Revised Proposal for Available Alternative Site-Designation and -Management Framework, 52817-52822 [E8-21232]

Agencies

• DEPARTMENT OF COMMERCE
• Foreign-Trade Zones Board

[Federal Register Volume 73, Number 177 (Thursday, September 11, 2008)]
[Notices]
[Pages 52817-52822]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-21232]


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DEPARTMENT OF COMMERCE

Foreign-Trade Zones Board


Revised Proposal for Available Alternative Site-Designation and -
Management Framework

SUMMARY: Based on comments received in response to the May 8, 2008, 
notice (73 FR 26077-26078), the Foreign-Trade Zones (FTZ) Board staff 
is making a number of revisions to its proposal to make available an 
alternative framework (for grantees that choose to participate) to 
designate and manage their general-purpose FTZ sites. Comments on the 
May proposal were overwhelmingly supportive overall with regard to 
making such a framework available to grantees on an optional basis. 
However, comments also raised a number of important questions and 
concerns.
    In response, we have made some significant revisions to the 
proposal. Key revisions are allowance for a special transitional phase 
for each grantee applying to transfer to the alternative framework, 
elimination of a general initial limit on the number of ``usage-
driven'' (formerly ``user-driven'') sites, elimination of the concept 
of an ``anchor'' site, and flexibility on the duration of the sunset 
limits for ``magnet'' sites--with five years established as a minimum 
rather than a fixed standard--so that the FTZ Board may take specific 
circumstances into account.
    Comments and questions are summarized and addressed below by 
general topic. The revised proposal is delineated after the discussion 
of the comments/questions.

Comments Received

Comments on Overall Framework and Application Process

    (1) One commenter suggested that, recognizing that a number of FTZ 
grantees currently have more FTZ sites and/or acreage than envisioned 
under the standard numbers associated with the proposed alternative 
site-designation and -management framework (``alternative framework''), 
the FTZ Board could require participating grantees to submit a plan in 
advance of an application to restructure the grantee's zone project 
outlining the process and standards to be used in assessing which of 
the grantee's existing sites to propose for continued FTZ status.
    (2) One commenter stated that a grantee seeking to use the 
alternative framework would be changing its zone plan, which could only 
be accomplished through application to and approval by the FTZ Board. 
However, designating existing sites as Anchor or magnet sites should be 
at the grantees' discretion. Further, requiring grantees to recompile 
economic data to resubstantiate the designation of already approved 
sites would tend to be time-consuming while yielding little benefit.
    (3) More than one commenter suggested a transitional period that 
would allow grantees whose numbers of existing sites exceed the 
envisioned standard limitations the opportunity to exceed those 
standard limitations if they believe it is desirable to do so for an 
initial period, with a sunset provision for all affected sites helping 
to ``weed out'' unused or unneeded zone sites at the end of the initial 
period.
    (4) One commenter indicated that the FTZ Board should provide an 
appeals process for any existing property owners that may be 
``detrimentally impacted'' by a grantee's decisionmaking process 
regarding whether to retain FTZ designation at currently designated 
sites. The framework should also address issues of concurrence needed 
from property owners that may not necessarily agree to have zone status 
removed.
    (5) One commenter stated that it is important that the process be 
managed as a flexible framework rather than as a set of rigid 
requirements. The final framework should set general standards but 
specific grants of authority should be based on grantee requests and 
the FTZ Board's assessment of applications. It would be incumbent on 
grantees to demonstrate the need to diverge from the established 
general standards.
    (6) One commenter stated that, for states where local inventory 
taxes can be a possible issue for approval of new sites, the FTZ Board 
should require evidence of taxing authority concurrence as part of the 
designation process. However, for existing FTZ sites being considered 
as part of the reframing of a zone project under the new framework, no 
new taxing authority approvals should be required. Also, if under the 
new framework FTZ designation is removed from a site either at the 
grantee's discretion or via a sunset mechanism, a taxing authority 
approval previously in place for the site should ``remain in place'' in 
the event of a future request for redesignation of the site as magnet 
or user-driven.
    (7) One commenter suggested that the FTZ Board allow a grantee to 
benefit from some of the proposal's benefits (``floating acreage,'' 
simplified process for minor boundary modifications) within a 2,000-
acre limitation but based on the grantee's own zone-site management 
plan, which the FTZ Board

[[Page 52818]]

could determine was an acceptable alternative to the model delineated 
in the alternative site management proposal.

