Import Administration
September 2001:   New FTZ Mailing Address  
last update: September 2002 
                      DEPARTMENT OF THE TREASURY 
                                Customs Service 
                    AGENCY: U.S. Customs Service, Treasury. 
 
                19 CFR PARTS 18, 24, 112, 141, 144, 146, and 191 
             Foreign Trade Zones; Proposed Specialized and General 
                                   Provisions 
 
                                  49 FR 28855 
 
                                 July 17, 1984 
 
 
ACTION: Proposed revision. 
 
 
SUMMARY: This proposed revision of the Customs Regulations relating to 
foreign-trade zones is undertaken essentially to incorporate a new 
audit-inspection method of zone supervision by Customs into those 
regulations. A foreign-trade zone is a defined area, considered to be 
outside the customs territory of the United States, where certain lawful 
activities can be conducted with a minimum of formalities. A zone provides 
a site at or adjacent to a Customs port of entry where operations 
involving foreign merchandise can take place which otherwise might have 
been done abroad for tariff and trade reasons. The proposed revision 
sets forth the general provisions applicable to the administration of all 
zones and other specialized provisions applicable to subzones and 
noncontiguous zone sites. In addition, changes in the language of the 
regulations are proposed to clarify some provisions, eliminate 
inconsistencies, and conform the Customs Regulations to current 
administrative practices. 
 
 
DATE: Comments must be received on or before October 15, 1984.  
 
 
ADDRESSES: Written comments (preferably in triplicate) may be addressed 
to the Commissioner of Customs, Attention: Regulations Control Branch, 
U.S. Customs Service, 1301 Constitution Avenue, NW., Washington, D.C. 
20229. Comments relating to the information collection aspects of the 
proposal should be addressed to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Washington, D.C. 20503, 
Attention: Desk Officer for the U.S. Customs Service, as well as to the 
Commissioner of Customs, as noted above. 

FOR FURTHER INFORMATION CONTACT: 
 
General operational aspects: John Holl or Louis Razzino (202-566-8151). 
 
Inventory control and recordkeeping system aspect: Marcus Sircus 
(202-566-2812).  
 
Appraisement and valuation aspect: Myles Flynn (202-566-5307).  
 
Liquidated damages, penalty and suspension aspect: William Lawlor 
(202-566-5856). 
 
Economic aspect: Daniel Norman (202-566-5307). 
 
All of the above Customs personnel are located at: U.S. Customs Service 
Headquarters, 1301 Constitution Avenue, NW., Washington, D.C. 20229.  
 
TEXT: SUPPLEMENTARY INFORMATION: 
 
 
Background 
 
   Although free trade is an ancient concept, free trade zones did not 
develop until the 19th century. The success of free trade zones in 
northern Europe, notably the "free port" of Hamburg, stimulated American 
interest in the concept and in establishing free trade zones. 
 
   In 1934, Congress enacted the Foreign-Trade Zones Act "to expedite and
encourage foreign commerce." The Act created domestic "foreign-trade 
zones", and was designed to stimulate international trade and create jobs 
in the United States. At that time, zones were envisioned as storage, 
manipulation, and transshipment (exportation) centers. In 1950, an 
emendment to the Act was passed authorizing manufacturing and exhibition 
inside zones. 
 
   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. Quota 
restrictions do not normally apply to foreign merchandise in a zone. 
Merchandise moved to a zone for export may be considered exported upon 
its admission to a zone for purposes of excise tax rebates and drawback.  
 
   Zones are established under the Foreign-Trade Zones 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. 
 
   Typically, a foreign-trade zone is a fenced-in area with a general 
warehouse type building or buildings and access to all modes of 
transportation. Space is available for leasing to firms for authorized 
zone activity. Some zones have industrial park characteristics or are 
located within such facilities and have lots on which zone users can 
construct their own facilities. Subzones are sites authorized by the board
through zone grantees for operations by individual firms when zone 
procedures are vital for an operation that is in the public interest but 
cannot be accompanied within an existing zone. 
 
   Between 1934 and 1970, just 12 zones were approved by the Board. At 
this time, there are 97 zones approved, of which 56 are in operation. In 
addition, there are about 30 subzones approved, of which 24 are in 
operation. There are pending with the Board at least 12 applications for 
zone approval. It has been estimated that the volume of business in zones 
has multiplied 50 times during the decade 1970-1980, with zones now 
handling about $3.5 billion worth of merchandise each year. 
 
   As can be appreciated from the foregoing, the number of zones and the
operations conducted therein have increased tremendously in recent years. 
Historically, Customs has administered zones and their operations by the 
physical presence of Customs officers at the various zone locations. 
However, as time has passed, Customs staffing available to supervise 
zones has declined while zones have continued to proliferate. This has 
resulted in delays in the approval or activation of a given zone, and 
has presented problems for Customs in the exercise of effective control 
over some zone operations, especially subzone manufacturing activities. 
Therefore, Customs undertook an effort to devise a method to reduce 
Customs staffing requirements in zones and other areas (notably bonded 
warehouses) without endangering the revenue or law enforcement priorities, 
while also not hampering the growth of those areas and not impeding 
commerce. 
 
   The "audit-inspection" program approach to administration of those 
areas of Customs responsibility, which de-emphasizes the physical 
presence of a Customs officer to supervise each transaction, was 
successfully implemented in regard to the operation of bonded warehouses 
(see Treasury Decision 82-204, published in the Federal Register on 
November 1, 1982 (47 49355)). This notice proposes to extend the audit-
inspection program, by regulation, to zones as a method of reducing 
Customs staffing commitment to those operations. The audit-inspection 
method no longer requires a Customs officer to be physically present to 
supervise the admission of merchandise into or removal of merchandise 
from a zone. The zone operator, on the other hand, has increased 
responsibilities for supervision, recordkeeping and other responsibilities
under its bond, and must pay an activation and annual reimbursement fee. 
Customs will verify operator compliance with regulatory and other 
requirements through selective merchandise examination, and other spot 
checks and audits. It should be noted that Customs initiated use of the 
audit-inspection method in August 1983, on the basis of voluntary 
agreements between Customs and zone operators. At present, four subzones 
and one general-purpose zone have entered into voluntary agreements to 
use the audit-inspection method to administer their operations. Customs 
has endeavored to take that limited experience under the audit-inspection 
method applied to zones into account in preparing this revision.  
 
   This proposed revision is part of the on-going general revision of the 
Customs Regulations and would amend Chapter I, title 19, Code of Federal 
Regulations, by removing the text of present Part 146 and adding a new 
Part 146.  
 
   Proposed Part 146 sets forth the general regulatory provisions 
applicable to the administration of foreign-trade zones. Substantive 
changes have been made in proposed Part 146. That part will follow the 
same basic format as the current Part 146, but will contain changes in or 
additions to language to clarify the current provisions that have been 
retained in the revision.  
 
   Proposed (revised) Part 146 is divided into seven subparts. Following 
is a summary discussion of the major new changes in each of those subparts.
 
   A general point needs to be made here; that wherever the word "days" 
appears in this revision, it means calendar days, unless "working days" 
is specified.  
 
