Grantee Handbook 2013

Transcription

1 Grantee Handbook 2013

2 Table of Contents Introduction..2 About NAFTZ..3 Part 1 Background on the Foreign-Trade Zone Program 1. FTZ Summary.5 2. The Role of the Grantee Overview of the FTZ Program The Role of Customs and Border Protection.21 Part 2 Applications and Activations 1. Applications Zone Schedules Activations 29 Part 3 Managing a Foreign-Trade Zone 1. The Online FTZ Information System (OFIS) Filing an Annual Report Maintaining Zone Document Files Operating Agreements Public Utility and Uniform Treatment...43 Part 4 Optimizing Your Foreign-Trade Zone 1. The Alternative Site Framework Applying for Reorganization or Expansion of an Existing FTZ Communications and Outreach Marketing Your Zone Holding a Promotional Event 59 Appendices Appendix 1 Glossary of FTZ Terminology...62 Appendix 2 Frequently Asked Questions..66 Appendix 3 E-214 Enrollment Information..69 1

3 Introduction Dear FTZ Grantee: Welcome to the 2013 edition of the NAFTZ Grantee Handbook. As a grantee in the U.S. Foreign-Trade Zones program, you play a vital role in promoting economic development and job creation in your community. Grantees are the backbone of the FTZ program, administering each of the more than 250 zones across the country as public utilities to serve your individual communities as well as advance our national economic goals. This Grantee Handbook is being provided as a tool to help you fulfill this important mission. Monumental changes have occurred in the Foreign-Trade Zones program since publication of the previous edition of the Grantee Handbook: In April 2012, the Foreign-Trade Zones Board began implementing its new 15 CFR Part 400 regulations. Among other major changes, the new regulations have redefined the ground rules for grantees in such areas as liability and uniform treatment of operator/users. Also in 2012 the FTZ Board implemented the Online FTZ Information System, or OFIS, which grantees now use to file their annual reports under new deadlines, consistent with calendar-year reporting requirements. The Alternative Site Framework, just beginning at the time of the previous edition, is rapidly becoming the norm for managing active zone projects. This streamlined regulatory environment has created new opportunities and responsibilities for FTZ grantees, and this revised edition of the handbook will be your guide to taking full advantage of the expanded opportunities for zone use. To help grantees promote the FTZ program in their communities, the 2013 Grantee Handbook contains a wealth of new material, ideas, and examples on how to more effectively market the program. New and revised chapters have been included on communicating the benefits of the FTZ program, marketing to potential users, and holding a promotional event in your community. The 2013 Grantee Handbook has been the result of the collective effort of NAFTZ staff and volunteers. Please contact the NAFTZ office if you have any questions about the material in the handbook or the role of the grantee in the FTZ program. We hope this handbook will be a useful guide to delivering real benefits to the companies, workers, and communities that you serve every day. Best wishes, Daniel Griswold President 2

4 About NAFTZ Mission Statement The National Association of Foreign-Trade Zones (NAFTZ), an association of public/private members, is the collective voice of the Foreign-Trade Zones (FTZ) program. The NAFTZ is the Program s principal educator and the leader in demonstrating the Program s value and role in the changing environment of international trade. As a non-profit trade association, NAFTZ works to: Promote and improve FTZs and their use Respond to the competitive needs of zone users Educate the public on the proper use of the FTZ program Encourage the growth of FTZs Ensure advantages of the program stay intact Improve communications and understanding between U.S. regulators, policymakers and the FTZ community Education and Advocacy The NAFTZ represents the interests of its members before the federal government, and strives to ensure that members stay informed of the latest policy developments in Washington, DC. In order to fulfill this role, NAFTZ hosts educational events and Webinars throughout the year, maintains an updated and interactive web site, distributes a monthly newsletter (Zones Report), and provides members with regular updates on breaking news in the FTZ world. This Handbook is a key component of our efforts to keep Grantees informed of the latest requirements and best practices in the world of Foreign-Trade Zone management. For more information on NAFTZ activities, events, and publications, visit us online at 3

5 Part 1: Background on the Foreign-Trade Zone Program 4

6 FTZ Summary The following summary is reproduced from the official website of the U.S. Foreign-Trade Zones Board. Foreign-trade zones are designated sites licensed by the Foreign-Trade Zones (FTZ) Board (Commerce Secretary is Chairperson) at which special customs procedures may be used. These procedures allow domestic activity involving foreign items to take place prior to formal customs entry. Duty-free treatment is accorded items that are re-exported and duty payment is deferred on items sold in the U.S. market, thus offsetting customs advantages available to overseas producers who compete with producers located in the United States. Subzones are special-purpose zones, approved for a specific company/use. A site which has been granted zone status may not be used for zone activity until the site or a section thereof has been separately approved for FTZ activation by local U.S. Customs and Border Protection (CBP) officials, and the zone activity remains under the supervision of CBP. FTZ sites and facilities remain within the jurisdiction of local, state or federal governments or agencies. Legal Authority and Requirements FTZ Act of 1934 (19 U.S.C. 81a-81u) establishes the FTZ Board (Commerce, Treasury) to license and regulate FTZs. FTZ Board regulations (15 CFR Part 400). Customs regulations regarding FTZs (19 CFR Part 146). Review Criteria Each U.S. port of entry is entitled to a zone project -- more only if need is shown. Applicants (usually public entities) must have a suitable plan including provisions for facilities and financing. Need for the proposed zone must be shown in terms of the local economy and overall economic development objectives. Production applications are reviewed under "public interest" criteria -- approval is limited to activity that is consistent with trade policy and yields net positive economic effects, taking into account potential impact on other domestic plants. Current Statistics U.S. communities with zones: over 200 States with zone projects: 50 and the Commonwealth of Puerto Rico. Pending cases for new zones, expansions, subzones and manufacturing: 60 Value of merchandise handled by zones: more than $640 billion Employment at active zone facilities: approximately 340,000 5

7 Exports: $54.3 billion Of incoming zone shipments, 57% is of domestic status (most of this figure represents domestic origin goods, but a small percentage would be duty paid/duty free foreign items). Additional Information The FTZ regulations, application formats, locations of zones and contact persons, details of FTZ Board actions, and other information can be found on the FTZ Board website. U.S. Customs and Border Protection information on FTZs can be found on the CBP website. Orders delegating certain FTZ Board authority from the Secretary of Commerce to the Assistant Secretary for Import Administration can be found here. 6

8 The Role of the Grantee The FTZ Board, chaired by the Secretary of Commerce, administers the U.S. Foreign-Trade Zone program. U.S. Customs and Border Protection (CBP) oversees the program s day-to-day operations and monitors the movement of goods into and out of Zones. FTZs are restricted-access sites that are within the geographic limits of the United States, but are considered outside of U.S. commerce and CBP territory. Companies that operate in FTZs can defer, reduce, or eliminate CBP duties on foreign products admitted into zones for storage, processing, assembly, manufacture, and exhibition. The FTZ Board provides a Grant by Board Order to a local organization to sponsor zone projects in its community. It is the responsibility of the Grantee organization to develop a comprehensive plan to organize, finance, maintain, and develop its zone to support the zone s sites (including subzones). The Grantee organization can be a public entity, such as a state, county, city, sea or air port authority, or a private not-for-profit corporation responsible for regional economic development and organized for the purpose of establishing a Zone project. An individual company cannot apply directly to the FTZ Board without the sponsorship of a local Grantee organization. A Grantee organization first establishes its zone under public utility principles to provide interested firms with the significant financial savings afforded by zone status. The public utility principles of the federal statute require that all interested parties be treated uniformly under like circumstances. After filing a detailed application with the FTZ Board describing the development plan, the FTZ Board issues a Grant or Board Order if the Board determines that the application has met the applicable legal criteria. The Grantee s role is to organize, finance, maintain, and develop its zone. Depending on the type of Grantee entity, there may be different goals involving investment, employment, and business activity in the community. Each Grantee must set its own standards for generating the revenues necessary to maintain the organization (although grantee organizations are free to subsidize their zones). Generally, fees charged to zone operators should be moderate so as to not discourage zone use. The FTZ Board regulations state that user fees should reflect the cost of actual services rendered plus any reasonable out-of-pocket expenses. Any companies that wish to utilize the FTZ program must do so under the contractual commitment with the Grantee and the zone operator as appropriate. Each Grantee organization must have an internal process for producing and approving contracts. Grantees are responsible for oversight of any parties to which they have contracted or outsourced any FTZ related functions. If applications must be filed with the FTZ Board in Washington, D.C., sponsorship of the Grantee organization is necessary. Grantee Responsibilities A Grantee organization is responsible for establishing and maintaining the zone project in its community or geographic area. It is most important that the Grantee organization employ knowledgeable employees that can effectively manage the organization. Required documents related 7

9 to FTZ projects include a zone schedule, FTZ Agreements with operators, annual reports filed with the FTZ Board, and zone marketing literature. The Grantee organization must also implement and establish a zone schedule which outlines the rules and regulations and rates and charges for the FTZ project. Each zone/subzone operator is required to enter into an agreement with the Grantee outlining the responsibilities of both parties. This is also required of Magnet Site and Usage-Driven site operators under the Alternative Site Framework (ASF). The Grantee is responsible for monitoring the status of these agreements, and should also be aware of any time limits (activitybased sunset limits or absolute time limits) that may apply to any zone or subzone sites. Grantees should also maintain frequent communication with zone operators, subzones, and property owners. The annual report filed by the Grantee organization with the FTZ Board describes the activity which occurred in the FTZ project during the previous year. The Grantee is responsible for having information from all zone/subzone operators (including Magnet Site and Usage-Driven Site operators under ASF) to compile this report and transmit it to the FTZ Board in Washington, D.C via the Board s Online FTZ Information System (OFIS). Zone/subzone operators ordinarily input their own information into OFIS; the grantee then reviews the information input by each of its operators. The Grantee organization is also responsible for the marketing of the FTZ to attract companies to locate within the zone. Many Grantees provide FTZ training or educational seminars to local companies to educate these companies on the benefits and responsibilities of operating an FTZ. These responsibilities will be discussed in greater detail in the various sections throughout this Handbook. Current Zone Documentation A Grantee is responsible for maintaining a comprehensive current record of its zone and subzone sites. Copies of all formal and informal applications and submissions to the FTZ Board and related correspondence must be maintained for ready access. This record should include a general description of each site, a site plan showing the zone boundaries, and the total acreage and buildings and square footage approved by the FTZ Board. Each zone user firm in a zone or subzone that has received authorization from the FTZ Board to conduct activity resulting in a change in tariff classification does so under a scope of authority. A record of each such scope of authority should be maintained by the Grantee. For each site, the Grantee must have a signed contract and all amendments thereto. A list of contractual parties and the dates of the contract should be maintained to assure that any renewals are made in a timely fashion. The Grantee should also maintain a current zone operator/zone user contact list. Any time limits on zone or subzone sites imposed by the FTZ Board must be noted to ensure that updated filings with the Board can be accomplished in advance of the expiration of the time limit. Organizational/Maintenance/Development Standards A Grantee organization should regularly evaluate its current zone structure. If the original zone plan was to support, for example, a development at an airport or seaport, a Grantee should consider the 8