Response on Overall Framework and Application Process

    Reframing the ``plan'' for a general purpose zone project under the 
alternative framework would inherently involve application to the FTZ 
Board (including the procedural requirement for technical comments from 
CBP pursuant to 15 CFR 400.27(d)(1)) so that the Board could evaluate 
and possibly approve the proposal for a new plan for the zone. For 
existing FTZs with disparities between their levels of designated sites 
and acreage relative to their sites and acreage where FTZ activity is 
being conducted, we agree with the comments suggesting allowance for a 
transitional phase between a grantee's existing structure and a future 
structure consistent with the goals of the alternative framework. As a 
result, the revised proposal outlined below specifically incorporates a 
mechanism for an optional, one-time transitional phase for a 
participating grantee.
    We also agree with comments indicating that applying rigid 
standards would be counterproductive. The proposal has been revised to 
eliminate any numeric limit or goal for usage-driven (formerly user-
driven) sites. The revised proposal also reflects that a request for 
designation for a usage-driven site would be explicitly linked to the 
specific entity(ies) which will be conducting FTZ activity at the site 
(or for which such activity will be conducted). As such, the 
designation of a usage-driven site--and continuation of that 
designation--would be directly tied to the specific entity(ies) 
associated with the request. Further, the revised proposal emphasizes a 
general goal of no more than six magnet sites per zone while 
recognizing the special circumstances that may exist with regard to 
certain zones (such as regional, multi-county projects). The revised 
proposal explicitly allows for a range of situations while also 
emphasizing the type of justification that would be needed for a larger 
number of magnet sites.
    Regarding grantee decisionmaking standards and appeals of such 
decisions, we agree that any grantee making a decision about whether to 
retain existing sites should apply uniform neutral standards in making 
that determination. A standard element of processing any application 
for Board action is a Federal Register notice with a public comment 
period. The notice and comment process provides appropriate procedural 
safeguards regarding any application for Board action. Also, as noted 
above, any grantee's use of the proposed alternative framework would be 
the result of an application to the FTZ Board to ``reorganize'' the 
zone. The FTZ Staff would aim to minimize the burden on the applicant 
(particularly regarding the type of economic data which had been part 
of a justification which had previously been submitted to the Board).
    Finally, regarding documentation for concurrence of local taxing 
entities in states with inventory taxes, the Board would be able to 
evaluate on a case-by-case basis pre-existing documentation for sites 
newly proposed for designation whose previous FTZ designation had 
lapsed.

Comments on ``Service Area'' Concept

    (8) One commenter, while agreeing with the concept of a ``service 
area'' (geographic area within which the grantee intends to be able to 
propose FTZ sites), noted that more than one grantee might present the 
same geographic location as part of their service areas and states that 
a grantee must satisfy the ``convenience of commerce'' (19 U.S.C. 
81b(b)) for any portion of its service area that overlaps another 
grantee's service area. The same commenter raised a number of questions 
regarding service areas: Will there be a process to continue overlaps 
in service areas? Will the Board determine the service area for each 
grantee and, if so, would there be an appeals process? Would the 
establishment of service areas require the transfer of existing sites 
from one grantee to another? Must a grantee's subzones be within the 
boundaries of the service area associated with that grantee?
    (9) One commenter stated that, in implementing the concept of a 
zone's service area, there is no need to change existing FTZ 
``projects'' from one port of entry affiliation to another where ports 
of entry overlap and each has its own FTZ grantee.