   Subpart A -- General Provisions 
 
   1. Proposed @ 146.1 defines the primary terms used throughout the 
revision. Some of the terms are new and some follow the definitions 
contained in a notice of proposed rulemaking on zones issued by the 
Foreign-Trade Zones Board, and published in the Federal Register on 
February 18, 1983 (48 FR 7188). They are:  
 
   a. Activation. 
 
   b. Alteration. 
 
   c. Deactivation. 
 
   d. Conditionally admissible merchandise. 
 
   e. Prohibited article. 
 
   f. Operator. 
 
   g. Reactivation. 
 
   h. Subzone. 
 
   2. Proposed @ 146.3(b) states the scope of Customs supervision 
exercised at a zone. That supervision may be physical, at the discretion 
of the district director. However, normal Customs supervision is 
envisioned to involve selective merchandise examination, other spot 
checks and audits. 
 
   3. Proposed @ 146.4 describes the increased supervisory 
responsibilities of the operator over zone merchandise and for 
recordkeeping. That section also allows the operator to provide, or 
contract for, private guard service to protect the revenue. 
 
   4. Proposed @ 146.5 provides that the operator or grantee of a zone 
will be charged a nonrefundable fee for activation of a zone or any 
portion thereof, or to alter or relocate a zone. Moreover, the operator 
of a zone will be charged a nonrefundable annual fee for each activated 
zone as payment for the cost of additional Customs service required by 
law. The fee schedule would be revised annually and published in the 
Customs Bulletin and the Federal Register. Examples of fees established 
for 1983 and 1984 under the voluntary audit-inspection program are: 
 
 
Activation 
 
   1. General-Purpose Zone -- $1,020. 
 
   2. Subzone or noncontiguous zone site -- $1,960. 
 
   Alteration -- $360 per site. 
Annual 
 
   1. Small zone (under $10 million volume) -- $2,600. 
 
   2. Large zone (over $10 million volume) -- $7,600. 
 
   A special fee for certain large subzones is tailored to each according 
to its size and other characteristics. Examples of the calculation of 
activation and alteration fees, and annual fees are included in this 
document as Appendices A and B, respectively. Those examples are taken 
from guidelines prepared by Customs as part of the voluntary audit-
inspection program method and the acceptance by operators of the 
agreements corresponding to that program.  
 
   5. Proposed @ 146.6 establishes the procedure for activation of a 
zone, including the required application, and actual activation.  
 
   6. Proposes @ 146.7 describes the procedures to be followed when the 
following zone changes occur: 
 
   a. Boundary modification. 
 
   b. Alteration of an activated area. 
 
   c. Deactivation or reactivation. 
 
   d. Suspension of all or part of an activated area. 
 
   e. New bond required by district director. 
 
   f. New operator. 
 
   g. Demand by district director for list of zone officers, employees, 
and other persons. 
 
   7. Proposed @ 146.8 authorizes the operator to affix or break a 
Customs seal on a vehicle or container arriving at or leaving a zone. That 
section also obligates the operator to notify the district director of 
any broken, missing, or improperly affixed seal. 
 
   8. Proposed @ 146.9 allows the operator to grant permission for zone 
operations, rather than the grantee. This conforms the regulations to 
current practice. 
 
   9. Proposed @ 146.13 establishes the procedure necessary for an 
operator of a subzone or a noncontiguous zone site to follow if that 
operator wants to: (1) Self-verify the quantity of merchandise admitted 
to the zone, and (2) accept responsibility for supervision of removal of 
zone merchandise on entries for consumption, transportation, or 
transportation and exportation. This section details the application 
procedure, including the criteria the district director will consider 
before a decision on the operator's application. As this section qualifies
an operator to use maximum flexibility and independence in its activities,
and is cross-referenced to other proposed sections which offer radical 
departures from current zone administration, it is recommended for 
especially close consideration by commenters. 
 
   10. Proposed @ 146.14 states the conditions necessary to be met before
certain domestic status merchandise may be admitted to a zone without 
prior application and permit for each shipment. 
 
   11. Proposed @ 146.15 describes the procedure to be followed when 
merchandise from a subzone more than 35 miles from the limits of an 
adjacent port of entry is to be admitted to or removed from the subzone. 
Liquidated damages are prescribed for losses. 
 
   12. Proposed @ 146.16 allows an operator to apply to the district 
director for permission to have zone merchandise examined not at the 
zone, but at another place within the limits of the port where the zone 
is located.  
 
   13. Proposed @ 146.17 specifies that records required by this revision 
be retained at the zone for at least 5 years after the date of entry of 
the subject merchandise that is removed from the zone. 
 
   Subpart B -- Inventory Control and Recordkeeping System  
 
   This proposed subpart is entirely new. It is essential to the audit-
inspection method of zone supervision, and given the greatly increased 
operator responsibility for recordkeeping, it should be carefully studied 
by commenters. 
 
   1. Proposed @ 146.21 sets forth the general requirements for an 
inventory control and recordkeeping system, including the system 
capability, procedures manual, and the responsibility of the operator to 
ensure that its system meets regulatory requirements. Customs will not 
approve or disapprove a system.  
 
   2. Proposed @ 146.22 provides the system requirements for admission of
merchandise to a zone. 
 
   3. Proposed @ 146.23 provides the system requirements for basic 
accountability of merchandise in a zone. 
 
   4. Proposed @ 146.24 provides the system requirements for removal of 
merchandies from a zone. 
 
   5. Proposed @ 146.25 provides the requirement for an annual 
reconciliation prepared by the operator along with its certification that 
the reconciliation is accurate, and available for review by Customs. 
 
   6. Proposed @ 146.26 states the operator's obligation to perform an 
annual internal review of its system and to notify Customs of any 
deficiency discovered and corrective action taken. 
 
   Subpart C -- Admission of Merchandise to a Zone 
 
   1. Proposed @ 146.31 describes merchandise permitted in a zone, and 
differentiates between a prohibited article (not permitted) and 
conditionally admissible merchandise (permitted under condition). 
 
   2. Proposed @ 146.32(b)(1) requires that among the supporting documents
to be filed with an application for admission of merchandise to a zone, 
the operator shall submit two copies of an invoice or similar commercial 
document.  
 
   3. Proposed @ 146.32(b)(5) authorizes the district director to require
any additional information or documentation needed to conduct an 
examination of merchandise to be admitted, or to determine the 
admissibility of that merchandise. 
 
   4. Proposed @ 146.32(c)(3) states that one of the conditions for 
issuance of a permit for admission of merchandise to a zone is that the 
merchandise be retained for examination at the place of unlading, the 
zone, or other place designated by the district director, except where 
direct delivery to a subzone or zone site is authorized. 
 
   5. Proposed @ 146.32(d) provides for a blanket application for 
admission of merchandise to a zone (rather than a separate application of 
each admission), when certain specified criteria are met. 
 
   6. Proposed @ 146.35 allows for the temporary deposit of merchandise 
in a zone for 5 working days, upon approval of an application by the 
district director, when documentation is incomplete. However, certain 
conditions specified in that section must be met, and the operator must 
submit complete documentation to Customs within the 5-working day period 
of temporary deposit.  
 
   7. Proposed @ 146.36 reserves to Customs the right to examine any 
merchandise at the place of unlading, the zone, or other place designated 
by the district director. However, the section also states that the 
district director may authorize release of the merchandise without 
examination.  
 
   8. Proposed @ 146.37 describes the responsibility of the operator for 
the maintenance of admission documentation, its liability for the receipt 
of merchandise, and its duty to supervise the receipt of merchandise into 
the zone (when authorized by the district director). 
 
