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NAFTZ Commends Foreign-Trade Zones Board for Responsiveness to Industry Concerns in New Regulations:  Comprehensive Revision Expedites and Simplifies Many Board Procedures

February 29, 2012

The National Association of Foreign-Trade Zones (NAFTZ) today commended the Foreign-Trade Zones Board for its comprehensive revision of regulations issued pursuant to the Foreign-Trade Zones Act of 1934. Published Monday in the Federal Register, the new rule is a complete revision of policies last updated in 1991 that aims to expedite and simplify many Board procedures in order to encourage greater utilization of Foreign-Trade Zones and stimulate U.S. manufacturing and export activity.

“We congratulate the Foreign-Trade Zones Board and staff for producing an excellent set of new regulations that we believe will have a very positive impact on U.S. trade,” said NAFTZ President Daniel Griswold. “We also commend the Board for its evident responsiveness to legitimate concerns expressed by the public and industry during the 14-month rulemaking period leading up to the release. It is clear that the Board followed through faithfully on its intended goal to simplify its outdated regulations and expedite the FTZ approval process while continuing to strike the proper balance of interests among all involved industry groups. The new rules will greater enable NAFTZ member companies to work toward President Obama’s national goal of doubling exports in five years.”

NAFTZ filed extensive comments last May and June on the proposed rules initially issued by the FTZ Board on December 30, 2010. Among the provisions addressed in NAFTZ comments that were subsequently amended in the final rule are:

  • Manufacturing/Production Activity. The new definition of “production” combines the definitions of the prior terms “manufacturing” (substantial transformation) and “processing” (change in tariff classification) into a single definition and set of procedures. The section also reduces the processing time for production notifications by two-thirds, from one year to four months.
  • New Penalty Provisions. In its May 2011 comments, NAFTZ expressed opposition to the then-proposed rule increasing FTZ Board penalties, in the belief that they could have a chilling effect on Grantees and Operators currently participating in the FTZ Program, as well as on potential participants considering whether to join the Program. The final rule includes sensible revisions that limit fining provisions to untimely annual reports and uniform treatment violations and clarify that if the operator is at fault, the grantee will not be fined.
  • Streamlined Subzone Applications. The streamlining of the subzone application format will help small- and medium-sized businesses to be more competitive in the global economy and compete successfully in export markets around the world.
  • Grantee Provisions. NAFTZ expressed serious concerns on a range of issues involving Grantee liability principles. The final rules provide clear guidance on Grantee liability and responsible revisions to uniform treatment and public utility concerns.

“The FTZ Board’s body of work represents a badly needed, wholesale simplification of critical regulations that determine whether America’s Foreign-Trade Zone program will continue to prosper and fulfill its potential to contribute to the success of U.S. manufacturing and trade,” said Daniel Griswold. “We believe these regulations have set a standard for responsible rulemaking that other federal agencies would be well-advised to follow. We urge the Office of Management and Budget to expedite its own review of appropriate sections so they may be implemented as soon as possible.”

The National Association of Foreign-Trade Zones is a not-for-profit trade association of 650 members representing public and private organizations involved in the foreign-trade zones program, including state and local governments, economic development organizations, distribution and warehouse firms, corporations engaged in exporting and importing, and legal services and professional consulting firms. FTZs play an important role in facilitating international trade and increasing the global competitiveness of U.S.-based companies by maintaining the cost competitiveness of U.S.-based operations with their foreign-based competitors. Over 2,400 U.S. companies and 320,000 American workers participate in the FTZ economy. NAFTZ is the primary voice of communities and industries that utilize the FTZ program, including zone grantees, operators and users.