Response on ``Service Area'' Concept

    The complexity of the FTZ Board's evaluation of a grantee's 
proposed service area may vary depending on the proposal and the region 
to which the proposal relates. Some regions have multiple existing 
grantees serving a single Customs and Border Protection (CBP) port of 
entry (POE) and the limitations of the areas those grantees seek to 
serve may not have been defined to date. (It should be noted that some 
regions with multiple grantees serving a POE may have the basic 
framework in place to define service areas through the plans previously 
presented to the FTZ Board, some of which may have tended to focus on a 
single county within a broader region served by the POE.) In instances 
where there is disagreement over proposed service area(s) serving a 
POE, the FTZ Board would need to evaluate the history of the zone(s) at 
issue (particularly as such history relates to the ``convenience of 
commerce'' clause of section 81b(b) of the FTZ Act). The FTZ Board will 
be able to evaluate such issues on a case-by-case basis.
    It is also important to recognize that the primary purpose of 
defining a service area is to put in place a zone ``plan'' that would 
clearly be compatible with subsequent requests for minor boundary 
modifications (MBMs) within the service area. As such, if a POE area is 
already served by multiple grantees with some overlap of communities 
served, defining a service area for grantee ``A'' would not inherently 
have an impact on an existing site of grantee ``B'' that happens to 
fall within the newly defined service area of grantee ``A.'' Also, 
approval of a service area for one grantee does not necessarily 
preclude another grantee in the POE from proposing a new FTZ site in 
the first grantee's approved service area based on evidence that the 
first grantee ``will not adequately serve the convenience of commerce'' 
(19 U.S.C. 81b(b)). In fact, the service areas could conceivably 
overlap although the FTZ Board would need to examine the public 
interest implications of such a situation, including burden on the 
resources of government agencies involved in administration and 
oversight related to the FTZ program.
    A key additional point is that a service area could only be defined 
through an application for FTZ Board action. Action by the FTZ Board 
would establish the service area, and the Board would retain its 
existing discretion to determine whether to approve an application in 
its entirety and whether restrictions or limitations might be required. 
In this context, presentation of a proposed service area in an 
application does not guarantee approval of the exact service area by 
the Board (particularly if controversy has arisen regarding the 
proposed service area during the processing of the application). In 
instances where any party may wish to object to the service area 
proposed by a grantee in an application to the Board, the standard 
Federal Register notice and public comment procedures for applications 
to the Board will ensure that all

[[Page 52819]]

perspectives can be presented for consideration.
    Finally, the proposal at issue here relates to a grantee's 
management of its general-purpose FTZ. As such, subzones are not a 
subject of any element of the proposal (service area, standard overall 
acreage limit, etc.) and, in any case, already are subject to 
regulations addressing issues of geography and sponsorship (see 15 CFR 
400.22(d)(2)).

Comments on 2,000 Acre Limit and ``Floating'' Acreage

    (10) More than one commenter indicated that the proposed initial 
limit of 2,000 acres of designated FTZ space for a participating 
grantee appears reasonable in light of the concept of ``floating 
acreage'' also described in the proposal, but that the proposal would 
likely fail without the flexibility associated with the floating 
acreage. The same commenters state that the proposed general initial 
limitations of 500 floating acres at an anchor site and 200 floating 
acres at a magnet site seem reasonable as long as the grantee is able 
to request an increase in the amount of floating acreage designated at 
a given site based on actual FTZ activity at the site.
    (11) Two commenters indicated that the proposed 2,000-acre limit 
per zone could cause confusion for some property owners of sites within 
a zone that currently exceeds 2,000 designated acres. Clarification 
should be provided regarding the availability of user-driven 
designation so that existing land owners (public and private) can 
understand how removal of designation now does not preclude them from 
getting FTZ designation on a usage-driven basis in the future.
    (12) One commenter was concerned that the proposed 2,000-acre 
limitation would be too restrictive for a grantee whose existing site 
approaches 2,000 acres in size.
    (13) One commenter asked whether acreage for subzones was included 
in the proposed 2,000-acre limit.

Responses on 2,000 Acre Limit and ``Floating'' Acreage

    The 2,000-acre limit reflects the FTZ Board's existing practice of 
limiting any FTZ grantee to activation of 2,000 acres (regardless of 
the overall size of the grantee's zone) unless further approval is 
obtained from the FTZ Board. It is important to emphasize that the 
concept of ``floating'' acreage significantly enhances the usefulness 
of the 2,000 acres. Given that major portions of large sites tend to 
remain unactivated, actual facilities encompassing significantly more 
than 2,000 acres could be served effectively by 2,000 floating acres. 
(For example, 500 floating acres within a 4,000 acre airport complex 
would enable activation of up to 500 acres anywhere within the 
complex.)

Comments on ``Anchor'' Site Concept

    (14) One commenter maintains that, where an existing site is to be 
proposed as an ``Anchor'' site, the grantee should be able to 
accomplish ``Anchor'' designation through a letter to the FTZ Board 
staff rather than a full application to the FTZ Board.

Response on ``Anchor'' Site Concept

    Based on factors described elsewhere in this notice, the revised 
proposal no longer includes the concept of an anchor site. Flexibility 
introduced into the revised concept for a magnet site enables magnet 
designation to cover a broader range of needs. At the same time, the 
proposal is simplified by having two categories of sites rather than 
three.