   9. Proposed @ 146.38 provides that Customs will now authorize for 
delivery of merchandise in lieu of certifying arrival of merchandise at 
a zone.  
 
   10. Proposed @ 146.39 states that once the district director has 
approved a blanket application for the admission of certain domestic 
status merchandise, no other application for admission of that 
merchandise will be accepted. For domestic status merchandise not covered 
by an approved application for blanket admission, an application for 
each admission will be required on Customs Form 214. 
 
   11. Proposed @ 146.40 sets forth the special procedures for admission 
of merchandise to a subzone or noncontiguous zone site. The district 
director may allow the direct delivery of merchandise without prior 
application or approval of Customs Form 214 and without Customs 
examination, if the operator qualifies uder proposed @ 146.13. The 
operator handles the arrival of the merchandise on the conveyance, 
completing the documentation formalities and notifying the district 
director of any irregularities. The operator has its option of filing 
either a cumulative Customs Form 214 for merchandise received each 
business day, or an individual Customs Form 214 for each shipment received 
on a given business day. Merchandise which arrives at a subzone or zone 
site must be formally admitted within 5 working days or it will be sent 
to general order, unless the district director grants an extension of 
that time period or the operator enters the merchandise and removes it 
from the premises. In addition, the operator generally assumes 
responsibility for the manifested quantity of merchandise, and must 
maintain an in-bond mainfest file of incomplete shipments as well as a 
continuing in-put quality control program for its inventory and 
recordkeeping system. 
 
   Subpart D -- Status of Merchandise in a Zone 
 
   The major new change of substance in this revised subpart is that a 
Customs Form 7502 will no longer be required to be filed on election of 
privileged foreign status for merchandise. There also has been a change 
in organization to include the concept of what previously was separately 
designated "privileged domestic merchandise," in proposed @ 146.43 that 
is now entitled only "Domestic merchandise." 
 
   Subpart E -- Handling of Merchandise in a Zone 
 
   1. Proposed @ 146.52(a)(2) provides for the approval by the district 
director of a blanket application for a continuous or repetitive 
manipulation, manufacture, or exhibition for a period up to one year. 
 
   2. Proposed @ 146.52(d)(2) provides that in lieu of the approved 
Customs Form 216 for manipulation or manufacture of merchandise, an 
operator may be granted approval of a blanket application and must 
maintain a record in its inventory control and recordkeeping system which 
provides an audit trail of the merchandise under blanket approval through 
the approved operation.  
 
   3. Proposed @ 146.52(c) requires that the operator shall certify a 
destruction of zone merchandise on Customs Form 216, and also maintain 
the report in its inventory control and recordkeeping system.  
 
   4. Proposed @ 146.54 states explicitly that it is the operator that 
is responsible for the security of merchandise in a zone (including 
storage and handling), and for the maintenance of records pertaining to 
that merchandise.  
 
   5. Proposed @ 146.55 relates to a shortage or overage of merchandise 
in a zone, and damage to merchandise in a zone. Much of the material in 
the section is new, specifically: 
 
   a. A report by the operator to the district director is required in 
the case of thefts or excess merchandise discovered in a zone; 
 
   b. The operator must record all shortages, overages, and damage, in 
its inventory control and recordkeeping system; 
 
   c. The liability of the operator under its bond for the shortages of 
merchandise, and liability for duty and taxes; 
 
   d. The treatment of merchandise that is considered an overage; and  
 
   e. The adjustment of the operator's liability under its bond for damage
to merchandise. 
 
   Subpart F -- Removal of Merchandise From a Zone 
 
   1. Proposed @ 146.61 provides that merchandise may be considered 
constructively transferred to Customs territory without the necessity to 
file a Customs Form 215, but upon presentation of any entry document.  
 
   2. Proposed @ 146.62, "Right to make entry," takes its content from 
the definition of who may make entry contained in Pub. L. 97-446.  
 
   3. Proposed @ 146.63(b)(2) provides that when an entry for consumption
is made for merchandise to be removed from a subzone or noncontiguous 
zone site approved under proposed @ 146.13, the district director may 
allow the importer to file an entry on Customs Form 3461 for the 
estimated removal of merchandise during the calendar week. The entry must 
be accompanied by a pro forma invoice covering the merchandise to be 
removed during the week and its value. If the merchandise actually 
removed exceeds the estimate, a supplemental entry must be filed to cover 
the additional merchandise before its removal from the subzone or zone 
site. 
 
   4. Proposed @ 146.63(c) specifies that either a daily entry summary 
or, in the case of a subzone or noncontiguous zone site approved under 
proposed @ 146.13, a weekly entry summary, may be filed for merchandise 
removed from a zone. 
 
   5. Proposed @ 146.63(d) provides that except for a statement of the 
quantity, zone status and value, and dutiable value of merchandise 
covered by an entry summary, the district director may waive presentation
of an invoice and supporting documentation with the entry or entry 
summary.  
 
   6. Proposed @ 146.64(c) specifies that an entry of zone merchandise for
warehouse must be made within the time limit provided for in 19 U.S.C. 
1557(a), i.e., five years from date of importation. 
 
   7. Proposed @ 146.65(a) provides that Customs may examine any 
merchandise on its removal from a zone. The section also states that all 
requirements and restrictions applicable to imported merchandise may also 
apply to merchandise constructively transferred to Customs territory from a
zone.  
 
   8. Proposed @ 146.65(b) allows for the classification of foreign 
merchandise at the time of the filing of an entry or entry summary with 
Customs.  
 
   9. Proposed @ 146.65(c)(2) provides for the determination of the 
dutiable value of merchandise removed from a zone, reflecting the cost 
or value of components having a foreign status, exclusive of any costs of 
processing or fabrication in the zone. 
 
   10. Proposed @ 146.66 states the documentation requirements for entry 
of merchandise for transportation to another port. 
 
   11. Proposed @ 146.67(b)(1) states the procedure to be followed when 
zone merchandize (other than domestic status merchandise) is transferred 
from one zone to another at the same port. 
 
   12. Proposed @ 146.67(d) describes the procedure to be followed when 
zone merchandise (other than domestic status merchandise) arrives at the 
destination zone at the same or at another port. 
 
   13. Proposed @ 146.69 sets forth the procedures applicable to 
merchandise removed from a subzone or noncontiguous zone for 
transportation or exportation. The district director may allow a person 
with the right to make entry to file an application for a weekly permit 
to enter and release merchandise during a calendar week. The application 
must be accompanied by a pro forma invoice or other satisfactory 
documentation. After approval, that person would be able to execute 
individual entries for merchandise covered by the weekly permit. However, 
the person with the right to make entry must file shortly thereaafter 
with the district director a statement of all merchandise entered under 
the approved weekly permit. 
 
   14. Proposed @ 146.71(c) provides that zone-restricted merchandise may 
be returned to Customs territory for warehousing in accordance with 
Treasury Decision 83-139, published in the Federal Register on June 16, 
1983 (48 FR 27536). 
 
   15. Proposed @ 146.72(c) states that domestic status merchandise may be
transferred into the Customs territory by means of a blanket submission 
prepared by the operator and filed with Customs on the next working day 
after that merchandise was removed from the zone. It is also noted in the 
section that certain domestic status merchandise admitted to a zone under
the procedure described in proposed @ 146.14 may be removed from a zone 
without Customs permit. 
 
