[Federal Register Volume 78, Number 110 (Friday, June 7, 2013)]
[Notices]
[Pages 34395-34398]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-13464]


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DEPARTMENT OF HOMELAND SECURITY

U.S. Customs and Border Protection


Announcement of Foreign-Trade Zones Test

AGENCY: U.S. Customs and Border Protection, Department of Homeland 
Security.

ACTION: General notice.

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SUMMARY: This notice announces U.S. Customs and Border Protection's 
(``CBP's'') plan to conduct a voluntary general test regarding certain 
foreign-trade zone (``FTZ'' or ``zone'') activities. Pursuant to the 
FTZ test, under

[[Page 34396]]

prescribed conditions, zone operators will be permitted liberalized 
procedures for certain zone activities. Specifically, zone operators 
approved for participation in the test will not be required to submit a 
CBP Form 216 (``Application for Foreign-Trade Zones Activity Permit'') 
for the manipulation, manufacture, or exhibition of merchandise within 
an FTZ where such activity has been previously approved in that zone's 
Grant of Authority by the FTZ Board. In addition, zone operators 
approved for participation in the test will have the option of allowing 
duty-paid merchandise that has been entered for consumption to remain 
in an activated zone area for up to 90 calendar days after CBP releases 
the merchandise, so long as the merchandise remains segregated, does 
not undergo further manufacturing, and is accurately recorded in the 
Inventory Control and Recordkeeping system within five (5) business 
days of release.
    The FTZ test is intended to evaluate whether liberalizing certain 
FTZ operational procedures will impact CBP's supervision and control 
over the zone, as well as the agency's ability to enforce applicable 
laws. This notice invites public comment concerning any aspect of the 
planned test, describes the eligibility, procedural and documentation 
requirements for voluntary participation in the test, and outlines the 
development and evaluation methodology to be used in the test.

DATES: A zone operator interested in voluntary participation in the FTZ 
test must submit an email to CBP establishing that he or she meets the 
eligibility criteria for participation in the test by July 8, 2013. CBP 
will notify interested parties of their test participation status 
within 10 calendar days of receipt of the email requesting 
participation in the test. The initial phase of the FTZ test will 
commence July 17, 2013, and will run for approximately two years. CBP 
will begin an evaluation of this test approximately 90 days after the 
test's commencement.

ADDRESSES: Comments concerning this notice or any aspect of the test 
may be submitted via email, with a subject line identifier reading 
``Comment on FTZ Test,'' to [email protected]. An email expressing 
interest in participating in the FTZ test should be sent to 
[email protected], with a subject line identifier reading 
``Participation in FTZ Test.''

FOR FURTHER INFORMATION CONTACT: Alyce Modesto, Acting Director, Cargo 
Security and Control, Office of Field Operations, (202) 344-2549 or via 
email at alyce.m.modesto @cbp.dhs.gov.

SUPPLEMENTARY INFORMATION:

Background

General

    A Foreign-Trade Zone (``FTZ'' or ``zone'') is a secure area under 
U.S. Customs and Border Protection (``CBP'') control and supervision 
that is within the United States, but considered to be outside the 
customs territory of the United States. Formal CBP entry procedures and 
payments of duties are not required on foreign merchandise lawfully 
within the FTZ until the merchandise enters the U.S. customs territory 
for domestic consumption. Merchandise that is lawfully admitted to an 
FTZ may undergo prescribed activities, such as storage, manipulation, 
manufacture, exhibition and destruction.
    The Foreign-Trade Zones Act of 1934, as amended (19 U.S.C. 81a-
81u), created the Foreign-Trade Zones Board (``FTZ Board''), which is 
responsible for the review and approval of applications to establish, 
operate and maintain FTZs. Upon approval, the FTZ Board issues a Grant 
of Authority to the zone grantee (the corporate recipient of the grant 
of authority for the establishment, operation, and maintenance of a 
zone project) to permit specified operations within the zone. Daily 
management of the zone is typically delegated to a zone operator (a 
CBP-approved entity that operates a zone under the terms of the Grant 
of Authority on behalf of the Zone grantee).
    Before merchandise may be admitted into a zone, CBP must approve 
activation of the FTZ. CBP is responsible for the transfer of 
merchandise into and out of the zone and for matters involving revenue 
collection. The CBP port director, in whose port a zone is located, is 
charged with enforcing applicable laws and overseeing zone activity as 
the local representative of the FTZ Board. The port director controls 
the admission, handling, and disposition of merchandise within the 
zone, and the removal of merchandise from the zone.
    The Foreign-Trade Zones Act is administered through two sets of 
regulations, the FTZ Board regulations (15 CFR Part 400) and CBP 
regulations (19 CFR Part 146). FTZs are also subject to the laws and 
regulations of the United States, as well as those of the states and 
communities in which they are located.