Comments on ``Magnet'' Site Concept

    (15) More than one commenter maintained that, where an existing 
site is to be proposed as a magnet site, the grantee should be able to 
accomplish magnet designation through a letter to the FTZ Board staff 
rather than a full application to the FTZ Board.

Response on ``Magnet'' Site Concept

    The designation of magnet sites is intended to be part of the 
reframing of a zone's plan through application to the FTZ Board. As 
such, magnet designation cannot be accomplished through administrative 
action by the FTZ Board staff. However, there is real merit to 
commenters' point that burden should be minimized for a grantee seeking 
to propose existing sites as magnet sites. Minimizing burden in that 
manner will be a goal for any guidelines to be issued by the Board 
staff for applications to reorganize zones using the alternative 
framework. Further, as noted above, such guidelines would aim to 
minimize any need to present new economic data for existing sites.

Comments on ``User-Driven'' Site Concept

    (16) One commenter recommended changing the nomenclature of ``user-
driven'' sites to ``usage-driven'' sites to reflect that designation of 
certain sites may be driven by the needs of an ``operator'' (15 CFR 
400.2(s)) rather than a ``user'' (15 CFR 400.2(v)).
    (17) One commenter recommended changing the nomenclature of ``user-
driven'' sites to ``operator/user-driven'' to reflect the possible use 
of such sites by third-party operators.

Response on ``User-Driven'' Site Concept

    The term ``user-driven'' unintentionally gave the impression of 
limiting such sites to situations driven by the needs of a zone 
``user'' (as defined in 15 CFR 400.2(v)). In this revised proposal, we 
have adopted the recommended nomenclature ``usage-driven'' (which will 
be used throughout the remainder of this notice). Usage-driven sites 
would be designated for the physical area(s) required for company(ies) 
conducting FTZ activity or ready to pursue conducting FTZ activity.

Comments on Numbers of Sites

    (18) Several commenters questioned the need to have general limits 
on the numbers of magnet and user-driven sites.
    (19) One commenter stated that a grantee should have the 
flexibility to determine appropriate numbers of magnet and user-driven 
sites for its zone project without limits on the numbers of such sites 
as long as the grantee's zone project remained within the overall 2,000 
acre limit.
    (20) One commenter indicates that for regional FTZ projects that 
span more than one county, of which multiple examples exist in the FTZ 
program, each county should be able to have an ``Anchor'' site.
    (21) Two commenters indicated that the concept should be amended to 
allow for designation of one anchor site per city or county 
participating in the zone project.
    (22) One commenter indicated that limitations on numbers of sites 
and on acreage for a type of site may be appropriate for many zones but 
inappropriate for some regionally focused zones. Also, the number of 
counties participating in a zone may be a good point of reference in 
many instances. However, counties can vary significantly in size, 
population and business activity, so counties may not be an appropriate 
point of reference in all cases.
    (23) One commenter indicated that it sees no reasonable or fair 
limits to the number of FTZ sites, whether magnet or user-driven.

Response on Numbers of Sites

    In addition to elimination of the concept of an ``anchor'' site, 
the proposal has been revised in several significant ways regarding 
numbers of sites. First, there is no longer a suggested initial limit 
on the number of

[[Page 52820]]

