Adopted Proposal for Available Alternative Site-Designation and Management Framework

Federal Register: January 12, 2009 (Volume 74, Number 7)

Notices

Page 1170-1173

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

DOCID:fr12ja09-28

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

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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

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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

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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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