1 WHAT IS A FOREIGN-TRADE ZONE? Foreign-Trade Zones (FTZs) are locations in U.S. designated by the FTZ Board where merchandise can be imported prior to formal entry and duty payment Zone activity cannot occur until a site is “activated” by CBP and zone activity then remains under the direct supervision of CBP FTZs encourage U.S. activity and jobs – in competition with foreign alternatives – by allowing delayed or reduced duty payments on foreign merchandise, as well as other savings

2 WHAT ACTIVITY IS PERMITTED IN FTZs? In an FTZ, merchandise may be assembled, exhibited, cleaned, manipulated, manufactured, mixed, processed, relabeled, repackaged, repaired, salvaged, sampled, stored, tested, displayed, & destroyed Certain activity (e.g. manufacturing/processing) needs specific approval by FTZ Board Retail trade is prohibited. No one can reside in an active FTZ. All other federal, state, and local laws apply –FDA, TTB, and EPA all have regulations that apply to FTZs

FTZ vs BONDED WAREHOUSE Both designated areas that provide duty benefits under CBP supervision However, in FTZs: –No time limit on goods –Domestic and foreign goods can comingle –Wide range of manufacturing may be authorized 3

WHO’S WHO IN FTZs FTZ Board – Commerce (chair) and Treasury departments. FTZ Staff located at Commerce Makes decisions on requests for FTZ sites and activity Customs and Border Protection (CBP) Advises the FTZ Board on applications Oversees FTZ activity Advises FTZ Board on CBP matters Makes decisions on requests to activate 4

5 WHO’S WHO IN FTZs - Grantee FTZ Board GranteeOperator User Grantee OperatorUser Operator/ User Grantee – The corporate recipient of a grant of authority for a zone project. Usually a public entity (city, county, port authority…). Sometimes Grantees hire Administrators to perform certain functions

6 WHO’S WHO IN FTZs - Operator FTZ Board GranteeOperator User Grantee OperatorUser Operator/ User Operator - A corporation, partnership, or person that operates a zone or subzone under agreement with the grantee, with the concurrence of the Port Director of CBP. The operator has the bond with CBP. In some zones, the grantee may also be the operator

7 WHO’S WHO IN FTZs - User FTZ Board GranteeOperator User Grantee OperatorUser Operator/ User User - A party using a zone under agreement with the zone grantee or operator. The user may also be the operator.

POSSIBLE FTZ SAVINGS TO COMPANIES Duty Exemption. No duties on or quota charges on re-exports. Duty Deferral. Duties and federal excise tax deferred on imports. Inverted Tariff. Where FTZ manufacturing results in finished product with lower duty rate than the rate on foreign input, finished product may be entered at the duty rate that applies to its condition as it leaves the zone – if approved by FTZ Board. 8

POSSIBLE FTZ SAVINGS TO COMPANIES Logistical Benefits. Companies using FTZ procedures may have access to streamlined customs procedures (e.g., "weekly entry" or "direct delivery"). Scrap/Waste. Duty may be reduced on foreign articles that become scrap/waste through FTZ activity. Other Benefits. Foreign goods and domestic goods held for export are exempt from state/local inventory taxes. FTZ status may also make a site eligible for state/local benefits which are unrelated to the FTZ Act. 9

10 TYPES OF ZONE SITES General-Purpose Zones –Traditionally industrial parks or sea/air port facilities –More flexibility now under the ASF for participating zones Subzones –Approved for a specific use (e.g. oil refining, cell phone distribution, auto assembly…) –Also referred to as “special-purpose subzones” May be subject to time limits and other restrictions

11 WHERE CAN ZONES BE LOCATED General-purpose zones Must be located either within the port limits OR within 60 statute miles from the outer limits of a port of entry OR within 90 minutes driving time from the outer limits of a port of entry (15 CFR (b)(2)) In some cases, PD may have to verify adjacency prior to filing of application per the request of the FTZB. Subzones May be located beyond 60 miles/90 minutes driving time if CBP can adequately oversee the activity (including through electronic supervision)

12 GENERAL-PURPOSE ZONE SITE FRAMEWORKS Traditional Site Framework (TSF) Expansions/reorganizations must be approved by the FTZ Board (lengthy process) Minor boundary modifications involve swapping acreage from an existing site to create a new one Problems: Inflexible for companies Encourages grantees to establish sites speculatively that may never get used (but CBP has agreed to oversee) Recordkeeping difficult due to swapping and returning of acreage

13 GENERAL-PURPOSE ZONE SITE FRAMEWORKS Alternative Site Framework (ASF) Developed to address problems with TSF Grantee reframes FTZ to serve broad area, can get simple MBMs for actual needs, and essentially all sites get “sunset” limits that remove designation if unused in 3 to 5 years No swapping needed for minor boundary modifications As under TSF – FTZ space can only be designated through FTZ Board or FTZ staff action (with concurrence of CBP Port Director).