10 economic development goals of the community, existing and potential businesses, and their consistency with the original zone plan. Each Grantee should also create its own development standards. These standards should be publicly stated to avoid having multiple expansions of zone property that may not be utilized for FTZ purposes. The standards should also take into account the zone s service area if the zone has shifted to the Alternative Site Framework. A Grantee organization should also take into consideration the ability of local CBP officials to oversee any future expansions within their area. 9

11 Overview of the FTZ Program What is a Foreign-Trade Zone? FTZs are designated sites licensed by the FTZ Board (Commerce Secretary is Chairperson) at which special CBP procedures may be used. These procedures allow domestic activity involving foreign items to take place prior to formal CBP entry. Zones are within the geographic limits of the United States, but are considered outside of U.S. customs territory for specific purposes. Merchandise of every description, except such as is prohibited by law, may be brought into an FTZ and stored or processed there under certain circumstances without being subject to the customs laws of the United States (19 USC 81c(a)). However, certain laws may be applicable to merchandise passing through U.S. customs territory before admission to (or after transfer from) an FTZ. In addition to CBP, Census and other governmental agencies have jurisdiction over products handled by FTZs relative to imports for admission to the zone, processing in the zone, and/or transfers out of the zone. Customs laws are also applicable to prohibited merchandise in a zone (see Section 6.2 of the CBP s FTZ Manual, explained in detail on page 12), vessels and aircraft entering or leaving a zone (see Section 2.5 FTZ Manual), and merchandise which has been brought into a zone for purposes not specified in the FTZ Act (Section 15 CFR 400.1(c)). The Secretary of the Treasury has authority to prescribe rules and regulations for Zones concerning protection of Federal revenues (19 USC 81c, 81a and 81o (b)). This authority has been implemented through by the CBP Regulations (19 CFR Part 146). The Purpose of Foreign-Trade Zones The goal of the U.S. Foreign-Trade Zone program is to encourage, facilitate, and expedite U.S. participation in international trade. In addition to encouraging and facilitating exports, the program seeks to attract offshore activity to the United States and encourage retention of domestic activity. Implicit within these objectives is the goal of creating and maintaining U.S. employment opportunities and fostering economic development. Participants in the Foreign-Trade Zone Program Grantees Grantees are local entities which have received a Grant of Authority from the U.S. Foreign-Trade Zones Board. This document authorizes a zone Grantee to establish, operate and maintain a zone. This authority to establish a zone also includes the responsibility to manage it. A Grantee organization can be a government entity, such as a state, county, or city government or an agency thereof, such as a port authority. A Grantee organization can also be a private, not-for- 10

12 profit entity organized for the purpose of establishing a zone project and chartered for this purpose under applicable State law. The Grantee serves as the sponsor of the zone project. Grantees may operate the zone, or contract the operator responsibility to other parties. A grantee must provide uniform treatment under like conditions to all companies that seek to use the zone. All Grantees must be authorized by State/Commonwealth of Puerto Rico enabling legislation. Individual companies that wish to be operators generally seek sponsorship from the nearest Grantee organization. However, depending on the circumstances, the FTZ Board s regulations do allow sponsorship by a grantee that is not the closest to the operator. Operators Operators provide day-to-day oversight of zone activities, including receipt, storage, handling, shipment, recordkeeping and reporting, and marketing of their services. Technical expertise is also provided by the Operator. The Operator may be the Grantee or a user firm; however, they also may be a third party private corporation in the warehousing or consulting business. These entities typically oversee the warehousing, storage, manufacturing, and distribution of goods. Operators of zone sites engaged in production activity should have copies of their application histories and scope. Users Users are those persons or firms who are ultimately receiving the benefits of zone use. These firms use a zone or subzone for storage, handling, or manufacturing and production of merchandise. Users may also be operators. Administrators Grantees may delegate certain tasks to FTZ administrators, including oversight of the day to day operations of the zone. In this case, the Grantee still remains responsible and liable for the zone project. The Grantee is also responsible for maintaining public utility access to the zone project for all zone user firms. Certain provisions of the FTZ Board s 2012 regulations may have an impact on some local arrangements. Customs Brokers Customs brokers are private individuals, partnerships, associations or corporations licensed, regulated and empowered by U.S. Customs and Border Protection (CBP) to assist importers and exporters in meeting Federal requirements governing imports and exports. Brokers submit necessary information and appropriate payments to CBP on behalf of their clients and charge them a fee for this service. Customs brokers may be used to transact CBP business on behalf of a Zone operator or user. The U.S. Foreign-Trade Zones Board The FTZ Board is the agency tasked with overseeing the FTZ program. The Board s staff is housed within the U.S. Department of Commerce. The FTZ Board is authorized, upon application, to grant to corporations the privilege of establishing, operating and maintaining FTZs under the FTZ Act. In addition, any expansions of 11

13 zone activity and any questions regarding the specific scope of authority (in terms of products, components and activities allowed) are determined by the FTZ Board. The Board and its staff have a range of other responsibilities, including pertaining to the public utility and uniform treatment requirements of the FTZ Act and the Board s regulations. The FTZ Board Executive Secretary is appointed by the Secretary of Commerce, as Chairman of the Board, to be the Chief Operating Official of the FTZ Board. The second member of the FTZ Board is the Secretary of the Treasury. U.S. Customs and Border Protection (CBP) U.S. Customs and Border Protection is responsible for the control of merchandise moving in-bond to FTZs and for overseeing activity conducted in FTZs. CBP is responsible for ensuring that all revenues are collected properly, all zone procedures are in compliance with the FTZ Act, and that all CBP and other federal agency laws and regulations pertaining to zone use are followed. All foreigntrade zones are subject to regular audits by CBP officials to ensure compliance with these laws and regulations. CBP officials authorize a number of important activities for Zone users, including: The authorization of admission and the assignment of the requested status designation, which is provided by signing the CBPF 214 or authorizing the E-214. The authorization of any activity in the zone by signing the CBPF 216. In the future, it is possible that only the destruction, scrapping, and/or temporary removal of merchandise from the Zone will need to be authorized by the 216. The authorization of release for CBP entry, in-bond zone to zone transfer, and in-bond transfer for export. For detailed information about CBP s role in the FTZ program visit CBP s Foreign-Trade Zone Manual. This manual describes the various laws, regulations, policies and procedures that Customs and Border Protection personnel, grantees, operators and users need to know in the daily operation of foreign-trade zones. Other Federal Agencies Since the FTZ Board and other federal agencies are directed to cooperate with one another (19 USC 81i and 81j), zone operators and users may expect to deal with a number of federal agencies other than CBP. These agencies, known as Participating Government Agencies (PGAs), are concerned with merchandise or activities in the zone falling within their jurisdiction. Major PGAs include the Environmental Protection Agency (EPA), the Food and Drug Administration (FDA), the Department of Transportation (DOT), and the U.S. Department of Agriculture (USDA). Types of Zones Foreign-trade zones must be organized under one of two separate frameworks, known as the Traditional Site Framework (TSF) and the Alternative Site Framework (ASF). Both frameworks can 12

14 enable a grantee to serve companies of all sizes and allow access the benefits of operating in an FTZ, but the ASF is designed to be more responsive and provide much greater flexibility. Depending on the unique characteristics of a particular region, either the TSF or the ASF may be more appropriate. While activities including storage, inspection and distribution are permitted at all FTZs, other activities including processing or production require special permission from the Foreign-Trade Zones Board. Grantees should ensure that operators understand the need for advance approval from the FTZ Board for any production activity. The Traditional Site Framework Under the Traditional Site Framework, there are two types of Zones zones and subzones. A zone site is typically a single warehouse available to multiple users or an industrial park site. Traditionally, a zone site has been available to more than one company, and was typically used for warehousing. Federal regulations require that zone sites (with the exception of subzones) must be located within 60 statute miles or 90 minutes driving time from the outer limits of a CBP port of entry. Due to the traditional need to accommodate multiple users, common locations for zone sites include industrial parks, public warehouses, or sea and air port facilities. While a number of zone sites are well-utilized by a variety of firms, the large majority of FTZ activity (over 80 percent) occurs in subzones. If a firm wants foreign-trade zone status for its own existing plant or facility, and the grantee s existing zone sites cannot accommodate the firm s proposed activity, the subzone designation may be pursued. Subzone status is delivered to the user s existing site, as opposed to having to relocate to a preexisting zone site. Typically, subzones are designated for an individual company s manufacturing operations. These operations must be located so that CBP can fulfill its proper oversight functions. Alternative Site Framework Under the Alternative Site Framework (ASF), entire counties are designated as part of the Service Area under the Grantee s jurisdiction. The entire Service Area must meet the FTZ port adjacency requirement (that is, being within 60 miles or 90 minutes driving time of the CBP port of entry). The ASF gives Grantees the ability to easily bring FTZ designation to single operator/user locations within local counties. There are also two types of zone sites under ASF Magnet Sites and Usage-Driven (or Subzone) sites. Like traditional zone sites, Magnet Sites are intended to serve multiple users and operators at a predetermined location. These sites are selected in advance by Grantees based on their potential to attract multiple operators and users, and typically include industrial parks, port facilities, airports, and warehouses. Magnet Site users must conduct their operations at these locations in order to receive FTZ benefits. Usage-Driven (or Subzone) sites are company-specific, and can be designated within 30 days by a simplified process known as Minor Boundary Modification (MBM). The FTZ Board s 2012 regulations recognize that Usage-Driven sites are functionally identical to subzones. The expedited approval time and streamlined application process required to obtain a Usage-Driven site help to 13

