[Federal Register Volume 74, Number 7 (Monday, January 12, 2009)]
[Notices]
[Pages 1170-1173]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-352]
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DEPARTMENT OF COMMERCE
Foreign-Trade Zones Board
Adopted Proposal for Available Alternative Site-Designation and
Management Framework
Summary: The Foreign-Trade Zones (FTZ) Board has adopted a final staff
proposal to make available an alternative framework (for grantees that
choose to participate) for designating and managing general-purpose FTZ
sites. An initial proposal was published for comment on May 8, 2008 (73
FR 26077-26078). Based on comments received, a revised proposal was
published on September 11, 2008 (73 FR 52817-52822). The final staff
proposal
[[Page 1171]]
takes into account comments received on the revised proposal.
The comments received on the revised proposal and the FTZ Staff's
analysis of legal and practical aspects of the proposal are contained
in a staff report available on the FTZ Board's web site, which can be
accessed via www.trade.gov/ftz. The final proposal is delineated below.
Final Proposal:
The fundamental trade-off addressed in this proposal is greater
flexibility and increased predictability for approval of FTZ sites
through simple and rapid ``minor boundary modification'' actions in
exchange for a grantee maximizing the linkage between designation of
FTZ space and actual use of that space for FTZ activity (after
``activation'' by CBP). The major benefit would likely be for existing
FTZ grantees, which would have the option of applying to reorganize
their FTZ by incorporating in an application for FTZ Board action
elements from the following framework:
1. An initial limit of up to 2,000 acres would be authorized for
FTZ activation within a specific geographic area. The proposal is
focused on linking FTZ designation more closely to FTZ activity, and
the 2,000-acre limit reflects the Board's existing practice of limiting
any FTZ grantee to activation of 2,000 acres unless further approval is
obtained from the FTZ Board. Acreage within the 2,000-acre limit which
had not been allotted to specific designated sites would be considered
``reserve'' acreage available for activation at future sites within the
general geographic area approved for the zone to serve (see ``service
area'' below).
2. Enhanced flexibility by allowing site-specific activation limits
that may represent only a portion of the acreage encompassed by the
sites' boundaries (as has been the FTZ Board's practice with certain
applications to date). For example, the boundaries of a site might
encompass a 700-acre port facility but the grantee could request that a
100-acre activation limit apply to the site. The precise 100 (or fewer
acres) that would be used within the site's boundaries would be
pinpointed at the time of CBP activation(s) of the specific area(s)
within the site.
3. The ``service area'' within which the grantee intends to be able
to propose general-purpose FTZ sites (e.g., specific counties, with
documented support from new counties if the service area reflected a
broader focus than the FTZ's current area served) using its standard
2,000-acre activation limit. The term ``service area'' applies a name
to a concept which already exists in certain approved FTZ applications
in which a grantee organization has named the localities it intends to
serve. It should be noted that any service area must meet the
``adjacency'' requirement of the FTZ Board's regulations (60 miles/90
minutes driving time from CBP Port of Entry boundaries). A grantee's
proposed service area would need to be consistent with enabling
legislation and the grantee organization's charter. The FTZ Board's
evaluation of a proposed service area could potentially involve
examination of issues related to the ``convenience of commerce'' (19
U.S.C. 81b(b)) in regions served by more than one FTZ grantee. Also,
designation of a service area for one grantee would not preclude other
grantees from proposing to the FTZ Board a service area (or a site)
that includes some or all of the same geographic area; the Board would
evaluate the specific facts and circumstances on a case-by-case basis
(including relative to the previously cited ``convenience of commerce''
standard).
4. Designation of a limited number of ``magnet'' sites selected by
the grantee--often as a result of local public processes--for ability
and readiness to attract multiple FTZ uses. An individual magnet site
would generally be proposed with an allotment of no more than 200 acres
for activation, although a larger proposed activation limit for a
magnet site could be justified based on factors such as the nature of
the site (e.g., a major harbor facility) or a specific type of
projected FTZ activity that would tend to require an unusually large
number of acres in simultaneous ``activated'' status at the specific
site. A magnet site could only be designated through an application for
FTZ Board action.