   16. Proposed @ 146.73 governs the general release and removal of 
merchandise from a zone. As a normal rule, no merchandise may be removed 
from a zone without a Customs permit on the appropriate entry or 
withdrawal form or other required document. In general, the operator will 
be held liable, absent an adjustment, for the quantity of merchandise in 
a zone shown on the entry, withdrawal or other document. The operator 
will be relieved of responsibility for the merchandise on receipt of the 
removal document signed by the carrier or importer. Merchandise for 
which a Customs permit has been issued must be segregated from other zone
merchandise, not further manipulated or manufactured, and must be removed
from the zone premises within 5 working days after the permit is issued. 
Of special note is a provision in this section (paragraph (d)(i)) which 
allows merchandise entered for consumption (and duty paid) to remain in 
the zone with the permission of the district director, subject to 
certain detailed conditions (e.g., no further processing). Furthermore, 
paragraph (d)(2) allows the restoration to former zone status of a 
component of merchandise entered because of clerical error, mistake 
of fact, or other indvertance not amounting to an error in the 
construction of the law. If the district director decides that there has 
been no error, etc., then the component will be treated as an overage. 
Paragraph (d) of proposed @ 146.72 was drafted to remedy certain problems 
encourtered in administration of manufacturing subzones, and should be 
carefully studied by commenters. 
 
   Subpart G -- Liquidated Damages; Penalties; Suspension; Revocation  
 
   This subpart is entirely new. 
 
   1. Proposed @ 146.81 sets forth the operator's liability under its 
bond for liquidated damages for defaults involving certain merchandise 
(three times the value of the merchandise) or any of the terms and 
conditions of that bond ($200 maximum for each default). In addition, 
that section provides for the imposition of liquidated damages for a 
default by the principal in respect to tardy payment of the annual fee. 
 
   2. Proposed @ 146.82 provides for a fine of $1,000 for each violation 
of the Foreign-Trade Zones Act of 1934, as amended (Act), or any 
regulations issued thereunder. Each day a violation continues will 
constitute a separate offense. Any penalty assessed may be augmented by 
applicable liquidated damages. All fines imposed by the district director
will be reviewed at Customs Headquarters.  
 
   3. Proposed @ 146.83 provides for the suspension by the district 
director, for cause enumerated in that section, of the activated status 
of a zone or zone site, for a period generally not to exceed 30 days. 
Prior to the suspension a notice and hearing procedure set forth in the 
section must be followed. The regional commissioner of the region in 
which the zone is located is charged with making the final Customs 
administrative decision in the matter.  
 
   4. Proposed @ 146.84 provides for a recommendation by the district 
director to the Foreign-Trade Zones Board that the zone or subzone grant
be revoked by the Board for willful and repeated violations of the Act. 
A recommendation for grant revocation may be made in addition to any 
applicable liquidated damages, penalty, or suspension of activation for 
cause. 
 
 
Editorial and Conforming Changes 
 
   Throughout the revision, numerous editorial changes have been made to 
clarify and simplify the language contained in the foreign-trade zone 
regulations. Furthermore, changes in other parts of the Customs 
Regulations have been proposed to conform them to the proposed revision 
of Part 146.  
 
 
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 the hours of 9:00 
a.m. to 4:30 p.m. at the Regulations Control Branch, Headquarters, U.S. 
Customs Service, 1301 Constitution Avenue, NW., Room 2426, Washington, 
D.C. 20229.  
 
 
Executive Order 12291 
 
   The proposed regulation is not a major regulation as defined in 
section 1(b) of E.O. 12291. Accordingly, a regulatory impact analysis is 
not required.   
 
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 applicable to this proposal. Accordingly, an initial regulatory 
flexibility analysis prepared by Customs is attached to this document as 
Appendix C. Comments on the analysis are also solicited and should 
accompany comments submitted on the proposal.  
 
 
Paperwork Reduction Act 
 
   The proposed regulation is subject to the Paperwork Reduction Act of 
1980, Pub. L. 96-511 (44 U.S.C. 3504(h)). Accordingly, applicable 
sections of this document have been submitted to the Office of Management
and Budget. Comments on the collection of information requirements 
contained in this document should be directed to the Office of 
Information and Regulatory Affairs, OMB, Washington, D.C., 20503, ATTN: 
Desk Officer for the U.S. Customs Service. Customs also requests that 
copies of those comments be sent to Customs at the address previously 
specified. 
 
 
Drafting Information 
 
   The principal author of this document was Todd J. Schneider, Regulations 
Control Branch, U.S. Customs Service. However, personnel from other Customs
offices participated in its development. 
 
 
List of Subjects in 19 CFR Part 146 
 
   Customs duties and inspection, Exports, Foreign-trade zones, Imports.  
 
 
Proposed Revision to the Customs Regulations 
 
   Under the authority of 5 U.S.C. 301, R.S. 251, as amended (19 U.S.C.
66), secs. 1-21, 48 Stat. 998, 999, as amended, 1000, 1001, 1002, as 
amended, 1003 (19 U.S.C. 81a-81u), 77A Stat. 14 (Gen. Hdnote 11) 
(19 U.S.C. 1202), secs. 623, as amended, 624, 46 Stat. 759 (19 U.S.C. 
1623, 1624), and 96 Stat. 1051 (31 U.S.C. 9701), it is proposed to amend 
the Customs Regulations as set forth below: 
 
   It is proposed to amend Chapter I, Title 19, Code of Federal 
Regulations, by revising Part 146 to read as follows: 
 
   PART 146 -- FOREIGN-TRADE ZONES 
 
   Sec. 
 
