NAFTZ Pushing FTZ Trade Deal Legislation, Update to CBP Regulations
ORLANDO -- The National Association of Foreign-Trade Zones is pushing for a legislative initiative to better balance FTZ and non-FTZ tariffs, NAFTZ executives said Oct. 17 during the group’s annual conference. The legislation, referred to as “Trade Equality for American Manufacturing” (TEAM), would aim to align tariff rates on FTZ imports from countries that have signed a trade deal with the U.S. with non-FTZ import tariff rates for goods from those nations, which are most often lower than FTZ products that meet the same preferential rules of origin, NAFTZ President Erik Autor said. The bill has yet to be introduced, and the trade group hasn't engaged lawmakers.
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The group wants Congress to include TEAM legislation with any Trans-Pacific Partnership implementation bill, though chances are “very slim” that lawmakers will consider TPP during their upcoming lame-duck session starting next month, Autor said. “We’re not asking for special treatment for FTZs, just an equal opportunity,” he said. Currently, goods imported directly from countries that have signed a free trade agreement with the U.S. can enter duty-free if they meet the agreement's rules of origin, while products that meet the same rules of origin do not qualify for the FTA's duty-free benefits if produced in an FTZ. TPP would further distort existing FTZ tariff imbalances by adding economically powerful Japan and nine other countries to a list of nations that offer lower FTZ duty rates than the U.S., Autor said.
The legislation would also align U.S. practices for exports within NAFTA with Canadian and Mexican rules. Neither Canada nor Mexico has regular most-favored nation tariffs on inputs imported and used in production of key manufactured goods for export, he said in an interview.
The situation represents an inverted tariff that hurts U.S. manufacturers, who could benefit from legislation that aligns all or specific FTZ tariff lines with normal tariff rates for U.S. trade-deal imports, he said. If not attached to TPP, it’s unclear when such legislation could surface for consideration again, but supporters of the legislation would work to get a bill passed "within the next year or so" if TPP stumbles, Autor said. The effort is in its early stages, and the NAFTZ is working on uncontroversial legislation that would not draw pushback from labor organizations, as occurred during its last attempt at advancing the legislation a few years ago, he said.
The trade group is also pushing for CBP to update regulations governing FTZs, which haven’t been changed since 1986, NAFTZ General Counsel Marshall Miller said during the conference. CBP has not codified FTZ weekly estimated export procedures and NAFTA duty deferral, and has not defined key terms like “Universal Identification Number” and “lot number” in its regulations, Miller said. Furthermore, under CBP FTZ regulations, only manufacturers are technically authorized to perform weekly entries, as regulatory language doesn't include non-manufacturing FTZ operators, he said.
CBP compliance reviews of FTZs seem likely to improve in the near future, said Jim Swanson, director of cargo security and controls in CBP’s Office of Field Operations. Such reviews are currently performed in a “very off-book” manner, and the agency wants to make their evaluations more efficient and spend less time performing them, he said. “There’s nothing wrong with that, but one of the things that ACE has given us … is we now have the ability to run better reports,” he said. Speaking later during the conference, Swanson said this is “one of the most difficult times in regulatory writing that I have ever seen in my 25 years in government.” He noted that he has “two sets” of regulations that have waited for Department of Homeland Security or Treasury Department approval for two years. Swanson said: “I don’t think we’re hesitant to write regulation, but there’s a backlog.”