FACT SHeet: New Foreign-Trade Zones Regulations
- On February 17, 2012, the U.S. Foreign-Trade Zones (FTZ) Board, chaired by the Department of Commerce (Commerce), issued new regulations designed to improve the FTZ program’s flexibility and responsiveness – including for export activity – and to enhance ease-of-use and transparency.
- With the Obama Administration’s directive to reduce unnecessary red tape of the regulatory process to promote economic growth, innovation, competitiveness and job growth for U.S. companies and workers, the rule change is the first regulatory overhaul of the FTZ program in 20 years.
- The new FTZ rule streamlines the application procedures manufacturers have to follow to get the benefits of an FTZ, and also streamlines the process that needs to be followed to designate new FTZ locations for individual companies’ use making them faster, flexible and more efficient. The new regulations should reduce the application-related burden on users by more than 50%.
- The revised regulations also improve businesses’ access to FTZs by updating provisions governing the local administration of FTZs, and simplifying and clarifying procedures so that businesses are able to use the program to its full potential and to quickly react to shifts in the marketplace.
- First established by the FTZ Act of 1934, the FTZ program boosts the U.S. economy by enhancing U.S. manufacturers’ competitiveness, helping to maintain business activity in the United States, and creating jobs in the communities where they are located.
- FTZs may be used to warehouse imported and domestic products; with specific authority from the FTZ Board, companies may use FTZs for manufacturing (incorporating components into different, finished products). Products warehoused or manufactured in FTZs may ultimately be exported or shipped to the U.S. market.
- Companies in FTZs currently employ nearly 330,000 U.S. workers and export approximately $30 billion a year in merchandise.
- There are currently more than 500 FTZs and FTZ subzones nationwide.
- The new regulations continue to require advance approval for manufacturing in FTZs, but significantly streamline the procedures and timeframe for issuing this type of approval.
- Specifically, the new regulations replace the prior manufacturing-approval procedures with a simpler and faster standard “notification” process. While the prior process required a complex application that took up to12 months to process the new rule will reduce the ordinary processing time for notifications by two-thirds, to 120 days.
- Under the new regulations, all proposed manufacturing activity will include a public comment period. If issues arise pertaining to the proposed manufacturing activity, the FTZ Board will be able to conduct a more extensive “application” process (akin to the prior process for all manufacturing proposals).
“Subzone” Designation for Individual Companies’ Use
- The new regulations significantly streamline and expedite the procedures for designating locations as “subzones” for individual companies’ use.
- Information required for subzone applications has been radically simplified, with the ordinary application-processing time cut in half – from 10 months to 5 months (or less).
- The new regulations also draw a clear distinction between a new subzone designation for a company – thereby allowing the company to conduct activity not requiring additional, specific approval – and the separate process for the FTZ Board to consider potential manufacturing activity for the company, where applicable.
- Foreign-Trade Zones (FTZs) – designated locations in the United States where companies can use special procedures that help encourage U.S. activity and value added by allowing delayed or reduced duty payments on foreign merchandise, as well as other savings.
- FTZ Board – a governmental board comprised of the Departments of Commerce and of the Treasury.
- Subzone – an extension of a FTZ to a location for a specific company’s use.
International Trade Administration
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