CFR part 146) governs zone operations, including the admission of merchandise into zones, zone activity involving such merchandise, and the transfer of merchandise from zones.
(c) To the extent ``activated'' under U.S. Customs and Border Protection (CBP) procedures in 19 CFR part 146, and only for the purposes specified in the Act (19 U.S.C. 81c), zones are treated for purposes of the tariff laws and customs entry procedures as being 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 production activity, to the emerging product. Quota restrictions do not normally apply to foreign goods in zones. The Board can deny or limit the use of zone procedures 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 certain state and local ad valorem taxes (19 U.S.C. 81o(e)). Articles admitted into zones for purposes not specified in the Act shall be subject to the tariff laws and regular entry procedures, including the payment of applicable duties, taxes, and fees.
Sec. 400.2 Definitions.
(a) Act means the ForeignTrade Zones Act of 1934, as amended (19 U.S.C. 81a81u).
(b) Agent means a person (as defined in Sec. 400.2(h)) acting on behalf of or under agreement with the zone grantee in zonerelated matters.
(c) Board means the ForeignTrade Zones Board, which consists of the Secretary of the Department of Commerce (chairman) and the Secretary of the Treasury, or their designated alternates.
(d) CBP means U.S. Customs and Border Protection.
(e) Executive Secretary is the Executive Secretary of the Foreign Trade Zones Board.
(f) Foreigntrade zone (FTZ or zone) is a restrictedaccess site, in or adjacent (as defined by Sec. 400.11(b)(2)) to a CBP port of entry, operated pursuant to public utility principles under the sponsorship of a corporation granted authority by the Board and under the supervision of CBP.
(g) Grant of authority is a document issued by the Board that authorizes a zone grantee to establish, operate and maintain a zone project or a subzone, subject to 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.
(h) Person includes any individual, enterprise, or entity. (i) Port Director is normally the director of CBP for the CBP jurisdictional area in which the zone is located.
(j) Port of entry means a port of entry in the United States, as defined by part 101 of the customs regulations (19 CFR part 101), or a user fee airport authorized under 19 U.S.C. 58b and listed in part 122 of the customs regulations (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) Production, as used in this part, means any activity which results in a change in the customs classification of an article or in its eligibility for entry for consumption, regardless of whether U.S. customs entry actually is ultimately made on the article resulting from the production activity.
(m) 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.
(n) Site is one or more parcels of land organized as an entity, such as all or part of an industrial park or airport facility. (o) State includes any state of the United States, the District of Columbia, and Puerto Rico.
(p) Subzone means a specialpurpose zone established as an adjunct to a zone project for a limited purpose.
(q) Zone means a foreigntrade 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.
(r) 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.
(s) Zone operator is a person that operates within a zone or subzone under the terms of an agreement with the zone grantee, with the concurrence of the Port Director.
(t) Zone participant is a zone operator, zone user, property owner, or other person participating or seeking to participate in some manner in, or to make use of, the zone project.
(u) Zone project means the zone plan, including all of the zone and subzone sites that the Board authorizes a single grantee to establish. (v) Zone site means a physical location of a zone or subzone. (w) Zone user is a party using a zone under agreement with the zone grantee or a zone operator.
Sec. 400.3 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 production activity in zones and subzones as described in this part;
(4) Make determinations on matters requiring Board decisions under this part;
(5) Decide appeals in regard to certain decisions of the Commerce Department's Assistant Secretary for Import Administration or the Executive Secretary;
(6) Inspect the premises, operations and accounts of zone grantees and operators;
(7) Require zone grantees to report on zone operations; (8) Report annually to the Congress on zone operations; (9) Restrict or prohibit zone operations;
(10) Terminate reviews of applications under certain circumstances pursuant to Sec. 400.35(d);
(11) Authorize under certain circumstances the return of ``zone restricted merchandise'' for entry into customs territory under Sec. 400.49;
(12) Impose fines for violations of the Act and this part; (13) Instruct CBP to suspend activated status pursuant to Sec. 400.62(i);
(14) Revoke grants of authority for cause; and,
(15) Determine, as appropriate, whether zone activity is or would be in the public interest or 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) Authority of the Assistant Secretary for Import Administration (Alternate Chairman). The Commerce Department's Assistant Secretary for Import Administration has the authority to:
(1) Make determinations pursuant to Sec. 400.14(d);
(2) Terminate reviews of applications under certain circumstances pursuant to Sec. 400.35(d);
(3) Mitigate and assess fines pursuant to Sec. Sec. 400.62(f) and (g) and instruct CBP to suspend activated status pursuant to Sec. 400.62(i); and,
(4) Restrict the use of zone procedures under certain circumstances pursuant to Sec. Sec. 400.14(e) and 400.38(c).