15 make FTZ status more accessible, especially for small and medium-sized businesses. Applications for a Usage-Driven site containing production activity can typically be approved within four months. Merchandise Status Types Goods that enter a Foreign-Trade Zone are classified into one of four categories: Domestic Status (D) Domestic status merchandise includes all growth, product, or manufacture of the United States on which all federal excise taxes have been paid. It can also include foreign-origin merchandise on which customs entry and duty payments have been made prior to admission to the zone site. Non-privileged Foreign Status (NPF) Non-privileged foreign status merchandise will be appraised and classified based upon the condition of the merchandise at its time of entry into U.S. commerce. Such merchandise can include: Foreign merchandise properly in a zone which does not have the status of privileged foreign merchandise or of zone-restricted merchandise; Waste recovered from any manipulation or manufacture of privileged foreign merchandise in a zone; and Domestic merchandise in a zone, which by reason of noncompliance with the regulations has lost its identity as domestic merchandise, and will be treated as foreign merchandise. Privileged Foreign (PF) Privileged Foreign status is awarded to foreign merchandise which has not been manipulated or manufactured so as to effect a change in tariff classification. Such merchandise will be given privileged foreign status on proper application to the port director. Status as privileged foreign merchandise can be binding. A status as privileged foreign merchandise cannot be abandoned and remains applicable to the merchandise even if changed in form by manipulation or manufacture, except in the case of recoverable waste (see (b)), as long as the merchandise remains within the purview of the Act. Zone Restriction (ZR) Merchandise of this status is to be exported or destroyed. Zone-restricted status merchandise can be entered into U.S. customs territory only if the FTZ Board finds that entry would be in the public interest. Permitted Activities Merchandise within a foreign-trade zone may be: 14

16 cleaned mixed with foreign and domestic merchandise manufactured, processed, or manipulated stored exhibited broken up repacked assembled distributed sorted graded title transferred tested sampled labeled destroyed displayed re-exported Activities and Products Prohibited by Law or Regulation All goods prohibited by economic sanctions (such as Cuban cigars), as well as any immoral or treasonous materials, are also prohibited from being admitted into foreign-trade zones. Switchblade knives are also prohibited, except when intended for use for or by the U.S. Armed Forces. The manufacture of the following products within a Foreign-Trade Zone is prohibited by the Fifth Provision of the FTZ Act: Tobacco, cigars, cigarettes, and cigarette papers and tubes (26 U.S.C ) Firearms (26 U.S.C , 5811) Distilled spirits, wines, and beer (26 U.S.C , 5010) Sugar (26 U.S.C ) Repealed Provisions: Playing cards (26 U.S.C. 1807), Oleomargarine (26 U.S.C. 2300), Filled cheese (26 U.S.C. 2350), Coconut and palm oil (26 U.S.C. 2470), Narcotic drugs (26 U.S.C ), (26 U.S.C. 2550), White Phosphorous Matches (26 U.S.C. 2650) Watches (Tariff Act of 1930-Paragraphs 367/368) Restricted Activities Conditional by Law or Regulation Below is a comprehensive list of activities that are prohibited or restricted in foreign-trade zones by federal law and/or regulations. The list of restricted activities has changed over time, however, and in several cases approvals have been granted for users seeking to perform restricted activities in foreign-trade zones. Bonded Warehouse Shipments Merchandise that has been entered into a bonded warehouse for storage shipped in-bond and may be admitted to a zone but only in zone restricted status (19 CFR (d), (c, d), and (g). See Sections 5.8(c) and 6.7(g) (3) of the FTZ Manual. Zone status merchandise may not be transferred back to a bonded warehouse. 15

17 Steel Imported steel may be warehoused in an FTZ. Any processing of steel products must be approved by the FTZ Board. Generally, the FTZ Board has not approved inverted tariff and scrap-related savings for steel products in recent years. In the 1980s, the FTZ Board approved such savings for certain steel products on public interest grounds (i.e., Berg Steel Pipe Corporation and the Auto industry.) Other operations have been approved primarily for export only; any other non-export activity has been subject to significant restrictions by the FTZ Board. Motor Vehicles for EPA/DOT Conversion in Zone Application for admission may not be made by motor vehicle dealers or brokers, or by EPA Independent Commercial Importers (ICE) or DOT Registered Importers (RI) on behalf of individual actual owners of motor vehicles who wish to have the vehicles repaired or processed for the purpose of bringing them into compliance with the regulatory requirements of the EPA under 40 CFR Parts 85 and 86 EPAR, 19 CFR Such applications must be made by a person with the right to make entry, such as the owner or purchaser. (19 CFR (b) (2)). However, such applications may be made by Customhouse brokers or zone operators on behalf of the person with the right to make entry, if a proper power of attorney is on file. (See Section 6.7(a) (1) FTZ Manual). Non Tax-Paid Alcohol and Tobacco Products Domestic non- tax-paid alcohol and tobacco products may be admitted to FTZs only in zone restricted status (CSD ). These products are deemed exported upon admission to the zone per the applicable provisions in 27 CFR Parts 252 and 290. As of January 1, 2000, only manufacturers and export warehouse proprietors with a valid permit from the Bureau of Alcohol, Tobacco, and Firearms may import tobacco products in bond, including into FTZs. (27 CFR Part 275). Tobacco Products previously exported from the United States may be imported or brought into the United States only under a license provided by the Bureau of Alcohol, Tobacco, and Firearms (BATF). Firearms and Other Weapons Firearms generally require BATF permits and high security storage. Any admission and other manipulation activity involving firearms must be conducted in accordance with BATF regulations and with the written concurrence of the FTZ Board. Merchandise Subject to Antidumping Duties or Countervailing Duties (ADD/CVD) The Board s policy is that zone procedures shall not be used to circumvent ADD/CVD orders under 19 CFR Parts 353 & 355 (15 CFR (e) (1)). Items subject to ADD/CVD orders will only be admitted to the zone in PF status. When these items are entered into CBP territory for consumption, the items shall be subject to ADD/CVD procedures as appropriate. (15 CFR (e)(2)). Timken Co. v. United States, 865 F. Supp. 413 (CIT. 1994). Sugar 16

18 The FTZ Board has not authorized any new sugar processing activity for domestic consumption since the mid-1980s. However, the FTZ Board has allowed certain imported sugar processing operations that had begun prior to 1986 to continue with limitations. Operations at FTZ Nos. 1, 8, 22, 25, and 49 were allowed to continue with quantitative limits that are monitored by the CBP Port Director and the FTZ Board. All but two (8 and 22) have lapsed. Subsequently, certain operations using sugar subject to quota and sugar used for exported products have been approved by the FTZ Board. No other types of operations using imported sugar have been approved by the FTZ Board. The U.S. Congress in the Customs and Trade Act of 1990 (HR 1594), 478, added U.S. Note 2 to Subchapter IV of Chapter 99, a new paragraph (c) authorizing the use of imported sugar to manufacture blended syrups within certain FTZs among those listed above within the parameters of the FTZ Board s scope of authority. See U.S. Customs Service Telegraphic Message (Nov. 6, 1984); Customs Rulings / (Nov. 7, 1984); Presidential Proclamation 5294 (Jan. 28, 1985); Arbor Foods, Inc. v. United States; 6 ITRD 1667, 600 F. Supp. 217 (CIT 1985); 1985 Farm Bill B Joint Explanatory Statement; FTZ Board Orders 346, 347, 431, 435, 472, 473, 499, 500, 569, 570, 589, 652, 692, 858, 881, 901, and 935; Customs Directive Orange Juice The FTZs Board has restricted the use of FTZs by not allowing change in HTS classification of imported frozen concentrated orange juice. See FTZs Board Memorandum (Aug. 26, 1981). Printer s Ink The FTZs Board has restricted the use of certain foreign made pigments used to make printers ink. See FTZ Board Orders, 332, 534, 562, and 615. Oil Refining The Board has approved activity but subject to restriction based on public interest considerations, the FTZ Board has restricted inverted tariff savings to certain refinery end products (petrochemical products and by products), which can be attributed to foreign status on crude oil and other inputs. (The standard list of end products is available on the FTZ Board website.) The restrictions also require that products used as refinery fuel shall be subject to duty. Tires The FTZ Board has restricted certain inverted duty savings opportunities for manufacturers of tires. See FTZ Board Order No Other Restricted Goods There have been other restricted goods in the past, such as: Chain Saws FTZ Board Order 418; Golf Carts FTZ Board Order No. 433; Refrigeration Compressor FTZ Board Order 448; Small Engines FTZ Board Order 454; Robots FTZ Board Order 745, no NPF for manufacture of goods subject to inverted duty FTZ Board Order 794. However, some of these restricted goods such as chainsaws have been approved in subsequent applications without restrictions. 17

19 Other FTZ Grant Restrictions Public interest concerns as defined in the FTZ regulations as detrimental to public interest, health or safety have been associated with several industries. Residence in a Zone No person shall be allowed to reside within an activated area of a zone except Federal, state, or municipal officers whose residence is deemed necessary by the Board. (19 USC 81(a). Online Resources Further regulations governing Foreign-Trade Zone activities can be found at the following locations: FTZ Board Regulations - Grantee Responsibilities CBP Foreign-Trade Zones Manual: FTZ Board Regulations: FTZ Act Benefits for Zone Operators and Users For U.S.-based companies involved in international trade, the FTZ program provides a means of improving their competitive position vis-à-vis their competitors abroad. The fundamental benefit offered by the FTZ program is the ability to defer, reduce or even eliminate Customs duties on products admitted to the zone. Deferral of Duties Customs duties are paid only when and if merchandise is transferred into U.S. Customs territory. This benefit equates to a cash flow savings that allows companies to keep critical funds accessible for their operating needs while the merchandise remains in the zone. Unlike bonded warehouses, there is no limit on the length of time that merchandise can remain in a zone. Reduction of Duties In a foreign-trade zone, with the permission of the Foreign-Trade Zones Board, users are allowed to elect a zone status on merchandise admitted to the zone. This zone status determines the duty rate that will be applied to foreign merchandise when it is eventually entered into U.S. commerce from the FTZ. This process allows users to elect the lower duty rate applicable to either the foreign inputs 18

20 or the finished product manufactured in the FTZ. If the rate on the foreign inputs admitted to the zone is higher than the rate applied to the finished product, the FTZ user may elect the finished product rate, thereby reducing the amount of Customs duties that would be owed. Elimination of Duties No Customs duties are paid on merchandise exported from an FTZ. Therefore, duties are eliminated on foreign merchandise admitted to but eventually exported from an FTZ. Generally, Customs duties are also eliminated for merchandise that is scrapped, wasted, destroyed or consumed in a zone. Elimination of Duty Drawback In some instances, Customs duties previously paid on exported merchandise may be refunded through a process called duty drawback. The drawback law is increasingly complex and expensive to administer. Through the use of an FTZ, the need for drawback may be eliminated, allowing these funds to remain with the company as operating capital. In certain cases, a zone operator may continue to file drawback on goods manufactured or processed within an FTZ and subsequently entered into the Customs territory prior to exportation. Weekly Entry Foreign-trade zone users are required to file only one Customs entry per week regardless of the number of shipments received, rather than filing one for each shipment as is normally required by federal law. This can translate into significant savings for companies receiving multiple shipments per week. Companies outside of foreign-trade zones that receive multiple shipments per week must pay the Merchandise Processing Fee (MPF) upon each entry, which can range from $25 to $485 per entry depending on the value of the shipment. Foreign-trade zone users are only required to pay the Merchandise Processing Fee once per week, regardless of how many shipments are received. Labor, Overhead and Profit In calculating the dutiable value on foreign merchandise removed from a zone, zone users are authorized to exclude costs of processing or fabrication, general expenses, and profit. Therefore, Customs duties are not owed on labor, overhead, and profit attributed to production in an FTZ. Taxes Since goods in a zone are considered to be in international commerce, tangible personal property imported from outside the United States and held in a zone, as well as that produced in the United States and held in a zone for exportation, is not subject to State and local ad valorem taxes. Quotas/Safeguards U.S. quota/safeguard restrictions do not apply to merchandise admitted to zones, though quotas/safeguards will apply if and when the merchandise is subsequently entered into U.S. commerce. Quota/Safeguard merchandise may be stored in an FTZ so that when the quota opens, the merchandise may be immediately shipped into U.S. Customs territory. Zone-to-Zone Transfers 19

