Agency Plans for More Use|of Duty Free Trade Zones

     WASHINGTON (CN) – The Commerce Department hopes to expand use of Foreign Trade Zones – areas on U.S. territory in which companies produce materials and products that do not require import duties unless they are exported for sale in the United States – by allowing companies in the zones to change their operations without prior approval, according to a proposed Foreign Trade Zone Board rule.
The agency’s rule also would require a company to only pay a fine of $1,000 if they self report on any violations of the Foreign Trade Zone Act.
     The Commerce Department hopes that the changes would increase the use of the zones by manufacturers that provide jobs to U.S. residents. The zones were created to offset customs advantages available to overseas producers who compete with domestic manufacturers.
     Currently, the Foreign Trade Zone Board must approve all manufacturing and value added operations in a Foreign Trade Zone (FTZ); the proposed rule would allow retroactive notification to the board for all changes to existing operations unless a lower U.S. duty rate would be applied to a component through its incorporation into a downstream product in the FTZ.
To reduce the time it takes for a company to gain approval for changes that still will require permission from the FTZ Board, the proposed regulations 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.
In a change of regulatory policy, operators of the zones – private companies that receive licenses from the government – would be required to operate the zones like public utilities meaning that fees charged to operators would have to reflect the actual cost of to the licensees of maintaining the zones.
     Zone licensees also would have to treat all applications to operate in the zone a uniform manner, meaning that no preferential treatment could be provided to companies associated with the licensees, and that in general permission to set-up operation in the zones would be the result of an open and fair bidding process.

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