Foreign Trade Zone|Rules Relaxed

WASHINGTON (CN) - The Commerce Department adopted a sweeping overhaul of regulations governing Foreign Trade Zones - duty-free manufacturing zones on U.S. soil - to increase the use of the zones by manufacturers that employ 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 new rule allows 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 require permission from the FTZ Board, the new regulations require a response to an application to change a manufacturing process, within 120 days.

In addition, the new rules delegate authority to the Commerce Department's Assistant Secretary for Import Administration to approve activities on an interim basis pending review by the full FTZ Board.

In a major change of policy, operators of the zones - private companies that receive licenses from the government - are required to operate the zones like public utilities, and must charge fees that reflect the actual cost of maintaining the zones.

In addition, access to facilities in the zones must be auctioned in an open bidding process.

The rules go into effect April 30, except for provisions detailing creation of a new FTZ, as the Office of Management and Budget first has to approve the recordkeeping requirements proposed by the department for new zones.

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