Import Administration
September 2001:   New FTZ Mailing Address  
last update: September 2002 


                          DEPARTMENT OF THE TREASURY 
                                Customs Service 
            AGENCY: United States Customs Service, Department of the 
                                   Treasury. 
 
                            19 CFR Parts 10 and 147 
          Drawback of Internal Revenue Tax and Transfer of Merchandise 
               Entered for a Trade Fair From a Foreign-Trade Zone 
 
                                  48 FR 27776 
 
                                 June 17, 1983 
 
 
ACTION: Proposed rule. 
 
 
SUMMARY: This document proposes amendments to the Customs Regulations 
relating to drawback of internal revenue tax and transfer of merchandise 
entered for a trade fair from a foreign-trade zone, to substitute current 
references to Tariff Schedules of the United States item numbers. The 
foregoing changes are necessary to conform the regulations to statutory 
provisions. The document also proposes a regulation amendment to clarify 
that the transfer of articles entered for a trade fair from a foreign-trade 
zone status of "zone restricted", and afterwards entered for consumption 
from a trade fair, can only be accomplished after the Foreign-Trade Zones 
Board has approved such a transfer as being in the public interest. This 
nonsubstantive change is necessary to avoid possible misinterpretation of 
the regulations and clearly state statutory requirements.  
 
 
DATES: Comments must be received on or before August 16, 1983.  
 
 
ADDRESS: Written comments (preferably in triplicate) should be addressed 
to the Commissioner of Customs, Attention: Regulations Control Branch, 
U.S. Customs Service, 1301 Constitution Avenue NW., Room 2426, Washington, 
D.C. 20229. FOR FURTHER INFORMATION CONTACT: 
  
Legal aspects of Part 147, Customs Regulations: Donald Beach, Carriers, 
Drawback and Bonds Division (202-566-5865) 
 
 
Legal aspects of Part 10, Customs Regulations: 
 
 
Russell X. Arnold, Classification and Value Division (202-566-5727)  
 
 
Operational aspects: 
 
 
Herbert Geller, Duty Assessment Division (202-566-5307) 
 
U.S. Customs Service, 1301 Constitution Avenue NW., Washington, D.C. 20229.  
 
TEXT: SUPPLEMENTARY INFORMATION: 
 
 
Background 
 
   This document proposes to implement Pub. L. 91-692 by amending the 
following two sections of the Customs Regulations: Section 10.3, Customs 
Regulations (19 CFR 10.3), and footnote 2 to that section relating to 
drawback of internal revenue taxes; and @ 147.45, Customs Regulations 
(19 CFR 147.45), relating to the transfer of merchandise entered for a 
trade fair from a foreign-trade zone, to delete the reference to item 
804.00, Tariff Schedules of the United States, (TSUS) (19 U.S.C. 1202) 
and substitute TSUS items 804.10 and/or 804.20, as appropriate. 
 
   Prior to Pub. L. 91-692, articles produced in the United States with 
the use of foreign articles imported under bond were excluded from entry 
under the provisions of TSUS item 804.00 as "American goods returned." 
Such articles would have to be entered and duty paid under another 
applicable provision of the TSUS. However, articles produced in the United 
States with the use of foreign articles and exported with the benefit of 
drawback (the refund of a duty or tax lawfully collected because of a 
particular use of the merchandise on which the duty or tax was collected 
(section 313(a) Tariff Act of 1930, as amended (19 U.S.C. 1313(a)) could 
be imported under TSUS item 804.00 as "American goods returned" upon 
repayment of the drawback. 
 
   In the manufacture of aircraft in the United States, it is fairly 
common practice to use some foreign articles or materials. Export sales 
of aircraft produced in the United States are significant, and normally, 
the duty paid on the foreign articles used in the manufacture of such 
aircraft is subject to the drawback procedure set forth in Part 22, Customs 
Regulations (19 CFR Part 22), under which 99 percent of the duty paid on 
the foreign articles or materials is refunded upon exportation of the 
completed aircraft. In some instances, foreign articles for use in 
aircraft are temporarily entered to be repaired or altered under TSUS 
item 864.05, free of duty under bond (see @@ 10.38 and 10.39, Customs 
Regulations (19 CFR 10.38, 10.39)). Such temporary duty-free entry 
arrangement is preferred by some manufacturers since no large amount of 
capital is committed to duty payment for the period between the original 
entry of the foreign component and the drawback of the duty upon 
exportation of the aircraft.  
 
   Over the years both provisions, i.e., drawback and temporary 
importation under bond, have been used with respect to eliminating the 
cost of U.S. duty on foreign articles used in the domestic manufacture of 
aircraft which are subsequently sold abroad. Competition in the sales of 
new aircraft in world markets is rising. Very often the "trade in" 
allowance for old aircraft is an important factor in obtaining contracts 
for sales of new aircraft abroad. Under these circumstances, the dutiable 
status of the old aircraft being "traded in" and returned to the United 
States becomes important. 
 