14 ALTERNATIVE SITE FRAMEWORK – KEY TERMS Service Area – is the geographic area where grantee wants to be able to propose general-purpose FTZ sites –Most commonly will be specific counties –The entire Service Area must meet the FTZ adjacency requirement and be within 60 miles/90 minutes’ driving time of the CBP port of entry limits –In a few parts of the country, closely clustered CBP Port of Entry may lead to grantees proposing partially overlapping Service Areas. CBP would need to consider whether the overlap would cause problems for CBP’s oversight of the zones.

15 ALTERNATIVE SITE FRAMEWORK – KEY TERMS Magnet Site – selected by grantee based on ability to attract multiple potential FTZ operators/users. –Designated only via FTZ Board action. –Akin to traditional FTZ site (industrial park, port facility, etc.) designated in advance – essentially speculatively – to attempt to draw FTZ operators/users.

16 ALTERNATIVE SITE FRAMEWORK – KEY TERMS Usage-Driven Site – designated for a company ready to pursue conducting FTZ activity –Can be designated via simplified boundary modification (with no swapping of acreage required) –Designation tied to the specific company and limited to the space needed by the company –If company vacates its designated Usage-Driven site, the FTZ designation terminates

17 FINDING GENERAL-PURPOSE ZONE SITE INFORMATION To confirm that a zone site exists and can be activated, use new online tool – Online FTZ Information System (OFIS) On the FTZ staff’s main page click on the OFIS link under the sealwww.trade.gov/ftz From the menu on the left select “Zone and Site Information” Choose the zone, and click “open” At the bottom of the screen will be a list of sites, you can click “open” next to any of the sites for additional information and a map of that site

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24 GENERAL-PURPOSE ZONE SITE INFORMATION The zone structure in ACE is not yet complete. Until the system is complete, the FTZ staff cannot add general- purpose zone site information into ACE Once complete, the FTZ staff will add zone site information to ACE Currently: to activate a GPZ operator, CBP must enter zone site information as well as operator information

25 INFORMATION AVAILABLE IN ACE General zone info (approval date, grantee contact info) Board Orders and docketing notices since 1980 Any restrictions or manufacturing approvals for each zone will be listed in the “Remarks” field Recent Board Orders also include copies of the application and examiner’s reports Subzone Information: –Board Orders and docketing notices since 1980 (including applications and examiner’s reports for recent actions) –Restrictions will be listed in the “Remarks” field –Site Information

26 APPLICATION TYPES FTZ Board Application Includes: expansions and reorganizations of general- purpose zones, manufacturing and subzone applications Time frame for review – 6-10 months Minor Boundary Modifications (for FTZ Staff action) Quicker land designation for an immediate need to activate TSF – require swapping of acreage ASF – no swapping needed Time frame for review days CBP pre-activation process can run concurrent with review

27 FTZ BOARD APPLICATION PROCESS When the FTZ Board dockets an application, notification will be sent to the Port Director requesting CBP’s comments on the application. To find a copy of the application and Federal Register notice: –Log in to ACE –Click on “Accounts”, then choose “FTZ Operator” and click “GO” then click “Records” and select the zone number at the bottom of the screen. –Click on the “Documents” tab to find the docket information.

28 FTZ BOARD APPLICATION PROCESS CBP’s comments should consider: –Are all sites adjacent (within 60 miles/90 minutes driving time of the outer limits of the port of entry)? If it is an ASF request, the entire service area must meet the adjacency requirement For subzone applications only, sites may go beyond the adjacency limit if sufficient oversight can be done electronically or through other means –Will CBP be able to adequately oversee what is being proposed? –Does CBP anticipate any difficulties or have any concerns regarding the application?