(e) Determinations of the Board. (1) The determination of the Board will be based on the unanimous vote of the members (or alternate members) of the Board.
(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.
Sec. 400.4 Authority and responsibilities of the Executive Secretary.
The Executive Secretary has the following responsibilities and authority:
(a) Represent the Board in administrative, regulatory, operational, and public affairs matters;
(b) Serve as director of the Commerce Department's ForeignTrade Zones staff;
(c) Execute and implement orders of the Board;
(d) Arrange meetings and direct circulation of action documents for the Board;
(e) Arrange with other sections of the Department of Commerce and other governmental agencies for studies and comments on zone issues and proposals;
(f) Maintain custody of the seal, records, files and correspondence of the Board, with disposition subject to the regulations of the Department of Commerce;
(g) Issue notices on zone matters for publication in the Federal Register;
(h) Direct processing of applications and reviews, including designation of examiners and scheduling of hearings, under various sections of this part;
(i) Determine subzone sponsorship questions as provided in Sec. 400.12(d);
(j) Make recommendations in cases involving questions as to whether zone activity should be prohibited or restricted for public interest reasons, including reviews under Sec. 400.5;
(k) Determine questions of scope under Sec. 400.14(f); (l) Determine whether additional information is needed for evaluation of applications and other requests for decisions under this part, as provided for in various sections of this part, including Sec. Sec. 400.21, 400.22, and 400.23;
(m) Issue instructions, guidelines, forms and related documents specifying time, place, manner and formats for applications as provided in Sec. 400.21(b);
(n) Determine whether proposed modifications involve major changes under Sec. 400.23(a)(2);
(o) Determine whether applications meet predocketing requirements under Sec. 400.31(b);
(p) Terminate reviews of applications under certain circumstances pursuant to Sec. 400.35(d);
(q) Authorize minor modifications to zone projects under Sec. 400.36;
(r) Review production changes under Sec. 400.37;
(s) Direct monitoring and reviews of zone operations and activity under Sec. 400.38;
(t) Accept rate schedules and determine their sufficiency under Sec. 400.45(e);
(u) Assess potential issues and make determinations pertaining to uniform treatment under Sec. 400.43 and review and decide complaint cases under Sec. 400.46;
(v) Make certain determinations and authorizations pertaining to retail trade under Sec. 400.48;
(w) Authorize under certain circumstances the return of ``zone restricted merchandise'' for entry into customs territory under Sec. 400.49;
(x) Determine the format and deadlines for the annual reports of zone grantees to the Board and direct preparation of an annual report to Congress from the Board under Sec. 400.51(d);
(y) Make recommendations and certain determinations regarding violations and fines, and undertake certain procedures related to the suspension of activated status, as provided in Sec. 400.62; and, (z) Designate an acting Executive Secretary.
Sec. 400.5 Authority to restrict or prohibit certain zone operations. (a) In general. After review, the Board may restrict or prohibit any admission of merchandise into a zone project or any 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 selfinitiated, or in response to a complaint made to the Board by a party directly affected by the activity in question and showing good cause. Sec. 400.6 Board headquarters.
The headquarters of the Board is located within the U.S. Department
of Commerce (Herbert C. Hoover Building), 1401 Constitution Avenue,
NW., Washington, DC 20230, within the office of the ForeignTrade Zones staff.
Subpart BAbility To Establish Zone; Limitations and Restrictions on Authority Granted
Sec. 400.11 Number and location of zones and subzones.
(a) Number of zone projectsport of entry entitlement.
(1) Provided that the other requirements of this part 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) Applications pertaining to zone projects in addition to those approved under the entitlement provision of paragraph (a)(1) of this section may be approved by the Board if it determines that the existing project(s) will not adequately serve the convenience of commerce. (b) Location of zones and subzonesport 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 generalpurpose zone site is located within 60 statute miles or 90 minutes' driving time (as measured by the Port Director) from the outer limits of a port of entry.