 
146.0 Scope. 
 
   Subpart A -- General Provisions 
 
 
146.1 Definitions. 
 
 
146.2 District director as Board representative. 
 
 
146.3 Customs supervision. 
 
 
146.4 Operator supervision. 
146.5 Activation fee and annual fee. 
 
 
146.6 Procedure for activation. 
 
 
146.7 Zone changes. 
 
 
146.8 Seals; affixing and breaking. 
 
 
146.9 Permission of operator. 
 
 
146.10 Authority to examine merchandise. 
 
 
146.11 Transportation of merchandis to a zone. 
 
 
146.12 Use of zone by carrier. 
 
 
146.13 Special procedure for subzone and noncontiguous zone site.  
 
 
146.14 Special provision for certain domestic status merchandise.  
 
 
146.15 Subzone distant from adjacent port of entry. 
 
 
146.16 Place of examination outside zone. 
 
 
146.17 Record retention. 
 
   Subpart B -- Inventory Control and Recordkeeping System  
 
 
146.21 General requirements. 
 
 
146.22 Admission of merchandise to a zone. 
 
 
146.23 Accountability for merchandise in a zone. 
 
 
146.24 Removal of merchandise from a zone. 
 
 
146.25 Annual reconciliation. 
146.26 System review. 
 
   Subpart C -- Admission of Merchandise to a Zone 
 
 
146.31 Merchandise permitted in a zone. 
 
 
146.32 Application and permit for admission of merchandise.  
 
 
146.33 Temporary deposit for manipulation. 
 
 
146.34 Merchandise transiting a zone. 
 
 
146.35 Temporary deposit in a zone; incomplete documentation.  
 
 
146.36 Examination of merchandise. 
 
 
146.37 Operator responsibility. 
 
 
146.38 Certificate of arrival of merchandise. 
 
 
146.39 Domestic merchandise. 
 
 
146.40 Subzone and noncontiguous zone site. 
 
   Subpart D -- Status of Merchandise in a Zone 
 
 
146.41 Privileged foreign merchandise. 
 
 
146.42 Nonprivileged foreign merchandise. 
 
 
146.43 Domestic merchandise. 
 
 
146.44 Zone-restricted merchandise. 
 
   Subpart E -- Handling of Merchandise in a Zone 
 
 
146.51 Customs control of merchandise. 
146.52 Manipulation, manufacture, or exhibition. 
 
 
146.53 Destruction. 
 
 
146.54 Safekeeping of merchandise and records. 
 
 
146.55 Shortage, overage, and damage. 
 
   Subpart F -- Removal of Merchandise From a Zone 
 
 
146.61 Constructive transfer to Customs territory. 
 
 
146.62 Right to make entry. 
 
 
146.63 Entry for consumption. 
 
 
146.64 Entry for warehouse. 
 
 
146.65 Examination, classification, valuation, and liquidation.  
 
 
146.66 Entry for transportation to another port. 
 
 
146.67 Transfer from one zone to another. 
 
 
146.68 Removal for exportation. 
 
 
146.69 Removal for transportation or exportation; subzone or noncontiguous 
zone site. 
 
 
146.70 Supplies, equipment, and repair material for vessels or aircraft.  
 
 
146.71 Transfer of zone-restricted merchandise into Customs territory.  
 
 
146.72 Transfer of domestic merchandise into Customs territory.  
 
 
146.73 Release and removal of merchandise from zone. 
 
   Subpart G -- Liquidated Damages; Penalties; Suspension; Revocation  
 
 
146.81 Liquidated damages. 
 
 
146.82 Penalties. 
 
 
146.83 Suspension. 
 
 
146.84 Revocation of zone grant. 
 
   Authority: R.S. 251, secs. 1-21, 48 Stat. 998, 999, as amended, 1000, 
1001, 1002, as amended, 1003, 77A Stat. 14, sec. 623, as amended, 624, 
46 Stat. 759; 19 U.S.C. 66, 81a-81u, 1202 (Gen. Hdnote 11), 1623, 1624; 
sec. 501, 96 Stat. 1051; 31 U.S.C. 9701. Additional authority and 
statutes interpreted or applied are cited in the text or following the 
sections affected.  
 
   @ 146.0 Scope. 
 
   Foreign-trade zones are established under the Foreign-Trade Zones Act 
and the general regulations and rules of procedure of the Foreign-Trade 
Zones Board contained in 15 CFR Part 400. This Part 146 of the Customs 
Regulations governs the admission of merchandise into a foreign-trade 
zone, manipulation, manufacture, exhibition, destruction,or storage in 
a zone; inventory control and recordkeeping system in a zone; exportation
of merchandise from a zone; and transfer of merchandise from a zone into 
Customs territory.  
 
   Subpart A -- General Provisions 
 
   @ 146.1 Definitions. 
 
   The following are general definitions for the purposes of this part:  
 
   (a) Act. "Act" means the Foreign-Trade Zones Act of June 18, 1934, as 
amended (48 Stat. 998-1003; 19 U.S.C. 81a-81u). 
 
   (b) Activation. "Activation" means approval by the grantee and district 
director for operations and for the admission and handling of merchandise
in zone status. An area in a zone which is not activated will be 
considered part of the Customs territory. 
 
   (c) Alteration. "Alteration" means a change in the boundaries of an 
activated zone or subzone; activation of a separate noncontiguous site 
of an already-activated zone or subzone with the same operator at the 
same port; or the relocation of an already-activated site with the same 
operator.  
 
   (d) Board. "Board" is the Foreign-Trade Zones Board established by the
Foreign-Trade Zones Act to carry out the provisions of the Act.  
 
   (e) Customs territory. "Customs territory" is the territory of the 
United States in which the general tariff laws of the United States apply 
but which is not included in the activated portion of any zone. "Customs 
territory of the  United States" includes only the States, the District 
of Columbia, and Puerto Rico. (Gen. Hdnote. 2, Tariff Schedules of the 
United States (19 U.S.C. 1202)).  
 
   (f) Deactivation. "Deactivation" means voluntary discontinuation of 
the activation of an entire zone or subzone site by the grantee or 
operator. Discontinuance of the activated status of only a part of a 
site is treated as an alteration. 
 
   (g) Grantee. "Grantee' is a corporation to which the privilege of 
establishing, operating, and maintaining a foreign-trade zone has been 
granted by the Foreign-Trade Zones Board. 
 
   (h) Merchandise. "Merchandise" includes goods, wares and chattels of 
every description, except prohibited articles. Building materials, 
production equipment, and supplies for use in operation of a zone are 
not "merchandise" for the purposes of this part. 
 
   (1) Domestic merchandise. "Domestic merchandise" is merchandise which 
has been -- 
 
   (i) Produced in the United States and not exported therefrom, or  
 
   (ii) Previously imported into Customs territory and properly released 
from Customs custody. 
 
   (2) Foreign merchandise. "Foreign merchandise" is imported merchandise 
which has not been properly released from Customs custody in customs 
territory.  
 
   (3) Conditionally admissible merchandise. "Conditionally admissible 
merchandise" is merchandise which may be imported into the United States 
under certain conditions. Merchandise which is subject to permits or 
licenses, or which may be reconditioned to bring it into compliance with 
the laws administered by various Federal agencies, is an example of 
conditionally admissible merchandise. 
 
   (4) Prohibited article. "Prohibited article" is an article the 
importation of which into the United States is prohibited by law on 
grounds of public policy or morals, or any article which is excluded from 
a zone by order of the Board. Books urging treason or insurrection against 
the United States, obscene pictures, and lottery tickets are examples of 
prohibited articles.  
 
   (i) Operator. "Operator" is a corporation, partnership, or person that
operates a zone, noncontiguous activated zone site, or a subzone. An 
operator's responsibilities and functions are covered in an operating 
agreement with the grantee, which can contract for the operation and 
maintenance of a zone or a zone activity, but cannot assign the grant of 
authority itself Those agreements are subject generally to the Act and 
regulations and should include the terms between the parties concerning 
such matters as the time length of the agreement and termination 
provisions, as well as the responsibilities for dealing with the Customs
Service. The district director's concurrence is required for the party 
designated "operator" to be recognized as such. A firm that is the sole 
occupant of a noncontiguous zone site or a subzone may be designated by 
the grantee as an operator. Where used in this part, the term "operator" 
also applies to a "grantee" that operates its own zone. 
 
   (j) Reactivation. "Reactivation" means a resumption of the activated 
status of an entire area that was previously deactivated without any 
change in the operator or the area boundaries. If the boundaries are 
different, the action is treated as an alteration. If the operator is 
different, it is treated as an activation. 
 
   (k) Subzone. "Subzone" is a special-purpose ancillary zone site 
authorized by the board through grantees of public zones, for operations 
by individual firms that cannot be accommodated within an existing zone, 
when it can be demonstrated that the activity, usually manufacturing, 
will result in a significant public benefit. It is considered a 
noncontiguous extension of a zone for a single user, usually at its own 
facility and, in this sense, is a private rather than a public zone 
facility. A separate zone site within an industrial or commercial complex 
subject to common management and covenants is part of a zone, rather 
than a subzone. 
 