   In view of the importance of the "trade in" of old aircraft to sales 
of new aircraft abroad, Congress believed it important to provide similar 
Customs treatment to aircraft produced in the United States which are sold 
abroad and returned, whether the drawback or temporary importation bond 
procedure was used with respect to foreign components. Pub. L. 91-692 
provided such Customs treatment for aircraft by amending the TSUS to 
delete item 804.00, which provided for articles previously exported from 
the United States which are excepted from free entry under any of several 
other provisions of Schedule 8, Part 1, TSUS, and are not otherwise free of
duty, and inserting in its place (a) TSUS item 804.10, relating to aircraft 
exported from the United States with benefit of drawback or TSUS item 
864.05, and (b) TSUS item 804.20, relating to other articles. In light of 
the foregoing, it is necessary to amend section 10.3 and footnote 2 to 
that section and @ 147.45 to delete the reference to TSUS item 804.00 and 
substitute a reference to TSUS items 804.10 and/or 804.20, as appropriate.
 
   In addition to the above proposed amendment, Customs proposes to amend 
@ 147.45 to clarify that the transfer of articles entered for a trade fair 
from a foreign-trade zone status of "zone restricted" and afterwards 
entered for consumption from a trade fair can only be accomplished after 
the Foreign-Trade Zones Board ("Board") has approved such a transfer as 
being in the public interest.  

   Customs has determined that @ 147.45 does not, in its present form, make 
it clear that the transfer of articles entered for a trade fair from a 
foreign-trade zone status of "zone restricted" and afterwards entered for 
consumption from a trade fair can only be accomplished after the Board has 
approved such a transfer as being in the public interest.  
 
   Foreign or "free" trade zones are secured areas legally outside a 
nation's customs territory. Their purpose is to attract and promote 
international trade.   

   Foreign or "free" trade zones are secured areas legally outside a 
nation's customs territory. Their purpose is to attract and promote 
international trade. Zones are operated as public utilities by states, 
their political subdivisions, or corporations chartered for that purpose. 
Foreign-trade zones usually are located in or near customs ports of entry 
at industrial parks or terminal warehouse facilities. 
 
   The Foreign Trade Zones Act of 1934 (19 U.S.C. 81a et seq. ) created the 
Board to review and approve applications to establish, operate, and 
maintain foreign-trade zones (see 15 CFR Part 400). The Board may approve 
any zone or subzone which it deems necessary to serve adequately "the 
convenience of commerce." The Board also regulates the administration of 
foreign-trade zones and the rates charged by zone operators, known as 
"grantees."  
 
   As provided in Part 146, Customs Regulations (19 CFR Part 146), Customs 
is responsible for the transfer of merchandise into and out of a zone and 
for matters involving the collection of revenue. The Customs Office of 
Regulations and Rulings, at Customs Headquarters, provides legal 
interpretations of the applicable statute, Customs Regulations, or 
procedure. 
 
   The district director of Customs in whose district a zone is located is 
in charge of the zone as the local representative of the Board. He 
controls the admission of merchandise into the zone, the handling and 
disposition of merchandise in the zone, and the removal of merchandise 
from the zone.  
 
   The exportation, entry, classification, and appraisement of merchandise 
tranferred from a foreign-trade zone is affected by the "status" of the 
merchandise in the zone. Merchandise may have a (1) privileged foreign 
status, (2) privileged domestic status, (3) zone restricted status, (4) 
nonprivileged status, foreign and domestic, or (5) mixed status. Each 
status, which is provided for in @@ 146.21 through 146.25, Customs 
Regulations (19 CFR 146.21-146.25), is discussed below.  

   Privileged foreign status.  Prior to any manipulation or manufacture 
which would change its tariff classification, an importer may apply to the 
district director to have imported merchnandise in the zone given 
privileged foreign status. The merchandise is classified and appraised and 
duties and taxes are determined as of the date the application is filed. 
Taxes and duties are payable, however, only when such merchandise or 
articles manipulated, manufactured, or produced from such merchandise, are 
transferred from the zone to the customs territory of the United States. 
 
   Privileged domestic status.  Privileged domestic status, which may be 
approved upon application to the district director, is available for 
merchandise which is (a) the growth, product, or manufacture of the United 
States on which all internal revenue taxes, if applicable, have been paid; 
(b) previously imported merchandise on which duty and/or tax have been 
paid; or (c) merchandise previously admitted free of duty and tax. 
Privileged domestic merchandise may be returned to the customs territory 
free of duty and tax. 
 
   Zone restricted status.  Merchandise tranferred to a zone from the 
customs territory for storage or for the purpose of satisfying a legal 
requirement for exportation or destruction is considered exported and 
cannot be returned to the customs territory for consumption unless the 
Board rules specifically that its return is in the public interest. The 
status of merchandise tranferred to a zone under these circumstances is 
"zone restricted." Zone restricted merchandise may not be manipulated, 
except to destroy, it, or manufactured in a zone. As in the case of 
privileged status, the zone user must apply for zone restricted status on 
the appropriate foreign-trade zones form. 
 