21 An increasing number of firms are making use of the ability to transfer merchandise from one zone to another. Because the merchandise is transported in-bond, Customs duties may be deferred until the product is removed from the final zone for entry into U.S. Customs territory. Other Benefits Additional benefits, sometimes referred to as intangible benefits, have begun to play a greater role in a company s evaluation of the FTZ program. First, many companies in FTZs find that their inventory control systems run more efficiently, increasing their competitiveness. Foreign-trade zone users also find that in meeting their FTZ reporting responsibilities to the U.S. government, they are eligible to take advantage of special Customs procedures such as the automated zone admission process (e-214) direct delivery, and weekly entries, which facilitate the timely and predictable movement of cargo in and out of the country and improve competitiveness. Benefits for Communities When firms are provided with the opportunity to increase cash flow, save on tax payments, and improve their bottom lines by locating their operations in U.S. foreign-trade zones, communities benefit in several important ways. Economic growth and development are stimulated as a result of the jobs that are retained and created in the community. The FTZ program impacts indirect employment as well. Increased employment activity in foreigntrade zones creates opportunities for other suppliers and service providers in the community, resulting in spillover benefits. The Alternative Site Framework, detailed on page X of this brochure, has also made the program more accessible for firms of all types, especially small and medium sized enterprises. As a result, an FTZ project can be a valuable asset when a community is trying to attract new business investment. Finally, a community with an FTZ may experience an improved infrastructure and expanded taxbase as a result of higher employment and the influx of new businesses. For all of these reasons, more than 250 communities throughout the United States support and rely on the benefits that the FTZ program offers public as well as private entities. 20

22 The Role of U.S. Customs and Border Protection in the FTZ Program U.S. Customs and Border Protection, or CBP, is an agency within the U.S. Department of Homeland Security. CBP is responsible for overseeing the transfer of merchandise into and out of Foreign-Trade Zones, and is also responsible for matters involving the collection of revenue. In addition to these responsibilities, CBP also supervises the handling and recordkeeping of merchandise in the zone and ensures that merchandise does not enter or leave a zone without proper permission. In addition to ensuring adherence to these laws and regulations governing merchandise, CBP also is responsible for ensuring that proper security measures are in place at Zone facilities. The Role of the CBP Port Director FTZs, upon activation under regulations of U.S. Customs and Border Protection, are secured areas under U.S. Customs supervision and are located in or near a U.S. Customs Port of Entry. The Port Director where the zone is located shall be in charge of the zone as the representative of the FTZ Board. In addition to serving as the FTZ Board s Representative, the Port Director has several other responsibilities. Primarily, the Port Director oversees the supervision of Zone activities, including admission, operations and transferring of merchandise. The Port Director must also approve the activation of the zone before any merchandise can be admitted. The Director also reviews port policy and comments on applications, reviews discretionary requirements (specific authority requests), and requires an adequate FTZ operator s bond from Zone operators. Finally, the Port Director has the authority to assess penalties and liquidated damages in the event of non-compliance. If necessary, the Port Director can also initiate suspension or recommend revocation of FTZ status to the FTZ Board. Building and Maintaining Relationships with CBP Given the vital and active role that CBP plays in the FTZ program, it is important to maintain positive working relationships with CBP officials in your area. It is recommended that Grantees establish regularly scheduled meetings with local CBP officials, and update CBP on activates in the Zone via or newsletter. When discussing future plans for your Zone or contemplating any changes, you should make an effort to include CBP in the process. 21

23 A solid working relationship with CBP officials can be mutually beneficial. CBP Officers make excellent speakers at regional trade seminars due to their knowledge of FTZ processes and procedures. It is also recommended that Grantees learn as much as possible about FTZ procedures and/or operations before contacting CBP with questions. CBP personnel can offer clarification on fine points and details, but individual CPB staff may not have the expertise to provide complete education to grantees and/or operators. How to Request Concurrence from CBP for Changes in Your Zone Project In order to request concurrence from CBP on a change in your Zone Project, it is important to set up a meeting with the CBP-FTZ coordinator to discuss the change. Prior to the meeting, send advance information, such as a draft of the proposed change to your Zone. Important CBP Documents The CBP Foreign-Trade Zones Manual contains important information regarding CBP regulations and procedures regarding FTZs. The Manual can be accessed online at The Manual should be considered as general guidance and is not law. Guidelines for FTZ Activation and Reinstatement by CBP are also available online. It is important to review these guidelines prior to pursuing your Zone project. 22

24 Part 2: Applications and Activations 23

25 Applications Application Formats Traditionally, many zone sites have been part of larger facilities that include warehouse/distribution and industrial park space. Projects were consolidated to provide zone procedures at a single or limited number of locations, which focused on accommodating activated operators and users. Zones can be authorized only for sites that are in or adjacent to the outer boundary of CBP ports of entry. Adjacency is defined as sixty (60) miles or ninety (90) minutes driving time from the outer boundary of a CBP port of entry. Subzones and Usage-Driven sites must be within a distance agreeable for oversight by the nearest CBP office. (See 19 CFR Part 101 for a list of such ports.) For samples, forms, and detailed instructions please refer to the FTZ Board Web site: Types of Application Requests: 1. New Zones 2. Alternative Site Framework (ASF) Reorganization 3. New Subzones 4. Production Activity 5. Reorganization/Expansion of Existing FTZs 6. Minor Boundary Modification (Traditional and ASF) 7. Reissuance of a Grant of Authority (Grant Transfer) All applications and related communications to the FTZ Board should come from, or be copied (CC'd) to the zone s grantee. The FTZ Board Staff is unable to review such application-related documents unless the grantee has been included in the communication. Formats vary according to the type of authority requested. For further details at visit the FTZ Board website: The required pre-docketing copy of the application should be submitted to: ftz@trade.gov Required Number and Format of Copies The original, one paper copy and an electronic copy (Adobe PDF format preferred). If you cannot submit a PDF-format copy, you may submit an MS Word-format copy. The electronic copy must have all pages in black and white (including scans of the signed versions of all letters) except for maps, which must be in color. In addition, applicants should avoid excess verbiage and unneeded or superfluous pages. The updated application formats also clarify that applications may list the titles of general studies or reports but may not include copies. These new 24

26 constraints relate to storage-size and download considerations tied to posting electronic scans of all applications on the FTZ Board s web site and to the new requirement to load scans of all applications into the Customs and Border Protection Automated Commercial Environment system. What Information Do I Need for Applications? A detailed list of the information required for FTZ applications is available on the Application page of the FTZ Board website. For any other questions, contact the FTZ Board staff. Draft Applications Applicants are encouraged to submit a complete draft of an application to the FTZ Board (electronically if possible to ftz@trade.gov). Submission of the draft application will enable the FTZ Board to review the application for completeness in order to expedite the final filing process. Complete drafts should include all required answers and documents. The only documents that may be omitted from the draft application (if they have not been finalized) are the final versions of the grantee s resolution and application (transmittal) letter. However, the draft application should include draft copies of the resolution and application (transmittal) letter so that they can be checked for adequacy. An overview of the FTZ Board s application review process can be found at: What is the Grantee s Role when Filing an Application with the FTZ Board? 1. Apply to the Board for a Grant of Authority to establish a subzone or to expand or otherwise modify its zone project (15 CFR , ); 2. Conduct pre-application meetings (or conferences) with: a) Owners, consultants and/or developers regarding zone sites; b) Companies and/or consultants regarding subzone sites, and/or production authority. 3. Provide public notice of the application in a local, general circulation newspaper. The public notice must be published in time to allow at least 30 days before the close of the comment period for the application. A copy of the local notice should be provided to the FTZ Board staff. For more information on what to include in the local public notice, click here. 25

27 The Zone Schedule The Zone Schedule is a document to be written and maintained by the Grantee. The Zone Schedule includes the internal rules and regulations of the zone, as well as a statement of the rates and fees charged to zone operators. The Schedule should also designate a Grantee contact person who can discuss and explain its contents, or any other matter relating to zone fees or zone access. While it is not required by law, grantees should provide a copy of the zone schedule and any subsequent amendments to their operators. Section of the FTZ Board regulations specifies the items that must be included in the Zone Schedule. Note that the compliance date for the requirements of section is February 14 th, Required Documents Each Zone Schedule shall include: 1. A title page, which shall include the name of the zone grantee and the date of the current schedule; 2. A table of contents; 3. Internal rules/regulations and policies for the zone; 4. All rates or charges assessed by or on behalf of the grantee; 5. Information regarding any operator which has an agreement with the grantee to offer services to the public, including the operator's rates or charges for all zone-specific services offered; and 6. An appendix with definitions of any FTZ-related terms used in the zone schedule (as needed). Submission The zone grantee shall submit to the Executive Secretary (in both paper and electronic copies) a zone schedule which sets forth the elements required in the section above. No element of a zone schedule (including any amendment to the zone schedule) may be considered to be in effect until such submission has occurred. Amendments Amendments to the zone schedule shall be prepared and submitted in the manner described above, and listed in the concluding section of the zone schedule, with dates. No rates/charges or other provisions required for the zone schedule may be applied by, or on behalf of, the grantee unless those specific rates/charges or provisions are included in the most recent zone schedule submitted to the Board and made available to the public in compliance with the Availability section below. 26