   (l) Zone. "Zone" is a foreign-trade zone established under the 
Foreign-Trade Zones Act. Where used in this part, the term also applies 
to a subzone, unless specified otherwise. 
 
   @ 146.2 District director as Board representative. 
 
   The district director in whose district the zone is located shall be 
in local charge of the zone as the resident representative of the Board.  
 
   @ 146.3 Customs Supervision. 
 
   (a) Assignment of Customs officers. Customs officers will be assigned 
or detailed to a zone as necessary to maintain appropriate Customs 
supervision of merchandise and records pertaining thereto in the zone, 
and to protect the revenue. 
 
   (b) Supervision. Customs supervision over any zone or transaction 
provided for in this part will be in accordance with @ 161.1 of this 
chapter. The district director may direct a Customs officer to supervise 
any transaction or procedure at a zone. Supervision may be performed 
through a periodic audit of the operator's records, quantity count of 
goods in a zone inventory, spot check of selected transactions or 
procedures, or review of recordkeeping, security, or conditions of 
storage in a zone. The operator shall permit any Customs officer access 
to a zone at any reasonable hour. 
 
   @ 146.4 Operator supervision. 
 
   (a) Supervision. The operator shall supervise all admissions, removals,
recordkeeping, manipulations manufacturing, destruction, exhibition, 
physical and procedural security, and conditions of storage in the zone 
as required by law and regulation. Supervision by the operator shall be 
that which a prudent manager of a storage, manipulation, or manufacturing
facility would be expected to exercise, and may take into account the 
degree of supervision exercised by the zone firm having physical 
possession of zone merchandise.  
 
   (b) Guard service. The operator is authorized to provide guards or 
contract for guard service to safeguard the merchandise and ensure the 
security of the zone (section 146.54). This authorization does not limit
the authority of the district director to assign Customs guards to 
protect the revenue under section 4 of the Act (19 U.S.C. 81d). 
 
   @ 146.5 Activation fee and annual fee. 
 
   The operator, or where there is no operator, the grantee, will be 
charged a nonrefundable fee to activate a zone or any portion of a zone, 
or to alter or relocate an activated portion of a zone, under the 
provisions of 31 U.S.C. 9701. The operator of an activated zone will be 
charged a nonrefundable annual fee for each activated zone as payment of 
the cost of the additional Customs service required under the Act, as 
provided in 19 U.S.C. 81n on the regulations in this part. The operator 
or grantee shall pay the annual fee to the district director of Customs 
of the district in which the zone is located within 14 days after 
activation and within 14 days after the effective date of the published 
fee schedule of each year thereafter that the area remains activated. 
The fee schedule will be revised annually and published in the Federal 
Register and the Customs Bulletin. 
 
   @ 146.6 Procedure for activation. 
 
   (a) Application. A zone operator, or where there is no operator, a 
grantee, shall make written application to the district director of the 
district in which the zone is located to obtain approval of activation 
of a zone or zone site. The application must include a description of 
all the zone sites covered by the application, any operation to be 
conducted therein, and a statement of the general character of the 
merchandise to be admitted. 
 
   (b) Supporting documents. The application must be accompanied by the 
following: 
 
   (1) The application fee required by @ 146.5 of this part;  
 
   (2) A blueprint of the area approved by the Board to be activated 
showing area measurements, including all openings and buildings; and 
all outlets, inlets, and pipelines to any tank for the storage of liquid 
or similar product, that portion of the blueprint certified to be 
correct by the operator of the tank; 
 
   (3) A gauge table, when appropriate, showing the capacity in the 
appropriate unit, of any tank certified to be correct by the operator 
of the tank;  
 
   (4) An executed Foreign-Trade Zone Operator's Bond on Customs Form 301
containing the bond conditions of @ 113.73 of this chapter;  
 
   (5) A procedures manual describing the inventory control and 
recordkeeping system that will be used in the zone, certified by the 
operator or grantee to meet the requirements of Subpart B; and 
 
   (6) The written concurrence of the grantee, when the operator applies 
for activation, in the requested zone activation. 
 
   (c) Inquiry by district director. As a condition of approval of the 
application, the district director may order an inquiry by a Customs 
officer into: 
 
   (1) The qualifications, character, and experience of an operator and/
or grantee and their principal officers; and 
 
   (2) The security, suitability, and fitness of the facility to receive 
merchandise in a zone status. 
 
   (d) Decision of the district director. The district director shall 
promptly notify the applicant in writing of his decision to approve or 
deny the application to activate the zone. If the application is denied, 
the notification will state the grounds for denial which need not be 
limited to those listed in section 146.83 of this part. The decision 
of the district director will be the final Customs administrative 
determination in the matter. The applicant may seek review by the Board 
of the decision to deny the application within 10 days after receipt of 
the notification. 
 
   (e) Activation. Upon the district director's approval of the 
application and acceptance of the executed bond, the zone or zone site 
will be considered activated, and merchandise may be admitted to the 
zone. Execution of the bond by an operator does not lessen the liability 
of the grantee to comply with the Act and implementing regulations. 
 
   @ 146.7 Zone changes. 
 
   (a) Boundary modification. A modification of a zone boundary involving 
a significant expansion of zone operations will be approved in accordance 
with the procedure established in the regulations of the Board (15 CFR 
Part 400). A boundary modification which is not significant may be 
approved by the Executive Secretary of the Board with the concurrence of 
the district director. The district director shall provide that 
concurrence, where warranted, in writing to the Executive Secretary and 
the applicant. 
 
   (b) Alteration of an activated area. An operator shall make written 
application to the district director for approval of an alteration of an 
activated area, including an alteration resulting from a zone boundary 
modification. The application must be accompanied by the fee required in 
@ 146.5 and the other requirements specified in @ 146.6. The district 
director may review the security, suitability, and fitness of the area, 
and shall reply to the applicant as provided for in @ 146.6. 
 
   (c) Deactivation or reactivation. A grantee, or an operator with the 
concurrence of a grantee, shall make written application to the district 
director for deactivation of a zone site, indicating by layout or 
blueprint the exact site to be deactivated. No fee is required for 
deactivation. The district director shall not approve the application 
unless all merchandise in the site in zone status has been removed at 
the risk and expense of the operator. The district director may require 
an accounting of all merchandise in a zone as a condition of approving the
deactivation. A zone may be reactivated using the above procedure if a 
sufficient bond is on file under @ 146.6(b)(4).  
 
   (d) Suspension. When approval of an activated area has been suspended
through the procedure in Subpart G, the district director may require all
goods in that area to be transferred to another zone, a bonded warehouse, 
or other location, where they may lawfully be stored, if the district 
director considers that transfer advisable to protect the revenue or 
administer any Federal law or regulation. 
 
   (e) New bond. The district director may require an operator to furnish 
on 10 days notice a new Foreign-Trade Zone Operator's Bond on Customs 
Form 301. If the operator fails to furnish the new bond, no more 
merchandise will be received in the zone and that merchandise therein will 
be removed at the risk and expense of the operator. A new bond may be 
required if the activated zone area is substantially altered; the 
character of merchandise admitted to the zone or operations performed in 
the zone are substantially changed; a new operator is authorized by the 
grantee; the existing bond lacks good and sufficient surety; or for any 
other reason that substantially affects the liability of the operator 
under the bond. Although a new bond may not be required, the operator 
shall obtain the consent of the surety to any material alteration in the 
boundaries of the zone. 
 