proposed usage-driven sites per FTZ. For magnet sites, the revised 
proposal describes a general goal of no more than six magnet sites per 
zone over the long term. However, the revised proposal also makes clear 
that the goal is not a fixed standard. There is explicit recognition 
that flexibility may be needed for zone projects with structures that 
could potentially justify larger numbers of magnet sites. Further, the 
newly proposed option for a transitional phase for any participating 
grantee incorporates initial flexibility on numbers of sites.
    At the same time, it is important to recognize that the alternative 
framework delineated in the proposal is, fundamentally, about 
significantly enhanced flexibility in marketing and managing a zone 
project. The increased flexibility for the grantee is explicitly linked 
to other elements, including a need for greater focus that makes such 
flexibility possible. The proposal also reflects the reality expressed 
by many grantees of the great difficulty in prospectively placing FTZ 
designation where it may be needed in the future. The proposal looks to 
enable a grantee to move beyond repeated (often unsuccessful) attempts 
at prospective FTZ designation by recognizing that the primary 
mechanism for a participating grantee to serve new needs would be 
usage-driven minor boundary modifications (MBMs) within the service 
area, with a lesser role for long-term efforts to attract FTZ use to 
specific pre-designated magnet sites. Concentrating FTZ designation 
where it is actually used will also yield important benefits for the 
government in terms of oversight burden and other resource-related 
considerations.
    One factor to bear in mind regarding the revised proposal's goal of 
no more than six magnet sites per grantee is that sites which begin 
their FTZ designation as magnet may ultimately prove appropriate to be 
shifted to usage-driven designation. For example, an industrial park 
newly designated as a magnet site may, after a number of years, be 
fully occupied but only have one active FTZ user and no other occupants 
that envision a short- to medium-term need for FTZ services. At the 
same time, the grantee may determine that it is desirable to propose a 
new industrial park as a magnet site. In that context, one option for a 
grantee to consider is redesignating the active FTZ portion of the 
older industrial park as a usage-driven site while seeking magnet 
designation for the new industrial park. Consideration of this type of 
option would be particularly appropriate if the grantee already had six 
magnet sites, and the FTZ Board could examine the number of distinct 
activated operations within each existing magnet site when evaluating a 
request for additional magnet sites beyond the goal of no more than 
six. This reflects that a grantee's participation in the alternative 
framework will make rapid MBM action available for any unanticipated 
FTZ-related need within the service area (including, when warranted, to 
bring usage-driven FTZ designation to any parcel that may have 
previously had zone designation).

Comments on Sunset Limits

    (24) One commenter stated that it is reasonable for magnet and 
user-driven sites to be subject to ``sunset'' limits whereby FTZ 
designation ``self-removes'' at the end of a five-year sunset period if 
no FTZ activity has occurred but added that differing standards should 
apply to magnet versus user-driven sites. Specifically, the commenter 
indicates that magnet sites should be subject to a sunset/removal 
standard based on ``activation'' (19 CFR 146.1(b)) whereas user-driven 
sites should be subject to a stricter sunset/removal standard based on 
the admission of foreign non-duty paid material into the zone site for 
a bona fide customs purpose.
    (25) One commenter expressed concerns that sunset limits may be 
counterproductive by inhibiting investment in FTZ sites by property 
owners, adding that the time frames needed for zoning, infrastructure, 
construction, as well as activation of a finished facility by CBP, can 
make a five-year sunset period unrealistically short.

Response on Sunset Limits

    Based on comments received, this revised proposal envisions a five-
year period as the minimum sunset limit for magnet sites and allows 
flexibility in the FTZ Board's evaluation of evidence so that a longer 
sunset period for a specific magnet site could be approved where 
appropriate based on the circumstances. For usage-driven sites, the 
proposed five-year sunset limit is unaltered since the first proposal 
and reflects the nature of usage-driven sites. The ability to designate 
a usage-driven site within a grantee's service area via simple and 
rapid MBM action should also enable the grantee to address needs for 
new FTZ designation in situations where activation for a specific 
operator or user could not be accomplished during a site's initial 
sunset period.
    With regard to the standard to be applied in the application of 
sunset limits, this revised proposal adopts standards suggested in 
comments. Specifically, FTZ designation will self-remove from a magnet 
site unless the site is activated by CBP prior to the specific site's 
sunset deadline. For a usage-driven site, FTZ designation will self-
remove unless there has been prior to the sunset deadline the admission 
into the site of foreign non-duty paid material for a bona fide customs 
purpose. These standards also apply to the periodic reapplication of 
the sunset test for a site under the ``recycling'' concept.

Comment on Site Numbering

    (26) One commenter stressed that the FTZ Board should coordinate 
with various other Federal agencies to ensure compatibility of any site 
numbering in automated systems and across agencies. The same commenter 
indicated that the Board should issue guidance on the potential need 
for grantees to amend zone schedules (15 CFR 400.42(b)) and agreements 
with third parties if the Board renumbers zone sites.

Response on Site Numbering

    The commenter is correct in highlighting the importance of the FTZ 
Board coordinating any site numbering or re-numbering with key 
government agencies. For any such numbering/re-numbering, the FTZ Board 
staff can also issue guidance where needed for affected grantees and 
third parties.