28 Review Zone Schedules may be reviewed by the Executive Secretary to determine whether they contain sufficient information for zone participants concerning the operation of the zone and the grantees rates and charges as specified in the Requirements section above. If the Executive Secretary determines that the zone schedule (or amendment) does not satisfy these requirements, the Executive Secretary shall notify the zone grantee. Availability A complete copy of the zone schedule shall be freely available for public inspection at the offices of the zone grantee and any operator offering FTZ services to the user community. The Board shall make copies of zone schedules available on its Web site. Complaints and Objections A zone participant may submit to the Executive Secretary a complaint regarding conditions or treatment that the complaining party believes are inconsistent with the public utility and uniform treatment requirements of the FTZ Act and the FTZ Board regulations. Complaints may be made on a confidential basis, if necessary. Grantees (and persons undertaking zone-related functions on behalf of grantees, where applicable) shall not enter into or enforce provisions of agreements or contracts with zone participants that would require zone participants to disclose to other parties, including the grantee (or person undertaking a zone-related function(s) on behalf of a grantee, where applicable), any confidential communication with the Board under section of the FTZ Board regulations. A zone participant showing good cause may object to any rate or charge related to the zone on the basis that it is not fair and reasonable by submitting to the Executive Secretary a complaint in writing with supporting information. If necessary, such a complaint may be made on a confidential basis pursuant to (a). The Executive Secretary shall review the complaint and issue a report and decision, which shall be final unless appealed to the Board within 30 days. The Board or the Executive Secretary may otherwise initiate a review for cause. The primary factor considered in reviewing fairness and reasonableness is the cost of the specific services rendered. Where those costs incorporate charges to the grantee by one or more parties undertaking functions on behalf of the grantee, the Board may consider the costs incurred by those parties (using best estimates, as necessary). The Board will also give consideration to any extra costs incurred relative to non-zone operations, including return on investment and reasonable out-of-pocket expenses. Requirements for the Commencement of Operations in an FTZ Approval of Applications Before a Zone operation can commence, an application for activation must be reviewed and approved by the CBP Port Director, as provided in 19 CFR Part 146. The FTZ Board must also 27

29 review and approve proposed production authority (formerly called manufacturing or processing), pursuant to Sec Approval of the Zone Schedule The zone Grantee shall submit to the FTZ Board Executive Secretary a Zone Schedule which contains the information as specified above. The FTZ Board Executive Secretary may review the schedule to determine whether it contains sufficient information for users concerning the operation of the facility and a statement of rates and charges as provided in paragraph (b) of section

30 Activations How to Facilitate the Activation of a Zone Site Prior to establishing a Zone site, a Grantee must first understand the activation requirements of CBP and what a Grantee s role is in the activation process. CBP will not initiate the activation process unless and until the Grantee provides a letter of concurrence. The Grantee should proactively discuss the company s interest in activating with CBP before issuing a concurrence letter. A Grantee should be familiar with the type of operation the company is involved in and the needs of the prospective operator. For example, many companies within zone sites are multi-user warehouses. Therefore, having an understanding of the company s inventory control, commodity mix, value-added requirements, and other aspects of the warehouse operations will enhance the Grantee s ability to effectively market the FTZ benefits. The company should be encouraged to take the next step and conduct a feasibility analysis to evaluate whether or not an FTZ makes sense for their business. The Grantee can provide resources, such as a savings calculator, so that the company can insert the proper numerical information, which will calculate if being in a zone will improve the company s profitability. This will encourage the company to take the next step and seek the expertise of a third party to do a complete analysis. With the permission of the Grantee s existing FTZ warehouse operators, the Grantee can also offer the warehouse company as a point of contact(s) to answer some questions or issues of concern. This can be somewhat delicate because other warehouse FTZ operators are not necessarily inclined to help potential competitors, but there are companies that will at least provide some initial consultation. It is also recommended that the Grantee become a member of the NAFTZ. As a member, the Grantee can network with other Grantees nationwide and establish business relationships. The Grantee will then have the ability to contact his or her counterparts for advice, and to answer questions with regard to activation. Learning from each other and acquiring new ideas benefits everyone involved, and certainly benefits the Grantee s zone program. As a member, the Grantee can also partake in the NAFTZ s webinars, seminars, and conferences to enhance knowledge of the FTZ program. Third-Party Assistance in the Activation Process Many attorneys and/or consultants specialize not only in the activation of companies in an FTZ, but also provide expertise in conducting a feasibility analysis and preparation of FTZ applications. Many third parties have numerous contacts in the industry, including at the FTZ Board and CBP, and are knowledgeable about the regulations, requirements, and nuances of the activation process. These experts can help to speed up the process and avoid unexpected problems. 29

31 Grantee Responsibility Checklist for Activation and Post-Activation 1. Prior to writing the letter of concurrence, Grantees should visit/tour the proposed operator s facilities to gain an understanding of their business operations and learn why the company has decided to activate. The Grantee should receive assurance from the company that a proper inventory control and recordkeeping system will be used. 2. The Grantee should also obtain assurance that the company will have someone on staff that is properly trained in the day-to-day administrative requirements/operations of the zone. The company should have a backup person as well. 3. Grantees should then provide a written letter of concurrence for activation. 4. Prior to activation approval, companies should enter into a contractual agreement with the Grantee, including an agreement to pay the Grantee any applicable fees as indicated in the Grantee s zone schedule. Many Grantees charge an annual fee, and some charge a one-time application fee and/or activation fee. 5. After activation, the Grantee should receive a copy of the activation approval letter from CBP. 6. The Grantee should encourage participation in periodic FTZ roundtable meetings and events when applicable. 7. The Grantee should encourage all users and operators to become members in the NAFTZ, in order to ensure that they are kept up to date on the latest regulatory issues and changes to the program. 8. The Grantee should require timely submission of annual report data in order to prepare and transmit the annual report for the FTZ Board by last business day of March each year. 30

32 Part 3: Managing a Foreign- Trade Zone 31

33 The Online FTZ Information System (OFIS) What is OFIS? The Foreign-Trade Zones Board developed OFIS in 2011 in order to provide information on each zone in one central location. The information that is available includes grantee information, site and subzone information, and Federal Register notices. OFIS also allows for the online submission of the Foreign-Trade Zones Annual Report. How to access OFIS OFIS can be accessed through the following website: web.ita.doc.gov/ftz/ofislogin.nsf, or through the Reading Room of the FTZ Board Home Page (illustrated below). 32

34 What can be found on OFIS? On OFIS you can: 1) Review Zone and Site Information: By clicking on the small arrows next to each column heading you can sort by Zone Number, Grantee, Location, State and Port of Entry. For more information on a zone, click open next to the zone number. The top part of the screen will then display general zone and grantee contact information. You can then click on the buttons below for more information on Sites, Subzones, Admin Actions (such as minor boundary modifications) and Federal Register notices specific to that zone. Each site has a status field and a field for the number of acres that are activated. Grantees will be able to log into OFIS and update the status (Active/Not Active) and activated acreage of any sites in their zone. It is the Grantee s responsibility to ensure that each site s information is up to date. Grantees will also be able to update their contact information. Grantee tip: It is a good practice to review all of the information that the FTZ Board has on OFIS for your zone project. Updated or clarified maps of the zone are welcomed by the FTZ Board, and can be submitted to them for inclusion on OFIS for your zone project. Acreage and activated status can be updated through your Grantee log in. 2) Review Summary Site Information: by clicking on this option, a page will display which allows you to select the zone that you are interested in. Once you select the zone number, you will see listed all sites and subzones for that zone along with any Federal Register notices and administrative actions contained in OFIS for that zone. This section is intended to provide a quick reference to certain key information about a specific zone. 3) Review Federal Register Notices: by clicking this option, a page will display that allows you to sort notices by company name, the year of publication or the zone number (note to find a specific notice you can also use the Search option described below). The Federal Register notices which are included are dated back to ) Search: Search all of the documents and zones contained in OFIS by entering a keyword, or phrase in the Search section. 5) File annual reports: A grantee user name and password will be assigned by the FTZ Board for the use of this section. Each grantee will need to request an additional user name and password for each of their operators. OFIS will compile the individual operators submitted reports for the final online submission to the FTZ Board. Additional guidance on annual report submission can be found on page 34 of this handbook. 33

35 Filing an Annual Report What Is the Annual Report? The Annual Report is a compilation of data required by the FTZ Board from each FTZ in the country covering the calendar year (January 1 through December 31). The annual report monitors the effectiveness of the FTZ program in terms of economic growth and development in the U.S. economy. The individual reports are consolidated by the FTZ Board into one master report that is submitted to the U.S. Congress annually. The most recent FTZ Board report to Congress can be accessed from the FTZ Board website, under the Annual Report section. FTZ Board Description of Grantee Responsibility for Annual Report Pursuant to the FTZ Act (19 U.S.C. 81a-u) and the FTZ Board's regulations (15 CFR Part 400), zone grantees must submit an annual report on zone and subzone activity. Information is reported on a calendar year basis (January 1 through December 31) and reports are due from grantees by the last business day in March of each year. They are used by the FTZ Board in preparing its Annual Report to the Congress. Failure to submit a report can be considered a violation of the FTZ Act resulting in fines or the revocation of a zone grant. The report/records retention period is five years. If you need assistance with the annual report process, please call the FTZ Board staff at Notes for Preparing FTZ Annual Report Data Effective in 2012, Annual Report data will be submitted through the FTZ Board s Online FTZ Information System (OFIS). Each grantee is issued a user name and password to log in under the Grantees and Operators section of the OFIS home page. The OFIS home page also includes a Tutorial section (in the upper right hand corner) with additional helpful information. The OFIS home page can be accessed at: In order to gain a better understanding of the data requirements that must be submitted by FTZ operators and subzones, grantees should refer to the FTZ Board website. Grantees should also be aware that a special annual report format exists for petroleum. Who Should File? Each grantee is responsible for collecting the information from their respective zone and subzone operators within a specified timeframe using OFIS. Each grantee is required to request a user name and password for each of its operators, which will enable them to input their annual report data. Once the grantee has reviewed the data, the grantee authorizes OFIS to compile all of the grantee reports for the online submission from the grantee to the FTZ Board. Grantees that have no activity in their zones must still submit a report on the status of the zone through OFIS to the FTZ Board indicating that they had zero activity in their respective zone during the fiscal year. In this case, the grantee should explain what is being done to market and promote the zone to FTZ prospects and describe future expectations. Zones activated during the year must submit reports through OFIS including information on all active zone and subzone operators for the time period activated. 34

36 Zones not yet activated but approved prior to December 31 of the calendar year which are covered in the report must submit a status report through OFIS. When Is It Due? The Annual Report must be submitted to the FTZ Board by the last business day of March each year for the previous calendar year (January 1 December 31). Suggested Steps for Preparing, Submitting, and Distributing the Annual Report 1. The grantee should send out a reminder on December 1 st to respective FTZ zone and subzone operators to submit their annual report information no later than February 28 th to allow the grantee time to prepare the annual report. 2. The grantee should confirm with their operators that they have their user name and password. 3. Grantees will need to request user names and passwords for any operators who do not have one. 4. Grantees will have to log into OFIS through the home page by clicking Log In on the left-hand side and selecting Grantee Sign-In. 5. Once signed in as the Grantee, select the Work on My New Annual Report option on the left-hand side. You will be presented with the following screen: 35

