Import Administration
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                           DEPARTMENT OF THE TREASURY 
                                Customs Service 
                       AGENCY: Customs Service, Treasury. 
 
                                19 CFR Part 146 
           Customs Regulations Amendments Relating to the Transfer of 
           Merchandise From a Foreign-Trade Zone to a Customs Bonded 
                                   Warehouse 
 
                                 [T.D. 83-139] 
 
                                  48 FR 27536 
 
                                 June 16, 1983 
 
 
ACTION: Final rule. 
 
 
SUMMARY: This document amends the Customs Regulations to permit the transfer
of zone-restricted merchandise from a foreign-trade zone to a Customs bonded 
warehouse pending exportation, without obtaining approval of the Foreign-
Trade Zones Board, Department of Commerce. This change is being made because
elimination of this unnecessary requirement will expedite the transfer 
process.  
 
 
EFFECTIVE DATE: July 18, 1983. 
 
 
FOR FURTHER INFORMATION CONTACT: Legal Aspects: William D. Lawlor, Carriers,
Drawback and Bonds Division (202-566-5856); Operational Aspects: John R. 
Holl, Office of Cargo Enforcement and Facilitation (202-566-8151); U.S. 
Customs Service, 1301 Constitution Avenue, NW., Washington, D.C. 20229.  
 
TEXT: SUPPLEMENTARY INFORMATION: 
 
 
Background 
 
   Foreign-trade zones (zones) are areas within the United States (but 
outside of the "Customs territory" of the United States, as defined in @ 
146.1, Customs Regulations (19 CFR 146.1)), where foreign or domestic 
merchandise may be brought for manipulation, manufacture, assembly, or 
other processing, or for storage or exhibition, provided that these 
operations are not otherwise prohibited by law. Foreign merchandise may be 
brought into a zone without being subject to the usual Customs entry 
procedures and payment of duty. Foreign or domestic merchandise may be 
exported or entered into the Customs territory from a zone. 
 
   Zones are established under the Foreign-Trade Zone Act of 1934, as 
amended (19 U.S.C. 81a-81u), and the general regulations and rules of 
procedure of the Foreign-Trade Zones Board (the Board), Department of 
Commerce (15 CFR Part 400). Part 146, Customs Regulations (19 CFR Part 
146), governs the admission of merchandise into a zone; the manipulation, 
manufacture, or exhibition in a zone; the exportation of merchandise from 
a zone; and the transfer of merchandise from a zone into the Customs 
territory. 
 
   Articles taken into a zone from the Customs territory for the sole 
purpose of exportation, destruction (except destruction of distilled 
spirits, wines, and fermented malt liquors), or storage are given "zone-
restricted" status upon proper application. (Certain shipments of zone-
restricted merchandise which have been placed in a zone to obtain the 
benefit of drawback or cancellation of a temporary importation bond are 
subject to footnote 3 of @ 22.2, Customs Regulations (19 CFR 22.2) and T.D. 
55819(11).) 
 
   Upon receiving zone-restricted status, merchandise is considered 
exported and may be returned to the Customs territory for domestic 
consumption only after the Board has determined that the transfer is in 
the public interest.  
 
   Because obtaining Board approval may be a time-consuming process and 
may result in lost sales to merchants who wish to transfer zone-restricted 
merchandise to a Customs bonded warehouse pending exportation, the question 
has arisen whether zone-restricted merchandise may be transferred to a 
Customs bonded warehouse pending exportation, without Board approval. While 
19 U.S.C. 81c prohibits the return of merchandise to Customs territory 
from a zone for domestic consumption without Board approval, it does not 
prohibit the return of merchandise to Customs territory for warehousing 
prior to exportation. It is noted that section 557, Tariff Act of 1930, as 
amended (19 U.S.C. 1557), provides, in part, that the total period of time 
that merchandise may remain in a bonded warehouse shall not exceed five 
years from the date of importation.   

   Customs published a notice in the Federal Register on August 27, 1982 
(47 FR 37927), proposing to amend @ 146.47, Customs Regulations (19 CFR 
146.47), to permit the transfer of zone-restricted merchandise from a zone 
to a Customs bonded warehouse pending exportation, without obtaining 
approval of the Board.  
 
 
Discussion of Comments 
 
   Two of the three comments received in response to the notice support the 
change.  

   The third commenter opposes the change. He contends: (1) that there is 
no need to remove merchandise from a zone prior to actual exportation since 
an immediate export or a transportation and exportation movement can be 
arranged to take the merchandise directly from the zone to the exporting 
carrier without the involvement of the Board; (2) that the change creates 
a means of circumventing the prohibition against retail trade in a zone by 
allowing the merchandise to move from a zone to a warehouse, and eventually 
to a duty-free shop; and (3) that the change can only enhance the 
possibility that Customs may lose complete control of zone-restricted 
merchandise, in view of an historic control problem with warehouse entries 
and immediate export and transportation for exportation bonded movements, 
and in view of the new warehouse procedures.  
 
   As the commenter notes, an immediate export or a transportation and 
exportation movement can be arranged without approval of the Board. However, 
commercial realities sometimes require the movement of zone-restricted 
merchandise to the port of exportation before there is a firm commitment 
with an exporting carrier. The amendment will simply permit such 
merchandise to be held in a bonded warehouse pending exportation. Approval 
of the Board will still be necessary where the goods are to be entered into 
the Customs territory for consumption or into a warehouse for any purpose 
other than exportation.  
 
