Adopted Proposal for Available Alternative Site-Designation and Management Framework, 1170-1173 [E9-352]

Agencies

• DEPARTMENT OF COMMERCE
• Foreign-Trade Zones Board

[Federal Register Volume 74, Number 7 (Monday, January 12, 2009)]
[Notices]
[Pages 1170-1173]
From the Federal Register Online via the Government Printing 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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