37 6. The options presented will be: a) Create annual report (which will finalize all of the data and submit it electronically to the FTZ Board) b) Input operator information c) Review a list of operators who have not submitted their data yet d) Review a draft, or submitted report from an operator 7. Grantees should review the reports as submitted by the operators for accuracy and content. Once the Grantee has reviewed the information, and is ready to include it as part of the final report, the Grantee will click the submit button on the bottom of the operator s report page. A copy of each operator s report can be printed for record retention if so desired. Best practice: OFIS automatically checks the accuracy of the math (i.e. beginning balance is the same as the ending balance for the previous year, all numbers add up, etc.) for each operator. However, a grantee should consider requiring its manufacturing/production operators to confirm that their activity is consistent with the FTZ Board approvals that authorized the specific manufacturing/production activity. 8. If an operator has not inputted their information, the Grantee can input it as provided by the operator by accessing the operator record under Click Below to input Operator Information for a: (select either: non-manufacturing operator, manufacturing operator, or oil refinery operator). 9. Once all of the operators reports have been reviewed and submitted, choosing the option Click Below to Create the FTZ Annual Report will create the screen below: 36

38 10. Choose edit to input and review information (which will be the compilation of the warehouse/distribution operator s data as entered from the operator s section). An option will be presented to either use the numbers as provided by the warehouse/distribution operators, or update the numbers. The individual operator s reports will be linked from the bottom of the page. Each manufacturing/production operator report will be attached separately in the final submission to the FTZ Board. An option on the bottom of the page will allow the Grantee to select Business Proprietary. An option will be presented to save as draft, prior to final submission. Best practice: Prior to filing the annual report with the FTZ Board, the grantee should provide a copy of the annual report without any separate operator reports (these are confidential and cannot be released by the grantee) to FTZ operators, and to any parties on an internal distribution list in the grantee corporation for final review. Any changes and/or corrections made to the annual report after submission should be updated and forwarded to your distribution list. A final copy of the grantee s annual report may be offered to the local CBP Port Director. If it is possible to identify data related to individual operations, those operators should be made aware that copy of their data is being provided to CBP. 11. When the grantee is ready to make the final submission of the completed report, the submit button will need to be clicked (as illustrated below). 37

39 Best practice: Grantees should secure internal management approvals before submitting the report to the FTZ Board. If an error is found at a later date, the annual report can be edited, and resubmitted. If any operator of the grantee cannot provide the completed annual report information in the specified timeframe, the grantee should meet with the operator to discuss its inability to provide its timely annual report. The inability to provide the timely report should raise concerns regarding whether or not the operator is managing its zone project appropriately. If the grantee is unable to complete the report on time, the grantee must seek an extension from the FTZ Board. Every effort should be made to secure the remaining information from the FTZ operator as soon as possible. The grantee may also submit its annual report on time and note the absence of the missing information. 38

40 Maintaining Zone Document Files According to the CBP FTZ Manual (paragraph 7.13), the Grantee has certain recordkeeping and reporting responsibilities under the FTZ Act, FTZ Board regulations, and instructions of the FTZ Board Executive Secretary. Accounts and Records The form and manner of keeping accounts on each zone shall be prescribed by the Board. (19 USC 81p). Zone records and forms shall be prepared and maintained in accordance with the requirements of CBP and the Board. (15 CFR (a)). Grantees should also ensure that each subzone also maintains all relevant documents pertaining to the subzone. Annual Reports Each Grantee shall submit a complete and accurate annual report to the Board within 90 days after the end of the reporting period. Each zone operator shall submit a complete and accurate annual report to the zone grantee in a timeframe that will enable the grantee's timely submission of a complete and accurate annual report to the Board. (19 USC 81p(b); 15 CFR400.51(c)(1)). Operator Responsibilities to Grantee The operator is responsible for maintaining records and making reports to the extent described in the operating agreement between the operator and the Grantee. The following is an inventory of all of the Zone-related documents that should be maintained by Grantees: FTZ Board Documents Grant of Authority FTZ Board Orders and application notices Correspondence Code of Regulations 15 CFR and 19CFR Application Guidelines FTZ Annual Reports FTZ Applications/Modifications and copies of all application related correspondence to/from the FTZ Board Documents relating to the lapse provision for the zone and all subzones List of approved zone sites and maps of all zone sites with zone boundaries FTZ Marketing Materials Brochures/Website FAQ Feasibility Questionnaire FTZ General Management Schedule of Rules, Regulations, Rates & Charges Sunset Condition Control Log Site Table Activation Process Operator s Manual Outline Zone Security 39

41 USCBP Records [For Operator] Contact information Correspondence CBPF 7512 CBPF 214 CBPF 3461/7501 AES/ITN CBPF 349/350 Audits State & Federal Tax Policy/Legislation Enabling Legislation Tax Code Forms Developer Administration / Management Operator User Agreements between grantee and zone/subzone operators and private landowners FTZ Accounts Should be organized by company to include operating agreements, Blanket CBP 216, and general correspondence. FTZ Management Support List of on-line resources FTZ Consulting Services NAFTZ Zones Report Membership Application Seminars / Conference Information Correspondence 40

42 Operating Agreements Operating Agreements All Grantees must enter into an agreement with each operator to carry out the objectives of the zone program, identify roles and responsibilities, and provide indemnification to the Grantee (15 CFR 400.2(w) and ). Operating Agreements are crucial to ensure that the goals of the Grantee, the property owner or operator, and the community will be met. Several questions need to be considered before finalizing an agreement with an operator: 1. What are the goals of the FTZ Project? 2. What will be the roles and responsibilities of each party involved? 3. What are the capabilities of the parties involved? 4. How will zone users pay for services? 5. Will the Zone project be a component of a long-term development plan? 6. How much flexibility will be allowed when making adjustments to the operating agreement? 7. What are your capabilities, in terms of both marketing and financial strength? The operator should possess a good working knowledge of U.S. trade policies, CBP procedures, reporting and data collection requirements, production, distribution, and transportation methods. Property Owner agreements are also recommended by the FTZ Board for property owners under the Traditional Site Framework. Similar to an operating agreement, this document helps to define the responsibilities of both the Grantee and the property owner. If an operator happens to also be the property owner, a separate property owner agreement may not be necessary. Property owner agreements are not necessary for usage-driven sites under the Alternative Site Framework. Under ASF, usage-driven site approval is tied to a specific company, rather than the physical site at which the company is located. As a result, usage-driven site approval is not transferrable to the property owner if the user changes locations, and neither a concurrence letter or property owner agreement is needed. Key Components of Property Owner and Operator Agreements Operator Agreements (for zone or subzone sites) should contain: A statement from the Grantee giving the Operator authority to activate A detailed description of the requirements and responsibilities of the operator pertaining to: Recordkeeping and reporting responsibilities The FTZ operations manual CBP FTZ operations bonds Compliance issues Insurance issues Indemnification 41

43 Day-to-day zone operations A description of the fees that will be required from the operator The terms of the agreement A description of the site plan for the zone operation A legal description of the zone property Termination provisions Access to the zone Notification procedures A description of the relationship between the Grantee and operator Under ASF, ASF concepts including sunset limits Property Owner Agreements should contain: A statement from the Grantee agreeing to include the property in the FTZ A description of performance standards and the time limit on activation The terms of the Agreement A description of the fees that will be required from the property owner Provisions explaining what will happen upon sale of the property Useful Points to Remember When Drafting an Operator Agreement The Grantee has ultimate liability for the zone, which cannot be completely contracted away. However, the operator is the party responsible under the CBP FTZ operators bond. The time to compare goals, interests, and potential conflicts is before an operator contract is signed. Be sure to maintain the flexibility to pursue your zone s goals as they may change or evolve. It is the Grantee s responsibility to monitor the expiration dates of all Operator and Property Owner agreements, and issue requests for renewals prior to their expiration. 42

44 Public Utility and Uniform Treatment In accordance with 15 CFR , the grantee must operate the zone project according to public utility principles. Grantees must adopt public utility standards. Fees (tariffs) may include a reasonable rate of return on investment and may not be tied to the financial savings of zone users. Such a rate or charge must be directly related to the service provided by the grantee to the zone participants. Zone participants shall not be required to utilize or pay for a Grantee designated provider of zone related services any effective requirement for a zone participant to pay for additional products or services in order to be permitted to use the zone would be inconsistent with the principles associated with the statutorily imposed public utility requirement of the Foreign-Trade Zones Act. Additionally, in compliance with 15 CFR , Uniform treatment, a grantee shall offer like treatment under like conditions to all who apply. Grantees must adopt uniform treatment standards. Based on these standards, Grantees must carefully understand how to manage its FTZ Operator/User relationships. All agreements must be made in writing. Grantees should be able to provide justification for any treatment that differs. Persons working with Grantees can avoid nonuniform treatment by not undertaking key functions in the operations of the zone project. Key functions are defined in the regulation as including: Taking action on behalf of or making recommendations to a grantee on proposals or requests for authority or activation; Approving user agreements pertaining to authority or activation; and Directly overseeing zone operations. If a person who offers/provided zone-related products/services to zone participants wishes to perform one or more of those key functions, a waiver request may be filed with the Foreign-Trade Zones Board by either the Grantee or the person seeking to undertake a specific key function. The Board will not be able to consider waiver requests until OMB approves the format for those requests (still pending as of March 2013). The compliance date for the above requirements is February 28, Liability The FTZ Board s regulations include a specific provision stating that a grant of authority, per se, shall not be construed to make the zone grantee liable for violations by zone participants. However, a zone grantee could create an exception to that ordinary exemption from liability by undertaking detailed operational oversight of or direction to zone participants. Further, failure to submit an annual report on a timely basis or violation of the uniform treatment requirements of the FTZ Act and regulations are subject to fines of up to $1,000/day while the violation continues. Willful and repeated violations may possibly result in suspension of activated status. Failure to submit an annual report is also considered a violation of the FTZ Act. Repeated and willful violations of the FTZ may ultimately result in revocation of the grant of authority for the zone. 43