5. Possible designation of ``usage-driven'' sites to serve
companies which are not located in a magnet site but which are ready to
pursue conducting activity under FTZ procedures. In the general
interest of maximizing the linkage between FTZ site designation and FTZ
activity at the site, a usage-driven site would be limited--in the
context of a larger industrial park or business district where other
companies interested in FTZ procedures might be able to locate in the
future--to the area(s) required for the company(ies) specifically
identified as ready to pursue conducting FTZ activity at the site.
6. Unlike magnet sites, usage-driven sites could be designated
through the current minor boundary modification (MBM) mechanism--a
rapid administrative action by the Board's staff--in addition to
through FTZ Board action. (It should be noted that usage-driven MBM
actions could conceivably be used to designate additional acreage where
needed at magnet site locations.) A simplification of the MBM process
would result from elimination of the need to ``swap'' like amounts of
acreage from existing sites because the total allotted acreage for
activation of existing and proposed sites would remain within the
standard 2,000-acre limit. Requests for MBM actions would continue to
require concurrence from the appropriate CBP port director.
7. No specific limit on the number of usage-driven sites (although
subject to the zone's overall 2,000-acre activation limit). However, it
should be noted that such usage-driven sites are by definition focused
on only the specific physical area(s) required for company(ies)
conducting FTZ activity or ready to pursue conducting FTZ activity.
Therefore, with regard to numbers of usage-driven sites, the definition
of such sites and the standard sunset limits (and resetting) described
below inherently function to limit usage-driven sites on an ongoing
basis to the number of specific areas required for activity by (or on
behalf of) FTZ users.
8. Regarding numbers of magnet sites, the framework would reflect a
general goal--after any transition period, as outlined below--of
focusing each FTZ on six or fewer simultaneously existing magnet sites.
Special circumstances of regional (multi-county) FTZs could be taken
into account based on factors which could justify a larger number of
magnet sites (e.g., population size, level of trade-related activity).
Also, a grantee seeking over a longer term to justify to the FTZ Board
proposed authority for a larger number of magnet sites could provide
evidence of multi-user FTZ
[[Page 1172]]
activity--as reflected in the grantee's annual reports to the FTZ
Board--at a significant percentage of the grantee's already designated
magnet sites. (It should be noted that a grantee with an approved
magnet site where only a single user activates over time will be able
to consider requesting usage-driven designation for the active portion
of that magnet site, thereby helping to retain focus and enabling the
grantee to consider whether a different site would be more appropriate
for magnet designation while remaining consistent with the goal
outlined above for total number of magnet sites.)
9. Magnet sites and usage-driven sites would be subject to
``sunset'' time limits which would self-remove FTZ designation from a
site not used for FTZ purposes before the site's sunset date. For
magnet sites, the default sunset period would be five years with sunset
based on whether a site had been activated by CBP. However, the FTZ
Board could take a range of factors into account in determining the
appropriate sunset period for a given site (e.g., nature of the site,
public ownership of the site). For a usage-driven site, the sunset
limit would require within three years of approval admission into the
site of foreign non-duty paid material for a bona fide customs purpose.
Experience in administering the framework could also reveal a need to
adjust practice for usage-driven sites to implement intermediate
benchmarks (such as progress towards activation) rather than a single
deadline date at the end of a three-year period.
10. Magnet sites and usage-driven sites would also be subject to
ongoing ``resetting'' whereby activation at a site during the site's
initial sunset period would serve to push back the sunset date by
another five years for magnet sites and by another three years for
usage-driven sites (at which point the sunset test would again apply).
Finally, if all of a grantee's sites were due to sunset based on lack
of activation, the grantee would need to apply to the FTZ Board at
least 12 months in advance of the ultimate sunset termination to
request designation of at least one site for the period beyond the
sunset of the previously approved sites.