   Nonprivileged status.  Nonprivileged status is a residual category for 
merchandise which does not have privileged or zone restricted status. 
Articles composed entirely of or derived entirely from nonprivileged 
merchandise are classified and appraised in their condition at the time of 
legal transfer to the customs territory for consumption or for customs 
bonded warehousing.  
 
   Mixed status. Since manipulation and manufacture are permitted in a 
zone, articles transferred to the customs territory may be composed in part 
of, or derived in part from, merchandiste that is privileged and 
nonprivileged, whether foreing and/or domestic. the articles are appraised 
according to the status of the merchandise of which they are composed or 
from which derived, as explained above.  

   Section 146.25, Customs Regulations, states that zone restricted 
merchandise, other than as set forth in @ 146.47, Customs Regulations, may 
not be returned to the customs territory for domestic consumption except 
where the Board deems such returns to be in the public interes. 
 
   Section 146.47 states that zone restricted merchandise may be returned 
to the customs territory only for entry for 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 section 309 or 317, 
Tariff Act of 1930, as amended (19 U.S.C. 1309, 1317). Any other transfer 
requires the Board to rule that the return of the merchandise to the 
customs territory for domestic consumption is in the public interest. 
 
   Accordingly, to avoid any misunderstanding, Customs is of the opinion 
that @ 147.45 should be amended to clarify that the transfer of articles 
entered for a trade fair from a foreign trade zone status of "zone 
restricted" and afterwards entered for consumption, can only be 
accomplished after the Board has approved such a transfer as being in the 
public interest. 
 
 
Executive Order 12291 
 
   This document will not result in a regulation which is a "major rule" as 
defined by section 1(b) of Executive Order 12291. 
 
 
Regulatory Flexibility Act 
 
   The provisions of the Regulatory Flexibility Act relating to an initial 
and final regulatory flexibility analysis (5 U.S.C. 603, 604) are not 
applicable to these amendments because the rule will not have a significant 
economic impact on a substantial number of small entities. The proposed 
amendments are technical conforming amendments which clarify existing 
regulatory requirements without making any substantive change. 
 
   Accordingly, it is certified under the provisions of section 3, 
Regulatory Flexibility Act (5 U.S.C. 605(b)) that the rule, if promulgated, 
will not have a significant economic impact on a substantial number of 
small entities.  
 
 
Comments 
 
   Before adopting this proposal, consideration will be given to any written 
comments (preferably in triplicate) that are submitted timely to the 
Commissioner of Customs. Comments submitted will be available for public 
inspection in accordance with @ 103.11(b), Customs Regulations (19 CFR 
103.11(b)), on regular business days between 9:00 a.m. and 4:30 p.m. at the 
Regulations Control Branch, Room 2426, Headquarters, U.S. Customs Service, 
1301 Constitution Avenue, NW., Washington, D.C. 20229. 
 
 
Authority 
 
   This document is issued under the authority of R.S. 251, as amended, 
sections 1-21, 48 Stat. 998, 999, as amended, 1000, 1002, as amended 1003, 
77A Stat. 14, section 624, 46 Stat. 759 (19 U.S.C. 66 81a-81u, 1202 
(General Headnote 11), 1624). 
 
 
Drafting Information 
 
   The principal author of this document was John E. Elkins, Regulations 
Control Branch, U.S. Customs Service. however, personnel from other 
Customs offices participated in its development. 
 
 
List of Subjects 
 
 
19 CFR Part 10 
 
   Customs duties and inspection, Imports. 
 
 
19 CFR Part 147 
 
   Customs duties and inspection, Fairs and expositions, Imports.  
 
 
Proposed Amendments to the Regulations 
 
   It is proposed to amend Parts 10, and 147, Customs Regulations (19 CFR 
Parts 10, 147), as set forth below. 
 
   PART 10 -- ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE, ETC.  
 
    @ 10.3 [Amended] 
 
   It is proposed to amend @ 10.3(a) by removing (a) the reference to 
footnote 2 and footnote 2, (b) the words "item 804.00" wherever they appear 
in paragraph (c)(3) and inserting in their place the words "items 804.10 or 
804.20" and (c) the words "item 804.00" in paragraph (f) and inserting in 
their place the words "item 804.20."  

   PART 147 -- TRADE FAIRS 
 
   It is proposed to amend @ 147.45 by revising it to read as follows:  
 
    @ 147.45 Merchandise from a foreign-trade zone. 
 
   Articles entered for a trade fair from a foreign-trade zone in the status 
of "zone-restricted merchandise" can afterwards be entered for consumption 
from a fair if the Foreign-Trade Zones Board has approved the entry for 
consumption as being in the public interest. Articles entered in the above 
manner are subject to the provisions of item 804.10, if aircraft, or item 
804.20, if not aircraft, unless excluded by headnote 1(c), Subpart A, Part 
1, Schedule 8, Tariff Schedules of the United States. 
 
 
Alfred R. DeAngelus, 
 
   Acting Commissioner of Customs. 
 
   Approved: May 26, 1983. 
John M. Walker, Jr., 
 
   Assistant Secretary of the Treasury.   
[FR Doc. 83-16305 Filed 6-16-83; 8:45 am]