Description of the Foreign-Trade Zones Test

    Under this FTZ test, zone operators who are approved FTZ test 
participants will be permitted liberalized procedures for two zone 
activities under prescribed circumstances. This test is intended to 
increase efficiencies and reduce administrative burdens for both CBP 
and the trade without compromising CBP's obligation to supervise and 
exercise control over the zone and enforce applicable laws. This test 
will evaluate whether liberalizing certain FTZ operational procedures 
will impact CBP's obligations.
I. CBP Form 216 Not Required for Manipulation, Manufacture, or 
Exhibition of Goods Within an FTZ When the Subject Activity Has Already 
Been Approved in the Zone's Grant of Authority
    Section 146.52(a), within subpart E of part 146 of the CBP 
regulations (19 CFR 146.52(a)), provides that a zone operator, prior to 
any action being taken, must apply for a permit on the CBP Form 216 
(``Application for Foreign-Trade Zones Activity Permit'') to 
manipulate, manufacture, exhibit, or destroy merchandise in a zone or 
transfer merchandise for any purpose from a zone. The CBP Form 216 
pertains to both individual and blanket permits. The blanket permit 
covers continuous or repetitive activity for up to a one-year period.
    Under this FTZ test, approved test operators will not be required 
to submit a CBP Form 216 for permission to manipulate or manufacture 
goods, or exhibit goods under certain circumstances, within an FTZ if 
the subject activity has already been approved in the zone's Grant of 
Authority. In the case of exhibition of merchandise within a zone, a 
CBP Form 216 will not be required if the test operators can demonstrate 
that the conditions designated for exhibition are suitable for 
preventing confusion of the identity or status of the merchandise and 
that the approved test operator exercises adequate oversight of 
individuals granted access to the FTZ, including those present for 
purposes of the exhibition.
    In these circumstances, CBP views the permit function served by the 
CBP Form 216 as duplicative and unnecessary inasmuch as the subject 
activities have already been permitted by the FTZ Board with CBP's 
concurrence. As the CBP port director has access to the zone's Grant of 
Authority, the elimination of the requirement to submit a CBP Form 216 
that describes

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a manipulation, manufacturing, or exhibition activity that has already 
been authorized in the zone's Grant of Authority is intended to 
simplify paperwork and administrative burdens for both CBP and the FTZ 
trade without impacting security controls and revenue collection 
functions.
    It is noted that submission of a CBP 216 remains a requirement for 
approved test operators for the following zone activities:
     Destruction of goods.
     Sampling.
     Temporary removal of goods (including temporary removal 
for purposes of exhibition outside of the FTZ).
     Manipulation or manufacture (including processing and 
production) of goods when the subject activity is not within the scope 
of the grant of authority for the FTZ operation.
II. Elimination of 5-Day Time Limit on Merchandise Remaining in a Zone 
After Issuance of CBP Permit for Transfer to U.S. Customs Territory
    Section 146.71, within subpart F of part 146 of the CBP regulations 
(19 CFR 146.71), prescribes the release and removal of merchandise from 
a zone. Paragraph (a) states that, except as provided for in Sec.  
146.43, no merchandise will be transferred from a zone without a CBP 
permit on the appropriate entry or withdrawal form or other document as 
required in this part. Section 146.71(c) provides that, except in the 
case of articles for use in a zone, merchandise for which a CBP permit 
for transfer to U.S. customs territory has been issued must be 
physically removed from the zone within five (5) working days of 
issuance of that permit and that merchandise awaiting removal within 
the required time limit will not be further manipulated or manufactured 
in the zone, but will be segregated or otherwise identified by the 
operator as merchandise that has been constructively transferred to the 
U.S. customs territory.
    Pursuant to this FTZ test, an approved test operator will have the 
option of allowing duty-paid merchandise that has been entered for 
consumption to remain in an activated zone area for up to 90 calendar 
days after CBP releases the merchandise, so long as the merchandise 
remains segregated, does not undergo further manufacturing, and is 
accurately recorded in the Inventory Control and Recordkeeping 
(``ICR'') system within five (5) business days of release. Such 
merchandise is considered to be constructively transferred to the 
customs territory of the United States and, while remaining in the 
zone, will have no zone status. See 19 CFR Part 146, Subpart D. 
Approved test operators are reminded that the procedures manual 
required by 19 CFR 146.21(b) should be updated to reflect changes in 
their procedures to comply with the FTZ test, including which status 
indicator is being used to describe the merchandise. The 5-day ICR 
system requirement is intended to ensure timely inventory control and 
to enable CBP to ascertain the status of merchandise within a zone 
without hindering CBP's supervision and control over the zone, and its 
ability to enforce applicable laws. It is noted that merchandise that 
is constructively transferred to the customs territory of the United 
States, which is removed from a zone but does not enter the commerce of 
the United States, may not be readmitted to a zone in domestic status.
    Elimination of the requirement, for purposes of this FTZ test, to 
remove merchandise from a zone within the prescribed 5-day period after 
release is intended to benefit the trade by permitting them to focus on 
production and accurate maintenance of their ICR system, rather than 
the timing of merchandise moving in and out of the zone. In addition, 
in situations where data or documentation from other government 
agencies is required, elimination of the 5-day zone removal requirement 
is intended to simplify logistics in that merchandise will not have to 
be moved from a secured FTZ location pending receipt of that 
information.

