In an FTZ, all “production” activity requires advance approval from the FTZ Board. This means that if your activity results in a change in the HTSUS classification at the 6-digit level for any foreign-status item – or otherwise results in “substantial transformation” or a change in eligibility for entry – then you will need production authority from the FTZ Board to conduct the activity under zone procedures.
Production could include traditional manufacturing activities as well as kitting or assembly operations. When looking at your activity, be sure to consider any imported (foreign status) items, even packaging or other similar materials. If any materials would be used in the zone before a customs entry has been made, then they are considered to be foreign status components.
When a company receives authority from the FTZ Board to conduct production activity, the authority is limited to the approved “scope of authority” for that production operation – which is the list of specific finished products and foreign-status components in the company’s request(s) approved by the FTZ Board.
- The company’s scope of authority is based on the written descriptions provided in the company’s request for production authority that was approved by the FTZ Board.
- Scope of authority generally is not based on HTSUS numbers. HTSUS numbers are provided only as a supplement to the written descriptions of components and finished products. Therefore, changes in the HTSUS number applicable to a component or product have no impact on an approved scope of authority if the physical component or product is the same (that is, consistent with the written description in the scope approved by the FTZ Board).
- Additional production authority from the FTZ Board to expand a company’s scope of authority is required before the company can make new finished products or use new foreign-status components within an active FTZ operation.
As part of the response to Question 2 in the production notification (using the format in the link found below this section), the following information should be provided:
- Location of company/parent company headquarters and any other company locations where similar activity is conducted.
- Number of employees associated with the proposed FTZ activity.
- Percent (by value) of components imported and sourced domestically.
- A breakdown providing the percent (by value) of imported components sourced from each country.
- Percent of production that is exported.
- Primary export markets.
- When a company operates as a contract manufacturer, identify the company or companies for which the manufacturing activity is being performed and/or identify its customers.
- Detailed discussion of why the company is sourcing from abroad instead of using domestic components. Any statements in this discussion should be supported by facts/evidence.
- Detailed discussion related to any potential public benefits tied to the proposed FTZ activity, including supporting evidence and data.
- For the products you want to produce under FTZ procedures, list the percentages (or percent ranges) by value of:
U.S. materials = ____________%;
Foreign materials = ____________%; and
Value added at your facility (labor, profit, overhead, etc.) = _______%.
(U.S. materials + foreign materials + value added = 100%)
Before submitting your production notification, check that you have addressed the issues listed below:
- Note the tab above for additional information needed in response to Question 2.
- FTZ authority is not specific to country of origin for foreign status components. Ensure that your response to Question 3 is accurate if components are sourced from any country.
- In Question 4, the descriptions of finished products and components are important. If approved, the descriptions provided here will become your scope of authority. Please be aware of the following:
- HTSUS descriptions should not be used.
- Warehouse/internal part numbers or descriptions should not be used.
- Spell out any acronyms and abbreviations.
- Backslashes should not be used.
- Generally, the material composition should be included as part of the description (as an example, “steel screws”).
- Each distinct product or component should be on a separate row and listed only once.
- For most items, specifications such as size are not needed.
- Descriptions such as “parts” or “components” should not be used in the components table.
- If applicable, CAS numbers (Chemical Abstracts Service Registry numbers) should be provided for products and components along with 10-digit HTSUS numbers for these items.
- UNS (Unified numbering system) numbers should be provided for any applicable commercial metals and alloys.
- 10-digit HTSUS numbers should be provided for textile components.
- Before submitting, check that your descriptions can be read and understood.