(ii) A subzone meets the following requirements relating to CBP supervision:
(A) Proper CBP oversight can be accomplished with physical and electronic means; and,
(B) All electronically produced records are maintained in a format compatible with the requirements of CBP for the duration of the record period; and,
(C) The grantee/operator agrees to present merchandise for examination at a CBP site selected by CBP when requested, and further agrees to present all necessary documents directly to the CBP oversight office.
Sec. 400.12 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 corporations and private nonprofit corporations. The eligibility of public corporations and private nonprofit 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. Any application must also be consistent with the charter or organizational papers of the applying entity.
(c) Private forprofit corporations. The eligibility of private forprofit 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 entities 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 (or a nonpublic corporation if no such other public corporation exists), 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) Notification of closest grantee. If an application is submitted under paragraph (d)(1)(ii) or (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 docketing 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) If the Executive Secretary determines that the proposed sponsorship is in the public interest, docket the application (see Sec. 400.64 regarding appeals of decisions of the Executive Secretary).
Sec. 400.13 General 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 Port Director, pursuant to 19 CFR part 146, are required prior to the activation of any portion of an approved zone project.
(2) 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.
(3) A grant of authority for a zone or a subzone shall lapse unless the zone project (in case of subzones, the subzone facility) is activated, pursuant to 19 CFR part 146, and in operation not later than five years from the Board order authorizing the zone or subzone. (4) A grant of authority approved under this part includes authority for the grantee to permit the erection of buildings necessary to carry out the approved zone project subject to concurrence of the Port Director.
(5) Zone grantees, 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.
(6) Activity involving production is subject to the specific provisions in Sec. 400.14.
(7) A grant of authority may not be sold, conveyed, transferred, set over, or assigned (FTZ Act, section 17; 19 U.S.C. 81q). (8) Private ownership of zone land and facilities is permitted provided the zone grantee retains the control necessary to implement the approved zone project. Such permission shall not constitute a vested right to zone designation, nor interfere with the Board's regulation of the grantee or the permittee, nor interfere with or complicate the revocation of the grant by the Board. 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 could, depending on the circumstances, be subject to the prohibitions set forth in section 17 of the Act. (b) Board authority to restrict or prohibit activity. 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 approvals of the applications for zone or subzone production authority required by Sec. 400.14(a), the Board may adopt restrictions to protect the public interest, health, or safety. The Commerce Department's Assistant Secretary for Import Administration may similarly adopt restrictions in exercising authority under Sec. Sec. 400.14(d) and (e). When evaluating zone or subzone production activity, either as proposed in an application or as part of a review of an ongoing operation, the Board shall determine whether the
activity is in the public interest by reviewing it in relation to the evaluation criteria contained in Sec. 400.25.
(c) Additional conditions, prohibitions and restrictions. Other conditions/requirements, prohibitions and restrictions under Federal, State or local law may apply to the zone or subzone authorized by the grant of authority.
Sec. 400.14 Productionactivity requiring approval or reporting; restrictions.
(a) Activity requiring advance approval. Approval in advance by the Board (or notification to the Board under the circumstances described in Sec. 400.37) is required for all production activity in zones or subzones which involves:
(1) A foreign article for which the actual or effective duty rate for U.S. entries will be reduced through incorporation into a different product or article (inverted tariff);
(2) A foreign article that would be subject (if it were to enter U.S. customs territory) to an antidumping duty (AD) or countervailing duty (CVD) order or which would be otherwise subject to suspension of liquidation under AD/CVD procedures, to an order of the International Trade Commission pursuant to 19 U.S.C. 1337 (Section 337), or to a quantitative import control (quota);
(3) Duty avoidance on scrap or waste resulting from the production activity (except for production activity that is for export only); or, (4) For a production operation that had been the subject of prior Board consideration and approval (including delegated authority), a foreign article:
(i) For which there is a new (or increased) inverted tariff due to a new (or increased rate of) general or special duty relative to the circumstances in effect at the time of the Board's prior consideration of the foreign article's u
FOR FURTHER INFORMATION CONTACT
Andrew McGilvray, Executive Secretary, Foreign Trade Zones Board, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue, NW., Room 2111, Washington, DC 20230, (202) 4822862 or Matthew Walden, Senior Attorney, Office of Chief Counsel for Import Administration, U.S. Department of Commerce, 1401 Constitution Avenue, NW., Room 4610, Washington, DC 20230, (202) 4822963.