11. An optional five-year transitional phase would be available for
grantees of zones with more than six existing magnet-style sites. For
the optional transitional phase, an individual grantee could apply to
reorganize its zone and request continued FTZ designation for existing
sites that the grantee determines warrant further opportunity to
demonstrate a need for FTZ status. For the transition period, there
would be no specific goal in terms of numbers of existing sites which
could be proposed for magnet designation. However, sites proposed for a
zone's transitional phase would need to comply with the framework's
limit of a 2,000-acre activation limit within the zone's service area
(see further discussion below).
12. For the transitional phase for a particular zone, the grantee
would have the option of requesting usage-driven designation for any
site where a single entity is conducting (or ready to conduct) FTZ
activity. For sites that the grantee believes are better suited to a
magnet (multi-user) role, the grantee could request magnet designation.
Any usage-driven sites would have the standard three-year sunset period
for such sites. The FTZ Board would establish sunset limits for
individual magnet sites based on the facts of the case (particularly as
they pertain to each site). For the transition phase, the default
sunset limit for magnet sites would be five years but the FTZ Board
would be able to establish longer sunset limits for specific sites if
warranted by the facts and circumstances present.
13. The five-year transition period for a specific grantee would
begin with approval of the grantee's reorganization application by the
FTZ Board. During the final year of the transition period, the FTZ
Board staff would initiate a review of all of the zone's sites for
which the sunset limits align with the end of the transition period.
The staff review would examine whether each of those sites had been
activated during the transition period and, for activated sites, the
specific FTZ activity which had taken place (including the operator(s)/
user(s) for each site). The staff review of a zone's transition period
would result in a report noting any sites subject to the review which
had remained unactivated during the period (for which FTZ designation
would self-remove at the end of the period). The staff report would
also make preliminary recommendations regarding magnet or usage-driven
designation going forward for sites activated during the period. The
FTZ Board staff would provide its preliminary recommendations to the
zone's grantee and allow a period of 30 days for the grantee to provide
any response to the staff's recommendations. After the end of the 30-
day period, the staff would create a final report taking into account
any response from the grantee regarding the preliminary
recommendations. The FTZ Board would be able to take action, as
appropriate, on the FTZ Staff's final recommendations, and the grantee
would be notified of any ultimate action.
14. The transitional phase for any zone would be limited by the
2,000-acre activation limit inherent in the proposed framework. In this
context, if existing sites which a grantee wishes to propose for a
transitional phase cumulatively exceed 2,000 acres in their current
configuration, the grantee would need to determine the specific
activation limit to propose allotting to each such existing site. (For
example, if an existing site is the 340-acre Acme Industrial Park, the
grantee could propose an activation limit of 100 acres within the 340-
acre Acme Industrial Park.) A grantee might opt for a simple mechanism
to apportion a certain total amount of its activation limit among sites
it is proposing for the transitional phase (after making allowance for
the amount of acreage the grantee determines it needs to keep in
reserve for possible future minor boundary modifications; a grantee
retaining a minimum of 200 acres in reserve is advisable).
It is important to note that the elements of the proposal support
each other in furthering the goals of flexibility and focus for FTZ
site designation (with important resulting resource- and efficiency-
related benefits for the government). As such, a framework
incorporating these types of elements would include the package of
elements as an available alternative to the Board's current practice.
As is currently the case, minor boundary modification actions would be
approved by the Board's staff while modifications to a zone's ``plan''
(e.g., increase in authorized activation limit, modifications to
service area) would be matters for the FTZ Board's consideration. FTZ
grantees opting to manage their zones under the Board's
[[Page 1173]]
current framework would be unaffected by this proposal.
Finally, in order to help the FTZ Board evaluate the effectiveness
and appropriateness of the alternative framework after actual
experience with FTZ grantees, the FTZ staff would report to the Board
on a periodic basis regarding the actual usage of the alternative
framework. The staff's reporting regarding implementation of the
framework at individual participating FTZs would result from staff-
initiated reviews and would not require any request or application from
the grantee.
Dated: January 5, 2009.
Andrew McGilvray,
Executive Secretary.
[FR Doc. E9-352 Filed 1-9-09; 8:45 am]
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