Comment on Tracking of Sites

    (27) One commenter indicated that increased complexity of site 
tracking associated with a grantee's participation in the optional 
framework means that the Board should require such a grantee to post to 
the FTZ Board's Web site regularly updated site and activation plans.

Response on Tracking of Sites

    The tracking of sites, including designation and sunset, will be 
critical to the successful functioning of the alternative framework. 
For any implementation of the alternative framework, the FTZ Board 
staff would coordinate availability and use of an effective, publicly 
available tracking mechanism.

Comment on Procedures for Minor Boundary Modifications

    (28) One commenter suggests enhancing the process for minor 
boundary modifications (MBMs) within the site management framework by 
allowing a grantee to request from the Customs and Border Protection 
port director a ``Zone time approval'' that would give the Grantee 
blanket CBP

[[Page 52821]]

concurrence for any user-driven sites the grantee might propose based 
on certain conditions.

Response on Procedures for Minor Boundary Modifications

    The process for local CBP evaluation and possible concurrence for 
proposed MBMs often involves an examination of the specific activity 
and entities involved. Variation in activities, users, etc., can have a 
significant impact on the ultimate burden imposed on CBP resources. In 
this context, the current request-by-request consideration by CBP will 
be maintained for MBMs under the revised proposal.

Revised Proposal

    The fundamental trade-off addressed in this proposal continues to 
be 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. 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). 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 would need to be consistent with 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.
    2. An initial limit of up to 2,000 acres of designated FTZ space 
within the service area. Given the proposal's focus on linking FTZ 
designation more closely to FTZ activity, the 2,000-acre limit reflects 
the FTZ Board's existing practice of limiting any FTZ grantee to 
activation of 2,000 acres (regardless of the overall size of the 
grantee's zone) unless further approval is obtained from the FTZ Board. 
Acreage within the 2,000-acre limit which had not been applied to 
specific designated sites would effectively be ``reserve'' acreage 
available for future FTZ designation for parcels or sites within the 
grantee's approved service area.
    3. Enhancement of the usefulness of the 2,000 available acres by 
emphasizing ``floating'' acreage within an individual site's boundaries 
(as has been the FTZ Board's practice with certain applications to 
date). For example, 100 acres of ``floating'' FTZ designation within 
the boundaries of a 700-acre port complex would mean that it would be 
possible to activate with CBP up to 100 acres of total space anywhere 
within that 700-acre complex.
    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 no more than 200 ``floating'' acres, 
although a larger number of proposed acres 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 as long as the total acreage for existing 
and proposed sites remained 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. 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 recycling) 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 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

[[Page 52822]]

sunset limit would require within five 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 five-year period.
    10. Magnet sites and usage-driven sites would also be subject to 
ongoing ``recycling'' whereby activation at a site during the site's 
initial sunset period would serve to push back the sunset date by 
another five years (when 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 existing configurations that differ from the 
general parameters envisioned in the proposal. 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 2,000 floating 
acres within the zone's site (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 five-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. Where appropriate, the Board's Executive Secretary 
would be able to take action on a recommended transition of a site from 
magnet to usage-driven designation via the minor boundary modification 
process.
    14. The transitional phase for any zone would be limited by the 
defining 2,000 acre 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 amount of 
``floating'' acreage to propose within the boundaries of each such 
existing site. (For example, if an existing site is the 340-acre Acme 
Industrial Park, the grantee could propose 200 floating acres within 
the 340-acre Acme Industrial Park.) A grantee might opt for a simple 
mechanism to apportion a certain total amount of floating acreage 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. 
FTZ grantees opting to manage their zones under the Board's current 
framework would be unaffected by this proposal. 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 FTZ acreage, modifications to service area) would be 
matters for the FTZ Board's consideration.
    In addition, 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.
    Public comment on this proposal is invited from interested parties. 
We ask that parties fax a copy of their comments, addressed to the 
Board's Executive Secretary, to (202) 482-0002. We also ask that 
parties submit the original of their comments to the Board's Executive 
Secretary at the following address: U.S. Department of Commerce, Room 
2111, 1401 Constitution Ave., NW., Washington, DC 20230. The closing 
period for the receipt of public comments is October 31, 2008. Any 
questions about this request for comments may be directed to the FTZ 
Board staff at (202) 482-2862.

    Dated: September 8, 2008.
Andrew McGilvray,
Executive Secretary.
[FR Doc. E8-21232 Filed 9-10-08; 8:45 am]
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