45 Part 4: Optimizing Your Foreign-Trade Zone 44

46 The Alternative Site Framework (ASF) The Alternative Site Framework (ASF) is an optional mechanism available to Grantees to designate and manage zone sites. The ASF provides unique benefits that are better aligned with today s business environment, allowing greater flexibility and responsiveness to serve single-operator/user locations. Note that the ASF application is an all-encompassing activity. A Grantee must be active under either TSF (Traditional Site Framework) or ASF, and once applied for and approved, the Grantee must follow all ASF rules. ASF gives Grantees the ability to easily bring FTZ designation to single operator/user locations where a company wishes to establish an FTZ. Under ASF, entire counties can be designated as part of the Service Area approved for the Grantee by the FTZ Board. For companies wishing to obtain FTZ status within the Service Area, a simplified Minor Boundary Modification is used to designate the site within 30 days. The ASF Transition Process The process to transition from the TSF to ASF follows the standard application procedures. The application format for a zone to simply transition ( reorganize ) to the ASF was designed to be a simple as possible. Once docketed by the FTZ Board, a typical ASF reorganization application takes approximately six to eight months for approval. After approval a Grantee is then classified as operating under the ASF. This designation allows all future applications within the newly approved Service Area to follow the Minor Boundary Modification (MBM) application process. This process takes approximately thirty (30) days. Additionally, all MBM applications do not have to follow the public process as it was followed to transition to ASF, and the MBM applications are approved by FTZ Board staff, not the FTZ Board itself. Once a Grantee is ASF, applications to designate sites for individual companies are done with stafflevel approval as an MBM, reducing the application time to thirty (30) days and avoiding the FTZ Board application fees associated with subzones under the TSF. As part of the transition application, a Grantee must define their Service Area. With the exception of subzones, FTZ sites (and therefore an ASF Service Area) must be within 60 miles or 90-minute drive time from the outer limit of the Port of Entry (POE). Within the ASF, the Service Area must be defined on a county-by-county basis. A Grantee has two ways of including a county as a formal part of the Service Area. The Grantee must first notify the county in writing of its intent to include the county in the application. The Grantee can either receive approval from the county to be included, or provide proof of notification of the counties to be included. A county must provide a statement in writing back to the Grantee if they choose not to be included in the ASF Service Area. That statement must explain the county s rationale for requesting not to be served by the zone. Counties must specifically deny the request if they do not wish to be included in the ASF 45

47 application. By default, with adequate proof of notification, a county can be included in the ASF Service Area if they do not take action to be excluded. The Sunset Clause A typical ASF Grantee may have up to six (6) Magnet sites without exceptional justification, but a Grantee is allowed to carry-over all current multi-user type sites as Magnets for an initial (five-year) transitional phase if they wish. A grantee may request to have one Magnet site exempted from the sunset ( use it or lose it ) provision that ordinarily applies to Magnet sites. Zones are not required to have Magnet sites. Some grantees have opted to simply have a Service Area and Usage- Driven Sites or Subzones. The decision on the best approach for the zone to pursue is up to the grantee. The sunset clause provides a use it or lose it mandate to each site. Magnet sites have a five-year sunset clause as a default (a longer sunset period could be requested, if justified) and Usage-Driven sites have a three-year sunset clause. For magnet sites the extension of the time period is based on whether a company receives activation approval from U.S. Customs within a portion of the magnet site which preserves the entire magnet site for all companies. For usage-driven sites, there must be activation approval from Customs and a bona fide Customs admission of foreign-status merchandise to the zone to preserve FTZ designation. This sunset feature allows Grantees to better manage their sites. As sites are unused and they sunset out, the Grantee is no longer responsible to monitor sites that have no activity. During transition, a Grantee is allowed to transfer all multi-user type sites to Magnet sites, even if they have more than the general goal of a maximum of six (6) Magnet sites per zone. Land Swaps After successful transition from TSF to ASF there is no longer a requirement of equal land swap when requesting a minor modification of a zone. Since the Service Area (generally entire counties) has already been pre-approved by the FTZ Board through a public process, the MBM application simply denotes the actual site and acreage to be activated for usage. No Grantee is allowed to activate more than 2,000 acres at any one time (unless the grantee has obtained approval from the FTZ Board to increase that standard activation limit ). Under the new ASF rules, however, the entire county effectively is already pre-approved. The grantee then undergoes the 30- day MBM process for each company that is ready to pursue activation with CBP, and the MBM is designed to obtain FTZ designation for the actual land that the company plans to use. This framework reduces the actual amount of acreage activated for each company. The 2,000 acre limit has not traditionally been an issue. 46

48 Usage-Driven Sites Usage-Driven sites are company-specific, and are not transferrable to a new company once the site has been unused. If a company is using a Usage-Driven site and then vacates the site for any reason, a new company cannot locate on the existing Usage-Driven site to begin use. The new company must apply using an MBM application for a Usage-Driven site and receive a fresh designation for the facility. Proximity Under certain circumstances, some Grantees are located within close proximity to other Grantees. A defined Service Area allows the Grantees to reduce overlap by working together on selecting counties for service. However, a county is allowed to be a part of multiple Service Areas under ASF. In instances of overlapping service areas, companies within the overlap will have more than one option for a grantee to serve their FTZ needs. Limitations For a grantee that was not the first FTZ established for its CBP Port of Entry (POE), an application to transition to ASF would need to address why approval to use the ASF is needed to adequately serve the convenience of commerce (the standard in the FTZ Act for approval of additional zones to serve a POE that already has a zone). 47

49 Applications for Reorganization or Expansion of an Existing Foreign-Trade Zone Before submitting an application for reorganization or expansion of an existing foreign-trade zone, be sure to visit the FTZ Board s Application page for the latest application requirements. Detailed and up-to-date information is available regarding the formats, timelines, and required documentation for each type of application. 48

50 Communications and Outreach As a Grantee, there are a number of communications tools and strategies available to help you increase awareness and utilization of your Foreign-Trade Zone. The following is a list of recommended tools and methods of communicating about your Zone: Media Releases Consider distributing press releases when you have your annual report statistics, when you add a new site or subzone, or when you have reached an established milestone (such as a certain number years in operation, dollar volumes reached, or reorganization). However, be sensitive to confidential business information submitted by companies. Release of State or Regional Economic Impact Findings Does your state or region collect and release impact statistics? Promote these as they relate to your FTZ. These figures will speak volumes to community and business leaders. TV/Radio In-Depth Interviews Offer to come to the station for an early morning news show interview. If there are local business shows, volunteer. Training Seminars & Workshops You are always an expert 90 miles from home! If you are working with a consultant, time their next visit with an introductory 4-6 hour seminar. Be sure to get as many top-level executives as possible to attend. Follow up the workshop with phone calls and a potential visit with your consultant. Training Meetings Targeted to Specific Groups (Prospects, Current Zone Sites, Economic Developers) Consider holding specialized meetings to bring together specific constituencies (for example: economic development officers and zone sites to discuss cross-marketing and differentiation of specific site specialties). Gather at different times in order to reach different audiences. Provide a specific agenda which addresses their concerns. Provide targeted training (staff or consultant) whenever possible. Build in time for open forum discussion. Education of the Board of the Sponsoring Entity Most Boards with management responsibilities for a public entity are cautious at best about the FTZ. Clearly this program is not as enticing as an air show or a new 100,000 square-foot building! The seeming complexity of the program is often a deterrent as well. Sometimes, other corporate business does not leave room on the agenda. Seek an ally on the Board and ask for a Board member to be assigned to work with you specifically on the FTZ. Work through them to provide educational opportunities. 49

51 Public speaking by staff or knowledgeable Board members Work with your Board liaison to establish and train a select few for an FTZ Speakers Bureau. Provide training (by staff and/or your consultant). Seek and schedule speaking engagements once they are trained. Also, see the Holding a Promotional Event section for more information on public events. Marketing materials (brochure/packet, workshop handouts, PowerPoint handouts, endorsements) Basic marketing materials should answer questions for a novitiate. Assume the reader knows nothing, but has a business that imports merchandise. Consider the following contents: What an FTZ is; The difference between a multi-user zone site and a subzone; A description of what the benefits include and how to evaluate the impact on their firm s bottom line; The costs and timeframe associated with the application process and activation; Consultant contact info; and Your FTZ history and map. Examples of FTZ marketing materials can be found in the upcoming section on Marketing Your Zone. FTZ newsletter and/or corporate newsletter with regular FTZ features Include national and local FTZ annual statistics, featured sites/partners, human interest stories, history of FTZs, CBP or FTZ Board news, legislative updates, a calendar with local FTZ events/milestones, and upcoming NAFTZ meetings and seminars. Monthly/regular partner s Take time to set up distribution lists. Consider making separate ones for all FTZ partners, prospects, subzones, zone sites, FTZ partners (economic development officers, elected officials), NAFTZ Board members, and other Grantees. FTZ Annual Report It is recommended that Grantees create an executive summary of their annual report to the Foreign- Trade Zones Board. Consider placing this summary in the FTZ section of your website, in a media release, or in a presentation to your Board. Membership in NAFTZ Advocacy and training are valuable benefits, but networking trumps all! Formal and informal gatherings offer an outstanding means of information exchange. Encourage all operators or end users and other partners to attend NAFTZ s annual conference each fall and consider a purchasing booth or sponsorship! This association s newsletter, the Zones Report, is also a great communication and advertisement tool for you and your colleagues. 50

52 Website Your Zone s website is a key communications tool, and can serve as the primary public face of your Zone operation. Your website can be a stand-alone site or readily accessible component of your organization s website. You may want to include general FTZ information and benefits, your zone history, maps of current sites and port of entry, your latest newsletter, a summary of your annual report, samples of your tariff schedule, and your operating agreement. Update your website regularly to include contact information. Key Constituencies for Your Zone FTZ Site or Subzone Operators This group includes end users, or contractors acting as operators. There are many tools available to connect and engage with this group, such as regular/monthly s, forwarding of local FTZ media releases, notices of upcoming events or activities (local FTZ, FTZ Board, CBP, and NAFTZ), meetings and training seminars with your consultant, audit visits, and requests for input or review of new marketing materials. The other way to build relationships with this group is to cooperate when addressing problems or concerns. When you are able to solve problems and answer questions posed by end users and operators, there is value-added that helps to justify the annual fee. Property Owners This section can include public sector, private sector or Not-for-Profit entities, owners of Greenfield development sites, or industrial parks. These are often non-activated but approved sites. One key issue with this constituency is to assure strong communication when their property begins to change hands. Is it still zoned as industrial (or is it now a tract-home subdivision)? Have new tenants purchased/long-term leased property? Do you have a letter from these tenants about their FTZ status? What is the owner doing to market the zone? Is it on their website, in their marketing literature, and on their business cards? Ensure that they understand the sunset clause attached to their property. No FTZ activity within 5 years may result in the end of the approved status. Prospective Sites, Subzones, Operators or Users To identify potential users, start with your FTZ historical records and files. Follow up with calls to area economic development officers and elected officials and others with an interest in promoting economic development. Refine your pitch to a concise five minute speech. Follow up on all leads with personal phone calls and visits. Ask for the CEO or plant manager, and count on them generating more leads. Keep in touch with these prospects, using your local FTZ newsletter or e- mails, NAFTZ newsletters, educational offerings, and sales calls to viable prospects. For those who import but have determined not to pursue their own site/subzone, pass along these leads to your zone site operators! U.S. Customs and Border Protection Be sure to provide copies of your annual report and share any news about sites and subzones. Cultivate this relationship and ask their help in prospecting for leads, as they have relationships with brokers, freight forwarders and others who may have suggestions. Work together to solve 51

