U.S. Foreign-Trade Zones Board

Alternative FTZ Site Framework:Introduction for CBP

What?

• The ASF is an optional “framework” to manage FTZ sites that gives much greater flexibility to use simple “minor boundary modifications” (instead of more complicated and time-consuming procedures) to bring FTZ designation to locations where a company is ready to pursue using FTZ procedures.

• A grantee can participate in the ASF by applying to the FTZ Board to “reorganize” its zone under the ASF.

The “What” and “Why” of the ASF:

Why?

• The traditional site-management framework (TSF) is outmoded. The designation of new FTZ locations for companies under the TSF tends to impose a major burden on applicants, to take far too long, and to consume too much in government resources, as well.

• TSF’s limitations for minor boundary modifications (MBMs) often lead to only temporary approval and require “swapping” of acreage (which may subsequently revert later). That can result in a record-keeping nightmare!

Why? (cont.)

• Too many unused FTZ sites (often designated for speculative reasons). Too little relationship between sites’ FTZ designations and actual use. Number of speculative sites – not tied to specific users – makes it hard for CBP to project resources needed for oversight.

• The ASF looks to address all of these shortcomings through a ground-up rethink: 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.

• Under ASF – as under TSF – FTZ space can only be designated or modified through FTZ Board or FTZ staff action (with concurrence of CBP Port Director).

• The FTZ Staff consulted with grantees and others to develop the ASF to be flexible (for users), focused (for oversight purposes), and predictable (for everyone’s benefit). CBP HQ concurred on the ASF concept as part of FTZ Board’s adoption of the FTZ Staff proposal

Key Points:

• A zone’s approval for a new ASF “plan” involves a public process to enable future site designations (via simplified FTZ Staff MBM process) across a broad geographic area served by the zone.

• ASF framework is a "package deal" – grantee would either continue to manage its zone sites under TSF or opt for ASF in its entirety.

• There is no change to CBP operator/site activation procedures under the ASF.

• The ASF does not change the grantee/operator structure. Activation of a site still requires that the specific site first be approved by the FTZ Board or Staff (with local CBP concurrence) and that the grantee concurs in the activation.

• “Service Area” is the geographic area where grantee wants to be able to propose general-purpose FTZ sites.

– Most commonly will be specific counties, and each county in proposed Service Area must concur in writing.

– 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.

– Defining Service Area up front eliminates need for full FTZ Board processes when new potential zone users appear and need FTZ designation quickly.

Terms and Concepts:

• A “Magnet” site is one 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.

– Magnet sites are not the true focus of the ASF, and the ASF sets a general goal of six or fewer Magnet sites per grantee.

Example of Magnet Site (outlined in red)

• A “Usage-Driven” site is 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. (A new Usage-Driven MBM would need to be done if a future occupant of the site wanted to pursue using FTZ procedures.)

Example of Usage-Driven Site (outlined in red)

• “Activation Limit” is cap on amount of space that can simultaneously be in CBP “activated” status.

– 2,000-acre activation limit for each zone has long been standard FTZ Board practice (a limit that no zone has ever reached).

– Under the ASF, the 2,000-acre activation limit currently is allotted to individual sites – creating site-specific activation limits. (The need to allot the activation limit to individual sites may be eliminated once the FTZ Board puts in place an internet-based site- and activation-tracking system that is currently under development.)

• Ongoing “Sunset” tests remove unused sites.

– Standard five-year sunset period for Magnet sites (applicant can request longer sunset on case-specific basis but request must be justified; possible waiver of sunset for one site).

– Three-year sunset period for all Usage-Driven sites.

– Sunset deadline for each Magnet site extended for additional five years based on activation during the sunset period.

– Sunset deadline for each Usage-Driven site extended for additional three years based on admission of foreign-status merchandise during sunset period.

• “Sunset” tests (cont.).

– FTZ Board web site will list all sites of each FTZ, including each site’s sunset date.

• “Transitional Phase” is initial period that allows a grantee to bring any number of existing FTZ sites into the ASF as Magnet sites.

– For Transitional Phase, grantee need not justify exceeding ASF’s general goal of six or fewer Magnet sites.

– Sunset tests (with five-year default period) automatically remove sites not used during Transitional Phase.

• To participate in the ASF, a grantee must apply to “reorganize” its zone.

• Simple application format with three possible application sections to complete:– Part One: Standard Info. Required– Part Two: Info. on New/Modified “Magnet” Site (if applicable)– Part Three: Info. on “Usage-Driven” Sites (if applicable)

• As with other applications to the FTZ Board, the “technical report” of the CBP Port Director is a major factor in FTZ Board’s evaluation of the application.

Application Process:

• It will be essential for the Port Director to assess – and address in his/her technical report – whether CBP can actually serve company-driven FTZ sites for the zone in question across the proposed Service Area.

• In a few parts of the country, closely clustered CBP Ports of Entry may lead to grantees proposing partially overlapping Service Areas. A major consideration will be whether the overlap would cause problems for CBP’s oversight of the zones.

Application Process (cont.)

The Bottom Line: A FTZ program that’s both more flexible and more focused.

• Through an application process to consider a zone’s proposal to be able to serve companies across a defined geographic area, the ASF can enable much simpler, quicker future MBM designations for FTZ sites – with CBP’s concurrence – for companies with real FTZ needs.

• At the same time, the ASF should ultimately clear out large numbers of unused, speculative FTZ sites through the “use-it-or-lose-it” sunset limits that will apply to virtually all sites.

Questions? Do not hesitate to contact the FTZ Board staff.

Contact info:

Camille Evans – (202) 482-2350 or camille.evans@trade.gov

Liz Whiteman – (202) 482-0473 or elizabeth.whiteman@trade.gov