Import Administration
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                          DEPARTMENT OF THE TREASURY 
                                Customs Service 
                       AGENCY: Customs Service, Treasury. 
 
                                19 CFR Part 146 
              Withdrawal of Proposed Customs Regulations Amendment 
          Relating To Admission Into Foreign-Trade Zone of Merchandise 
                         From Customs Bonded Warehouse 
 
                                   49 FR 3200 
 
                                January 26, 1984 
 
 
ACTION: Withdrawal of proposed rule. 
 
 
SUMMARY: This document withdraws the proposed amendment to the Customs 
Regulations to allow imported merchandise withdrawn from a Customs bonded 
warehouse to be admitted into a foreign-trade zone without restriction for 
use in manufacturing operations. That merchandise will continue to be 
restricted and must be exported from the United States, destroyed, or 
merely stored in a foreign-trade zone. It cannot be used to manufacture 
a product in a zone.  
 
 
DATE: Withdrawal effective on January 26, 1984. 
 
 
FOR FURTHER INFORMATION CONTACT: Russell A. Berger, Carriers, Drawback and 
Bonds Division, U.S. Customs Service, 1301 Constitution Avenue, NW., 
Washington, D.C. 20229 (202-566-5856). 
 
TEXT: SUPPLEMENTARY INFORMATION: 
 
 
Background 
 
   Foreign-trade zones ("zone") are established under the Foreign Trade 
Zones Act of 1934, as amended (FTZA) (19 U.S.C. 81a-81u) and the general 
regulations and rules of procedure of the Foreign-Trade Zones Board 
contained in 15 CFR Part 400. Part 146, Customs Regulations (19 CFR Part 
146), governs the admission of merchandise into a zone; manipulation, 
manufacture, or exhibition of merchandise in a zone; exportation of 
merchandise from a zone; and transfer of merchandise from a zone into the 
customs territory of the United States ("customs territory"). 
 
   Foreign or domestic merchandise may be admitted into a zone for, among 
other things, manipulation, manufacture, assembly, or other processing, or 
for storage or exhibition, provided these operations are not otherwise 
prohibited by law. Normal customs entry procedures and payment of duty are 
not required for merchandise located in a zone unless and until the 
merchandise is removed from a zone and entered into the customs territory.
 
   In response to a petition from a member of the public challenging the 
restrictive nature of @ 146.25(d), Customs Regulations (19 CFR 146.25(d)), 
relating to the treatment of certain zone merchandise, Customs published a 
notice in the Federal Register on May 13, 1982 (47 FR 20627), proposing to 
amend that section of the regulations. As proposed, @ 146.25(d) would have 
been amended to allow imported merchandise withdrawn from a Customs bonded 
warehouse to be admitted into a zone without restriction for use in 
manufacturing operations. 
 
   As presently written, @ 146.25(d) specifies that merchandise entered for
warehousing under section 557(a), Tariff Act of 1930, as amended (19 U.S.C.
1557(a)), and thereafter transferred to a zone shall have the status of 
"zone-restricted merchandise". This means that the merchandise may be taken 
into the zone only for the purpose of exportation, storage, or destruction. 
Consequently, such merchandise may not be used in the zone in manufacturing
operations.  
 
Discussion of Comments 
 
   A total of 24 comments were received in response to the notice, 20 of 
which favored the proposal. Those commenting favorably stated that adoption 
of the proposal will allow greater flexibility in distributing merchandise 
to a zone depending upon existing commercial needs and will generally 
enable more efficient and economical utilization of zones, which accords 
with Congressional intent to stimulate American business and labor by 
facilitating the conduct of any lawful activity in a zone. 
 
   Four commenters were opposed to the proposal. One commenter was opposed 
to the possibility of heretofore zone-restricted merchandise being used in 
a particular manufacturing operation in a zone. Another commenter objected 
to the proposal because it is contended that to increase manufacturing in 
zones only dislocates established small businesses and does not create jobs, 
but only transfers existing jobs into zones. Finally, two other commenters 
were opposed to the proposal on legal grounds, i.e. , construction of the 
statutory language of 19 U.S.C. 1557(a) in light of the Congressional 
intent (and the plain meaning of the language itself), the restriction 
pertaining to this type of zone merchandise which is contained in the 
fourth proviso to 19 U.S.C. 81c, and the rational correlation between 19 
U.S.C. 1557(a) and 19 U.S.C. 1562 that would be destroyed if the proposal 
were adopted. Parenthetically, an internal Customs comment noted that 
adoption of the proposal could effectively defeat the 5-year maximum 
warehousing period prescribed by law. 
 
   Customs has carefully reviewed and considered each of the comments. 
Although the negative comments do constitute a minority of those received, 
Customs believes they have significant merit and point out persuasive 
legal impediments to adoption of the proposal. In addition, it is clear 
that administrative precedent, e.g. , Customs Service Decisions 79-204 and 
81-88, has consistently held that merchandise transferred from a bonded 
warehouse to a zone may be admitted only in zone-restricted status. 
 
 
Withdrawal of Proposal 
 
   In view of the foregoing, and after consideration of the comments 
received and further review of the matter, Customs has determined to 
withdraw the notice of proposed rulemaking published in the Federal 
Register on May 13, 1982 (47 FR 20627). 
 
 
Drafting Information 
 
   The principal author of this document was Todd J. Schneider, Regulations 
Control Branch, Office of Regulations and Rulings, U.S. Cusoms Service. 
However, personnel from other Customs offices participated in its 
development.   
 
William von Raab, 
 
   Commissioner of Customs. 
 
   Approved: January 12, 1984. 
 
 
John M. Walker, Jr., 
 
   Assistant Secretary of the Treasury.   
[FR Doc. 84-2197 Filed 1-25-84; 8:45 am] 
 
   BILLING CODE 4820-02-M