   With respect to the commenter's second contention, Customs notes that 
there is no prohibition against retail trade in a Customs bonded warehouse 
operated as a duty-free shop. Merchandise sold from a duty-free shop is 
for export, and not for domestic consumption. Retail trade in a duty-free 
shop is not in derogation of the Foreign-Trade Zones Act of 1934 or the 
Customs Regulations.  
 
   Customs believes that the new warehouse audit/inspection approach 
provided for by T.D. 82-204 (see Federal Register of November 1, 1982 
(47 FR 49355)), provides for adequate control over merchandise in 
warehouses, including zone-restricted merchandise transferred to warehouses. 
Pursuant to @ 146.47(e)(4), Customs will maintain "paper control" over 
zone-restricted merchandise. 
 
   After analysis of the comments and further review of this matter, the 
proposal to amend section 146.47 is adopted. Language has been added to 
proposed section 146.47(e)(4) to provide that zone-restricted merchandise 
transferred from a zone to a Customs bonded warehouse may not be 
manipulated, except packing or unpacking incidental to exportation. 
Further, pursuant to 19 U.S.C. 1557, the total period of time that 
merchandise may remain in a Customs bonded warehouse may not exceed five 
years from the date of importation. 
 
 
List of Subjects in 19 CFR Part 146 
 
   Customs duties and inspection, Exports, Imports, Foreign-trade zones.  
 
 
Amendments to the Regulations 
 
   Part 146, Customs Regulations (19 CFR Part 146), is amended as set forth 
below. 
 
   PART 146 -- FOREIGN-TRADE ZONES 
 
   1. Section 146.47(a) is revised to read as follows: 
 
    @ 146.47 Transfer of zone-restricted merchandise into Customs territory. 
 
   (a) Types of entry.  If the return of zone-restricted merchandise to 
Customs territory for domestic consumption has been ruled by the Board to 
be in the public interest, it may be entered for consumption, for 
warehousing, or for immediate transportation without appraisement, unless 
the Board has specified which of these forms of entry shall be made. 
Otherwise, zone-restricted merchandise may be returned to Customs territory 
only for entry for exportation, for Customs bonded warehousing at the 
same or a different port prior to exportation, for entry for transportation 
and exportation, for destruction (except destruction of distilled spirits, 
wines, and fermented malt liquors), for transfer from one zone to another, 
or for delivery to a qualified vessel or aircraft or as ground equipment of 
a qualified aircraft under sections 309 or 317 of the Tariff Act of 1930, 
as amended. 

* * * * * 
 
   2. Section 146.47 is further amended by adding a new paragraph (e)(4) to 
read as follows: 
 
 
* * * * * 
 
   (e) * * * 
 
   (4) Zone-restricted merchandise may be transferred from a foreign-trade 
zone to a Customs bonded warehouse for storage pending exportation. The 
warehouse entry, Customs Form 7502, shall be endorsed by the district 
director to show that the merchandise may not be withdrawn for consumption. 
In the case of zone-restricted merchandise transported in bond to another 
port for warehousing and exportation, Customs Form 7512 shall be endorsed 
by the district director to show that the merchandise is foreign-trade zone 
merchandise in zone-restricted status, which shall be entered for warehouse, 
with proper endorsement on Customs Form 7502, and which may not be withdrawn 
for consumption. Zone-restricted merchandise transferred from a foreign-
trade zone to a Customs bonded warehouse may not be manipulated, except 
packing or unpacking incidental to exportation. Pursuant to section 557, 
Tariff Act of 1930, as amended (19 U.S.C. 1557), any merchandise placed in 
a Customs bonded warehouse may not remain in the warehouse after five years 
from the date of importation and no merchandise may be placed in a Customs 
bonded warehouse after five years from the date of importation.  
 
 
(R.S. 251, as amended; section 1, 48 Stat. 998, et seq.,  as amended; 
section 624, 46 Stat. 759 (19 U.S.C 66, 81a-81u, 1624)). 
 
 
Regulatory Flexibility Act 
 
   Pursuant to section 3 of the Regulatory Flexibility Act (5 U.S.C. 
605(b)), it is certified that the regulations set forth in the document 
will not have a significant economic impact on a substantial number of 
small entities.   
 
Executive Order 12291 
 
   Because this document does not meet the criteria for a "major rule" as 
defined in section 1(b) of E.O. 12291, a regulatory impact analysis as 
prescribed by section 3 of the E.O. is not required. 
 
 
Drafting Information 
 
   The principal author of this document was Gerard J. O'Brien, Jr., 
Regulations Control Branch, Office of Regulations and Rulings, U.S. Customs 
Service. However, personnel from other Customs offices participated in its 
development.  
 
 
Alfred R. De Angelus, 
 
   Acting Commissioner of Customs. 
 
   Approved: May 26, 1983. 
 
 
John M. Walker, Jr., 
 
   Assistant Secretary of the Treasury.   
[FR Doc. 83-16171 Filed 6-15-83; 8:45 am] 
 
   BILLING CODE 4820-02-M