CBP, FTZ Board Rejected Virtual FTZ Idea
ORLANDO -- After several companies expressed interest to the government to get Foreign-Trade Zone benefits without goods transiting a physical FTZ location, the FTZ Board and CBP jointly determined there is no basis to grant such perks, FTZ Board Executive Secretary Andrew McGilvray said Oct. 18 during the National Association of Foreign Trade Zones annual conference. That's because of the Foreign-Trade Zones Act and a law passed in 2000 that affects weekly entry, he said. Speaking Oct. 17 during the same conference, Jim Swanson, director of cargo security and controls in CBP’s Office of Field Operations, said that big companies approached the government to explore a “virtual” FTZ, highlighting that FTZ-afforded weekly entries would help them avoid paying merchandise processing fees.
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Swanson said that companies argued that creating that capability could also bolster the effectiveness of Customs-Trade Partnership Against Terrorism (C-TPAT) benefits. “What we don’t want is to get to the point where zones become superfluous, and trust me when I tell you there are some big companies out there that want to make zones superfluous,” Swanson said. “We need to find real [C-TPAT] benefits for those partners. However, subverting the rest of the rules, and subverting the other thousands of folks who got approved may not be the answer to that.”
Over 94 percent of respondents to a Foreign-Trade Zones Board survey reported that they were not affected by the agency’s 2012 regulation establishing unified treatment of production and one set of production protocols, McGilvray said. The board received responses from 254 of 263 designated FTZ grantees surveyed. The board in February 2012 issued a final rule eliminating the distinction between “manufacturing” and “processing” FTZ operations, instead applying a single concept of production (see 12022903). Of the 5.9 percent of surveyed grantees who reported effects from the rule, commonly cited changes related to the manner in which outside contractors could perform FTZ operator compliance reviews, and to how grantees structure operator’s agreements, McGilvray said. The board cleared about 50 FTZ approvals in 2015, ranging from new site approvals to tweaks to production scope, McGilvray said.