   (f) New operator. A grantee of an activated zone site shall make written
application to the district director for approval of a new operator, 
submitting with the application a copy of the proposed operating 
agreement, a certification by the new operator that the inventory control 
and recordkeeping system meets the requirements of subpart B, and a copy 
of the system procedures manual if different from the previous operator's 
manual. The district director may order an inquiry into the 
qualifications, character, and experience of the operator and its 
principal officers. The bond in @ 146.6(b)(4) shall be submitted by the 
operator before the operating agreement may become effective. The district
director shall promptly notify the grantee in writing of the approval or 
disapproval of the application. 
 
   (g) List of officers, employees, and other persons. The district 
director may make a written demand upon the operator to submit, within 
30 days after the date of the demand, a written list of the names, 
addresses, social security numbers, and dates and places of birth of all 
officers and persons having a direct or indirect financial interest in the 
operator; and of all persons employed in the carriage, receipt or delivery 
of merchandise in zone status, whether employed by the zone operator or a 
zone tenant. If a list was previously furnished, the district director may
make a written demand for the same information in respect to new persons 
employed in the carriage, receipt, or delivery of zone status merchandise
within 10 days after such employment. The list need not include employees
of common or contract carriers transporting goods to or from the zone.  
 
   @ 146.8 Seals; affixing and breaking. 
 
   The district director may authorize an operator to break a Customs in-
bond seal affixed under @ 18.4 of this chapter, or under any Customs 
order or directive, on any vehicle or container of district director 
approved for admission to the zone upon its arrival at the zone; or 
affix a Customs in-bond seal to any vehicle or container of merchandise 
for which an entry, withdrawal, or other approval document has been 
obtained for movement in bond from the zone. The authorized affixing or 
breaking of that seal will be considered to have been done under Customs 
supervision. The operator shall report to the district director, upon 
arrival of the vehicle or container at the zone, any seal found to be 
broken, missing, or improperly affixed, and hold the vehicle or container 
and its contents intact pending instructions from the district director. 
If the operator does not obtain the written concurrence of the carrier as 
to the condition of the seal or delivering conveyance, the district 
director shall deem the seal or delivering conveyance to be intact. 
 
   @ 146.9 Permission of operator. 
 
   An application for permission to tranfer merchandise into a zone, or 
to do anything involving merchandise in a zone must include the written 
concurrence of the operator, except where the regulations of this part 
provide for the making of application by the operator itself or where 
the operator files a separate specific or blanket approval. The written 
concurrence of the operator in the removal of merchandise from a zone is 
not required, because the merchandise is released by the district 
director to the operator for delivery from the zone, as provided in 
@ 146.73(a). 
 
   @ 146.10 Authority to examine merchandise. 
 
   The district director may cause any merchandise to be examined before 
or at the time of admission to a zone, or at any time thereafter, if the 
examination is considered necessary to facilitate the proper 
administration of any law, regulation, or instruction which Customs is 
authorized to enforce.  
 
   @ 146.11 Transportation of merchandise to a zone. 
 
   (a) From outside Customs territory. Merchandise may be brought directly
to a zone from any place outside Customs territory. 
 
   (b) Through Customs territory; foreign merchandise. Foreign merchandise
destined to a zone and transported in bond through Customs territory will
be subject to the laws and regulations applicable to other merchandise 
transported in bond between two places in Customs territory. 
 
   (c) From Customs territory; domestic merchandise. Domestic merchandise
may be brought to a zone from Customs territory by any means of 
transportation which will not interfere with the orderly conduct of 
business in the zone.  
 
   (d) From a bonded warehouse. Merchandise may be withdrawn from a bonded
warehouse under the procedure in @ 144.37(g) of this chapter and 
transferred to a zone in the same or at a different port for admission 
in zone-restricted status. 
 
   @ 146.12 Use of zone by carrier. 
 
   (a) primary use; lading and unlading. The water area docking 
facilities, and any lading and unlading stations of a zone are intended 
primarily for the unlading of merchandise into the zone or the lading of 
merchandise for removal from the zone. Their use for other purposes may 
be terminated by the Commissioner of Customs if found to endanger the 
revenue or by the Board if found to impede the primary use of the zone. 
 
   (b) Carrier in zone not exempt from law or regulation. Nothing in the 
Act or the regulations in this part shall be construed as excepting any 
carrier entering, remaining in, or leaving a zone from the application 
of any other law or regulation. 
 
   @ 146.13 Special procedure for subzone and noncontiguous zone site. 
 
   (a) Application. An operator of a subzone or noncontiguous zone site, 
desiring to verify a count of its own merchandise upon admission to the
zone and carry out the special procedures of Subparts C and F (see @@ 
146.40, 146.63, 146.69) shall file a written application with the 
district director at least 30 days before the special procedure is to 
become effective. The application will describe the merchandise to be 
handled or processed, and the kind of operation which it will undergo. 
 
   (b) Criteria. The district director shall approve the application if 
the following criteria are met: 
 
   (1) The operator has made an arrangement to transmit statistical 
information directly to the Bureau of the Census, relieving Customs of 
the responsibility of collecting the information on Customs Form 214-A; 
 
   (2) The merchandise to be admitted to the zone, and the operations to 
be conducted therein, are known well in advance, are predictable and 
stable over the long term, and are relatively fixed in variety by the 
nature of the business conducted at the site; 
 
   (3) The operator owns or has a share in the ownership of the 
merchandise brought into the zone, or has decision-making authority over 
whether the merchandise may be accepted for shipment to the zone; 
 
   (4) The merchandise is not restricted or sensitive or of a type which 
requires Customs examination or documentation review before or upon its 
arrival at the zone; and 
 
   (5) The site is a subzone, or a noncontiguous zone site operated and 
occupied by a single enterprise (whether or not that enterprise consists 
of more than one separate but relegated legal entity). A zone area which 
is in, or abuts, a general purpose zone site may be considered 
"noncontiguous" if:  
 
   (i) It is separated from the rest of the general purpose site by a 
barrier meeting Customs cargo security standards set in T.D. 72-56;  
 
   (ii) There are no openings in the barrier for the movement of 
merchandise or persons between that area and the rest of the general 
purpose site; and  
 
   (iii) All merchandise for the area is received directly into, and 
delivered directly from, that area without passing through any other 
activated area of the general purpose site. 
 
   (c) Decision on application. The district director shall promptly 
notify the operator in writing of Customs decision on the application. 
If the decision is to deny the application, the district director shall 
specify the reason for denial in his reply. The district director's 
decision will constitute the final Customs' administrative determination 
concerning the application.  
 
   (d) Revocation of approval. Approval of the application will not 
affect the right of a Customs officer to examine the merchandise at any 
time it is under Customs custody or control. The district director may 
revoke the approval given under this section if it becomes necessary for 
Customs routinely to examine the merchandise or documentation before or 
upon admission to the zone.  
 
   @ 146.14 Special provision for certain domestic status merchandise.  
 
   (a) Appliction. A prospective applicant for admission of domestic 
merchandise (@ 146.39) may make written application to the district 
director to allow the merchandise to be admitted to a zone without prior 
application and permit for each individual shipment. 
 