53 site/subzone issues and to assure that the latest technology for reporting is available through their port of entry. Other Grantees and Members of NAFTZ Outside of NAFTZ meetings, offer to work on a committee, serve on the NAFTZ Board, or present at a training seminar on a topic that you have mastered. Build relationships, stay in touch, and include your fellow NAFTZ members on lists. Do not be afraid to ask questions or seek advice! Regional Economic Development Groups & Chambers of Commerce (City, County, Regional or State) Nurture these relationships, recognizing that these groups have the potential to be your best friends in the prospecting process. Make sure they are recognized (some require more care and feeding than others) and have the chance to get all their questions answered. From time to time, throw them into the mix of meetings that involve current or incoming sites/subzones. They are your unpaid sales force! Elected Officials Begin with officials of any municipality which sponsors your Grantee organization; then expand your sphere to others in the region. Include them in media releases and training seminars, and create special briefing opportunities for them. Ask them for feedback, questions and leads! Offer to speak to their City Council or help prepare their staff member of choice for that assignment. Include all of your FTZ contacts on your distribution list. General Public Some neighbors may be prospects (business owners or operators) who have not yet been qualified. At the very least, the economic development impact of the FTZ is good news that you want to share. Our best friends in this effort are the local and/or regional media. We need to court them at least to the extent that they fully understand the basics. This means offering to conduct in-depth interviews that are done on a one-on-one basis. When they call, always take time to answer questions and perhaps suggest some a human interest or feature story about a partner. Consultants It is both a courtesy and an imperative that consultants notify and "consult with Grantees at the earliest stages of applications for new, expanded, zone or subzone projects. Agreements may be required in advance of applications regarding Grantee fees and there should be a clear understanding of Grantee policies (e.g. Grantees may require visits to sites, or meetings with operators) prior to consideration of applications. 52

54 Marketing Your Zone The marketing plan for your FTZ should reflect its original scope of authority and the intentions of the Zone project. Zones provide businesses with the opportunity to improve their competitive position in the global marketplace and increase exports. Oftentimes, FTZs also provide strategic and innovative means for business development, encouraging both domestic and foreign direct investment. Zones can also be an integral part of local or regional economic development initiatives, and have the potential to create and retain jobs. All of these characteristics are important to remember and showcase when developing your Zone s marketing plan. Developing a Comprehensive Marketing Plan When you begin developing a marketing plan for your zone, the first step is to identify your FTZ s unique assets and attributes. Be sure to ask yourself the following questions: Is the zone project used for economic development purposes? What leadership strengths can be leveraged? Do you know your partners for growth? What real estate, facilities, industrial sites, or logistics strengths does the zone offer? What sectors, clusters, or markets does the zone project already serve? Understanding the Target Audience Next, you should make an effort to understand the needs of your current and potential customers. Becoming knowledgeable about the businesses in your area will enable you to answer the following questions: Do businesses in your area import, export, manufacture, warehouse and/or distribute products? Are businesses in your area facing pressure to improve their competitiveness in the global marketplace? Are they seeking sites for investment and/or growth? Setting Goals and Priorities Finally, before proceeding with implementation of the marketing plan, you should reflect upon the short and long-term goals for your Zone project. Are you seeking to develop new usage-driven sites? Is attracting more active users and/or operators a high priority? Is your Zone project striving to achieve fiscal sustainability? Are there any other goals that could be furthered through your marketing efforts? 53

55 Implementing the Marketing Plan With an understanding of your Zone s assets, the existing and potential customer base, and the goals of your specific project, you have the basis for a marketing plan strategically suited to your Zone. The following steps can help you to move it forward: Identify Local International Supplier Connections Plan an annual visit with each of your zone users/operators. Use this visit as an opportunity to ask questions about how their business is progressing. Leverage Domestic and International Contacts It is important to maintain and expand relationships with any contacts that can help you to find new customers for your Zone project. Organizations that may be able to help include banks, nongovernmental agencies, American Chambers of Commerce, and utility companies. Local, regional and statewide economic development groups may also be aware of businesses that could benefit from operating in a Foreign-Trade Zone. National trade organizations (such as NAFTZ, the Korea Trade-Investment Promotion Agency, the Japan External Trade Organization, SelectUSA, etc.) can also be useful partners. Other international trade-related associations such as the Customs Broker and Freight Forwarders Association may be able to assist you as well. Educate Yourself As an FTZ Grantee, it is important to keep yourself informed and up to date in the world of international trade. Keep track of the progress of current US trade policies and agreements, and make an effort to understand concepts such as exchange rates and the mobility of capital. You should also learn which commodities are subject to anti-dumping and/or countervailing duties, and learn the duty rates for commonly imported items. Educating yourself in these areas will enable you to raise your profile as an international trade expert in your area. Producing FTZ Marketing Materials There are a number of useful tools that can help you to spread the word about your Zone. Producing marketing materials for your Zone is one of the most effective ways to generate publicity among potential customers. First, it is important to develop marketing materials that make a strong, business-focused case for your locale. Advertisements in local business publications, handouts, and brochures are a great way to draw attention to your Zone and the benefits that it can offer. As discussed in the previous section, FTZ marketing materials should contain both general information about the FTZ program and specific information about your Zone. Your marketing materials should give a description of the unique benefits of the Zone, and provide some way for firms to evaluate the Zone s potential impact on their bottom line. The following 54

56 pamphlet, produced by FTZ No. 281 in Miami, Florida, provides an excellent example of a costsavings calculator, which can help firms to evaluate the Zone s potential impact on their profitability. It also describes some of the Zone s unique benefits and characteristics, provides a map of the service area, and gives an estimated timeframe for activation under ASF. 55

57 In addition, it is also important for FTZ marketing materials to provide a thorough description of the benefits of operating in an FTZ. Many companies may not be aware of the specific benefits of FTZs, or may be unfamiliar with how the process works. The following brochure from FTZ No. 138 in Columbus, Ohio, provides an excellent description of the program s benefits in an appealing and easy-to-understand format. 56

58 Newsletters Creating a newsletter for your Zone can also help to keep local leaders informed about happenings in your FTZ. The newsletter below, produced by Foreign-Trade Zone No. 43 in Battle Creek, Michigan, is an excellent example. This newsletter contains important information about the Zone, including a list of upcoming events, an article on a current topic of interest (Production in an FTZ), and a message from the Executive Director to highlight any notable stories or achievements. 57

59 Use Social Media Become active on Twitter and Facebook by sharing brief updates, news, and marketing materials related to your Zone. Include a link to your Zone s Twitter or Facebook profile in your signature to ensure that you build a substantial online following. Seek Your Partners Expert Investment in the Zone Project It is important to keep your Zone s partners involved in the project on an ongoing basis. Invite them to serve on your board of directors, and ask economic developers to deliver regular reports at your board meetings. Your partners can also be helpful when drafting marketing materials or planning export workshops. Take advantage of Alternative Site Framework for marketing purposes The Alternative Site Framework, described in greater detail previously in this handbook, can also serve as an important centerpiece for marketing efforts. The flexibility of ASF provides Grantees with the opportunity to achieve goals on a more regional basis. After defining your geographic service area and indicating initial sites to be served, it is important to gain the support of economic developers throughout the service area. Try to supplement these activities by liaising with local elected officials and making presentations to county (or parish) and/or regional officials. ASF provides an opportunity to expand your Zone s target market, making it an important component of your marketing plan. 58

60 Promotional Events Holding a promotional event is another effective way to raise awareness about your Foreign-Trade Zone operation. Promotional events and informational seminars provide valuable opportunities for Grantees to speak directly with companies who are specifically interested in FTZ activities. If you are considering holding a promotional event for the first time, it may be better to shorten the event timeline and widen the base of topics to be covered. By covering a wider array of topics and recruiting a diverse group of speakers, it is likely that you will attract more companies to the event. What to Cover at an FTZ Promotional Event It is important to remember that most companies either have not heard about FTZs or know very little about FTZ benefits. You can attract those companies by hosting speakers that will discuss introductory topics, such as the basic benefits and advantages of operating in an FTZ, and how a company can begin to get involved. A wide range of speakers should be considered, including federal, state and local officials. The following is a list of suggested organizations and agencies that may be able to provide speakers. NAFTZ The NAFTZ President is a frequent guest speaker at regional FTZ events, and can serve as an ambassador for the FTZ program and for your specific Zone. As the public s principal educator regarding the FTZ program, the NAFTZ President can discuss the benefits of FTZs for companies in your area and for the economy as a whole. NAFTZ directors and long-time members can also represent NAFTZ while sharing insights from their experience as FTZ grantees, operator/users, and consultants. National Organizations/Agencies Officials at a number of national organizations and federal agencies can discuss the benefits of the FTZ program, and also cover other international trade-related topics that will attract area businesses to your event. These agencies include: The Department of Commerce The Foreign-Trade Zones Board The Export-Import Bank Foreign Consulates and Embassies District Export Councils The Local CBP Port Director Trade Organizations (such as the American Association of Exporters and Importers) The World Bank Foreign Direct Investment Organizations 59

61 State Level Government Agencies and Organizations State Chambers of Commerce Small Business Development Centers/International Trade Offices within State Government State Port Authorities State Departments of Economic Development City/Local Government Agencies and Organizations Service Corps of Retired Executives (SCORE) Local or Regional Economic Development Organizations City Economic Development Departments City/Regional Port Authorities District Export Councils Promoting the Event After deciding on speakers and topics, the next step is to spread the word about your upcoming event. Many of the organizations listed above have their own list of suggested events, and may be willing to add your FTZ event or seminar to their list. It is crucial to send event information and promotional materials to your local Chamber of Commerce and other local business associations and ask that they be distributed to their membership lists. The Chamber is always looking for new information to supply to their membership, and this is the core audience that you should be looking to reach. The companies that belong to the Chamber or other business associations are used to receiving meeting notices via , and are typically looking to attend informational meetings. Event Advertisement Pieces To help spread the word about your event, a small advertisement piece is usually helpful. In today s digital world, such an advertisement may not need to be printed en masse. A PDF or electronic image, such as the one displayed below, should help you to generate interest in your event. 60