29 FTZ BOARD APPLICATION PROCESS Once the FTZ Board has made a decision on an application, the Board Order and Examiner’s Report will be posted in ACE under the Board Order number in the documents tab of the zone record. Any restrictions will be listed in the main record under the “Remarks” field –Subzone restrictions will be included in the “Remarks” field in the subzone record.

30 Common Restrictions on FTZ Application Approvals Approval of an application may be subject to restrictions Common restrictions include: 2,000-acre activation limit Expiration dates or sunset limits on sites Approval for export activity only Requirement that certain merchandise be placed in Privileged Foreign (PF) status Note: All merchandise subject to AD/CVD orders must be admitted in PF status (15 CFR )

31 Common Restrictions on FTZ Application Approvals Sunset Limits are dependent on activation within a certain time frame –Each site (except 1 magnet site) approved under ASF has a 3-5 year sunset limit Expiration dates are absolute time limits regardless of zone activity –Most common for Traditional sites

32 FTZ BOARD APPLICATION PROCESS – Manufacturing Approval by the FTZ Board needed for any activity that changes the 6-digit HTSUS classification –Includes kitting (examples - imported glassware and a bottle of liquor placed in a box and entered as a gift set or an imported battery combined with a cell phone into a retail package) If the activity changes, including new imported components or finished products, new approval from the FTZ Board may be needed The specific activity approved is described in the application

33 Major Industries using FTZ Procedures Oil Refining (separate CBP regs –SubPart H) Pharmaceuticals Electronics Autos Farm and Construction Equipment

34 APPLICATION PROCESS – Minor Boundary Modifications Grantee or operator will approach CBP to discuss proposed site change If CBP concurs (sees no issues and can oversee the site), the Port Director signs a letter The applicant will include the CBP letter in their request to the FTZ staff The FTZ staff will notify the Port Director when a decision is made on the request

35 LAPSE PROVISION FOR APPROVED FTZs Distinct from sunset limits on individual sites Grant of authority for a zone or subzone will lapse within five years from a Board order if the zone or subzone remains inactive A zone project not receiving shipments but actively offering FTZ services to the public may fulfill the activation requirement by obtaining CBP approval under 19 CFR (“technical activation”) Once lapsed, an 18 month reinstatement period is available

36 RECORDKEEPING Local CBP office should keep on file: Application Documents since the past few years (authority requested and approved): Federal Register notice Application Board Order Available in ACE Current site information - available on the FTZ website Grantee Zone Schedule – describes policies, rates and fees (provided to the PD, but no CBP action required) Procedures Manual for each operator and other activation documents

REFERENCE FTZ Act of USC 81a-81u FTZ Regs 15 CFR 400 –(last revised 1991) –adopted criteria for establishing FTZ authority –Currently undergoing revision CBP Regs 19 CFR 146 –Describes CBP day to day oversight FTZ Manual for CBP –Lists procedures and forms for FTZ activity 37

38 FTZ STAFF – REGIONAL REPRESENTATIVES R e g i o n S t a t e s S t a f f C o n t a c t Eastern Maine, Vermont, New Hampshire, Massachusetts, Connecticut, Rhode Island, New York, New Jersey, Pennsylvania, Maryland, Delaware, Tennessee, West Virginia, Virginia, North Carolina, South Carolina, Georgia, Florida Kathleen Boyce (202) Great Lakes Minnesota, Iowa, Wisconsin, Michigan, Illinois, Indiana, Ohio, Kentucky Liz Whiteman (202) Central North Dakota, South Dakota, Nebraska, Kansas, Missouri, Oklahoma, Arkansas, Texas, Louisiana, Mississippi, Alabama, Puerto Rico Camille Evans (202) Western Washington, Montana, Oregon, Idaho, Wyoming, Colorado, Utah, Nevada, California, Arizona, New Mexico, Alaska, Hawaii Christopher Kemp (202)

39 FOREIGN-TRADE ZONES STAFF Main: (202) Andrew McGilvray, Executive Secretary Kathleen Boyce (202) Pierre Duy (202) Camille Evans (202) Diane Finver (202) Christopher Kemp (202) Liz Whiteman (202) Marsha Foust (202)

FTZ STAFF – GENERAL CONTACT INFO Web site: Telephone: (202)

41 ACE AND ACTIVATIONS Tips: –Zone Site # = Assigned by FTZ Board (check with FTZ staff or website to confirm) –Site # = alphanumeric code (A1, B1, Z6…) CBP chooses to distinguish between operators within a zone site