FTZ Test Participant Eligibility

    Participation in this FTZ test is voluntary and open to all FTZ 
operators who timely notify CBP of their interest in participating in 
the test and establish, to CBP's satisfaction, that they: (1) Are 
authorized and approved in an activated FTZ; (2) have an approved FTZ 
operator bond on file with CBP; and (3) can demonstrate the ability to 
comply with the requirements of the test.

Authorization for the Test

    This FTZ test is being conducted in accordance with Sec.  101.9(a) 
of the CBP regulations (19 CFR 101.9(a)), which prescribes general test 
requirements.

Regulatory Provisions Suspended

    The following regulatory provisions will be suspended to the extent 
that they conflict with the terms of this FTZ test. The regulatory 
suspensions will remain in effect for the duration of this test and 
will apply to approved test participants only; the regulatory 
provisions remain in effect for all non-test participants:
     Section 146.51, which requires that no merchandise, other 
than domestic status merchandise provided for in Sec.  146.43, will be 
manipulated, manufactured, exhibited, destroyed or transferred from a 
zone in any manner or for any purpose, except under CBP permit.
     Section 146.52(a), to the extent that it requires a zone 
operator, prior to any action being taken, to apply for a blanket 
permit on the CBP Form 216 to manipulate, manufacture, or exhibit 
merchandise in a zone.
     Section 146.71(c), which requires that merchandise for 
which a CBP permit for transfer to the U.S. customs territory has been 
issued must be physically removed from the zone within five (5) working 
days of issuance of that permit, except in the case of articles for use 
in a zone.

Test Dates

    This FTZ test will commence no earlier than July 17, 2013, and will 
run for approximately two years from that date with a final evaluation 
to take place at the end of the test period. CBP may extend, terminate, 
or change the terms of the test at any time, by way of announcement in 
the Federal Register.

Test Evaluation

    CBP will begin an evaluation of the FTZ test approximately 90 days 
after its commencement.

Misconduct under the Test

    An FTZ test participant may be subject to civil and criminal 
penalties, administrative sanctions, liquidated damages, and/or 
discontinuance from participation in this test for any of the 
following:
     Failure to follow the terms and conditions of this test.
     Failure to exercise reasonable care in the execution of 
participant obligations.
     Failure to abide by applicable laws and regulations that 
have not been waived.
    The Director, Cargo Security and Control, Office of Field 
Operations, CBP Headquarters, will administer the suspension or 
revocation of participation privileges for misconduct under the test. 
CBP will issue a written notice to the test participant that describes 
the proposed action and includes a description of the facts or conduct 
warranting the action. The test participant may appeal the decision, in 
writing, within ten (10) calendar days of receipt of the written 
notice. The appeal must be submitted to U.S. Customs and

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Border Protection, Office of Field Operations, Cargo and Conveyance 
Security (``CCS''), 1300 Pennsylvania Ave. NW., Suite 2.3D, Washington, 
DC 20229-1015 or by email to [email protected]. The Executive 
Director, CCS, will issue a written decision on the proposed action 
within 30 working days after receiving a timely filed appeal from the 
test participant. If no timely appeal is received, the proposed notice 
becomes the final decision of the agency as of the date that the appeal 
period expires.
    Except in the case of willful misconduct, or where a test 
participant's conduct may cause immediate harm to the public health, 
interest, or safety, a proposed discontinuance of a test participant's 
participation privileges will not take effect until the time to file an 
appeal has expired. In the case of willful misconduct, or where a test 
participant's conduct may cause immediate harm to the public health, 
interest, or safety, the Director, Cargo Security and Control, OFO, may 
immediately discontinue a participant's test privileges upon written 
notice to the test participant. The notice will contain a description 
of the facts or conduct warranting the immediate action.
    The test participant will be offered the opportunity to appeal the 
decision within ten (10) calendar days of receipt of the written notice 
providing for immediate discontinuance. The appeal must be submitted to 
U.S. Customs and Border Protection, Office of Field Operations, CCS, 
1300 Pennsylvania Ave. NW., Suite 2.3D, Washington, DC 20229-1015 or by 
email to [email protected]. The immediate discontinuance will remain 
in effect during the appeal period. The Executive Director, CCS, will 
issue a decision in writing on the discontinuance within 15 working 
days after receiving a timely filed appeal from the test participant. 
If no timely appeal is received, the notice becomes the final decision 
of the Agency as of the date that the appeal period expires.

Test Evaluation Criteria

    The following is a non-exhaustive list of evaluation factors that 
CBP may use to assess the merits of the FTZ test:
    1. Workload impact;
    2. Policy and procedure accommodations;
    3. Cost savings;
    4. Trade compliance impact;
    5. System efficiency;
    6. Operational efficiency; or
    7. Other issues raised by public comment or by the test 
participants.
    Results of the FTZ test will be formulated at the conclusion of the 
test and will be made available to the public upon request.

    Dated: June 3, 2013.
David A. Murphy,
Acting Assistant Commissioner, Office of Field Operations.
[FR Doc. 2013-13464 Filed 6-6-13; 8:45 am]
BILLING CODE 9111-14-P