   (b) Criteria. The district director shall approve the application if: 
 
   (1) The applicant has made an agreement with the Bureau of the Census 
for direct transmittal to that agency of statistical information on the 
merchandise and Customs consequently need not collect and transmit a 
Customs Form 214-A to Census; 
 
   (2) Merchandise commercially identical to the merchandise covered by 
the application is not, nor will be received in the zone in a foreign or 
zone-restricted status; 
 
   (3) Domestic merchandise will not be mixed, combined or manufactured 
with foreign merchandise in such a way as to lose its identity;  
 
   (4) The merchandise is not a prohibited article; 
 
   (5) The operator has given written approval of the application; and  
 
   (6 The district director does not consider the prior application and 
permit for admission of the merchandise to be necessary for the 
protection of the revenue or the administration of any Federal law or 
regulation.  
 
   (c) Decision on application. The district director shall promptly notify 
the applicant in writing of the decision on the application. If the 
decision is to deny the application, the district director shall specify 
the reaon for the denial in the reply. The decision of the district 
director will constitute the final Customs administrative determination 
concerning the application. Approval of the application will be valid 
until revocation by the district director. Approval of the application 
will not affect the right of a Customs officer periodically to review any
transaction involving the covered merchandise.  
 
   (d) Admission, handling, recordkeeping, and removal. Upon approval of 
the application, the district director shall allow merchandise covered by 
the application to be admitted to the zone; manipulated, manufactured, 
exhibited, or destroyed in the zone; or removed from the zone without 
prior application or permit. This privilege extends to merchandise 
covered by the application which was in the zone in domestic status at 
the time the application was approved. An application and permit will be 
required for transactions involving merchandise of any other status with 
which such domestic status merchandise will be combined in the zone, and 
covered domestic status merchandise must be clearly identified in the 
application. The operator shall comply with the inventory control and 
recordkeeping requirements in Subpart B. 
 
   (e) Revocation of approval. The district director may revoke the 
approval of the application made under this section, if it becomes 
necessary for the district director to require prior application and 
permit for transactions involving the merchandise. The revocation will 
extend to merchandise which is in the zone at the time the revocation 
takes effect. 
 
   @ 146.15 Subzone distant from adjacent port of entry.  
 
   (a) Examination and inspection at adjacent port. When a subzone or 
subzone site more than 35 miles from the limits of the adjacent Customs 
port of entry is approved by the Board, the district director may order 
that merchandise destined for the subzone or to be removed from the 
subzone, and the required documentation, be presented for Customs 
examination and inspection at a designated location within the adjacent 
port of entry. 
 
   (b) Merchandise to be admitted. Foreign or zone-restricted status 
merchandise to be admitted to the subzone will be considered admitted in 
its quantity and condition at the time of delivery authorization to the 
subzone by the district director, and the operator will be responsible 
for any loss of merchandise occurring after the delivery authorization. 
 
   (c) Merchandise to be removed. Foreign or zone-restricted status 
merchandise being removed from the subzone will be considered to be 
removed in its quantity and condition at the time of delivery 
authorization from the subzone by the district director, and the operator 
will be responsible for any loss of merchandise occurring before delivery 
authorization. 
 
   (d) Liquidated damages. The subzone operator shall pay liquidated 
damages as required in Subpart G for any loss occurring under paragraphs 
(b) and (c) of this section as though the loss occurred in the subzone.  
 
   (e) Direct delivery. If a subzone under this section has been approved 
under @ 146.13 for the special procedures in Subparts C and F, zone 
status merchandise may be admitted to, or removed from, the site as 
provided in those sections without respect to paragraphs (b) and (c). The 
documentation for that merchandise will be delivered to the district 
director within the limits of the adjacent port, and the district director 
may order the delivery of the merchandise to the adjacent port for 
examination. 
 
   (f) Domestic merchandise. Domestic merchandise for which no permit for 
admission is required as provided in @ 146.14 need not be presented for 
Customs examination, and an application need not be filed with the 
district director. Domestic merchandise for which an application and 
permit is required, will be presented for examination only when ordered 
by the district director, but documentation for any transaction involving 
that merchandise must be presented to the district director within the 
limits of the adjacent port for review and permit as provided in this part.
 
   @ 146.16 Place of examination outside zone. 
 
   (a) Application. An operator may request in writing that the district 
director examine or inspect merchandise destined to, or being removed 
from, the zone at a location outside the zone but within the limits of 
the port where the zone is located, with the understanding that the 
operator will be responsible for delivery of the merchandise between the 
zone and the place of examination. The district director shall not grant 
a request made under this section for merchandise to be transported from 
one port to another port, or from the jurisdiction of one port to that 
of another port. 
 
   (b) Certification. The request must be accompanied by a certification 
that the operator agrees to be responsible for the loss of any 
merchandise between the zone and the place of examination as though the 
merchandise were lost in the zone, and agrees to pay liquidated damages 
for loss as set forth in Subpart G.  
 
   (c) Approval of application. The district director shall approve the 
request if he is satisfied that the merchandise can be conveniently 
examined elsewhere than at the zone, the revenue is protected, and all 
Customs laws and regulations can be administered. 
 
   @ 146.17 Record retention. 
 
   The operator shall retain the records required in this part and 
defined in @ 162.1a of this chapter at the zone for at least 5 years 
after the date of entry relating to the merchandise removed from the zone.
 
   Subpart B -- Inventory Control and Recordkeeping System  
 
   @ 146.21 General requirements. 
 
   (a) System capability. The operator shall maintain either a manual or 
automated inventory control and recordkeeping system or combination manual
and automated system capable of: 
 
   (1) Accounting for all merchandise temporarily deposited, admitted, 
granted a zone status and/or status change, stored, exhibited, 
manipulated, manufactured, destroyed, and/or removed from a zone; 
 
   (2) Producing accurate and timely reports and documents as required by 
this part;  

   (3) Identifying shortages and overages of merchandise in a zone in 
sufficient detail to determine the quantity, description, tariff 
classification, zone status, and value of the missing or excess 
merchandise; 
 
   (4) Accounting for the physical output from a given input;  
 
   (5) Providing all the information necessary to make entry for 
merchandise being transferred to the Customs territory; 
 
   (6) Providing an audit trail to Customs forms from admission through 
manipulation, manufacture, destruction, or removal of merchandise from 
a zone; and 
 
   (7) Safeguarding and making available to Customs all records 
pertaining to the inventory control and recordkeeping system for 
merchandise admitted to a zone. 
 
   (b) Procedures manual. (1) The operator shall provide the district 
director with a copy in English of its written inventory control and 
recordkeeping system procedures manual in accordance with requirements 
of this part.  
 
   (2) The operator shall keep current its inventory control and 
recordkeeping system procedures manual and shall submit to the district 
director any change at the time of its implementation. 
 
   (3) The operator may authorize a zone user to maintain its individual 
inventory control and recordkeeping system procedures manual. The 
operator shall furnish a copy of the zone user's procedures manual, 
including any subsequent changes, to the district director. However, the 
operator will remain responsible to Customs and liable under its bond for 
supervision, defects in, or failures of a system. 
 
   (4) The operator's procedures manual and subsequent changes will be 
furnished to the district director for information purposes only. 
Customs receipt of a manual does not indicate approval or rejection of 
a system.  
 
   (c) Liability of operator. Zone activation approval does not relieve 
the operator of liability for complying with all inventory control and 
recordkeeping system requirements set forth in this part. 
 
   @ 146.22 Admission of merchandise to a zone. 
 
   (a) Identification. All merchandise will be recorded in a receiving 
report or document using a lot control or unique identifier. All 
merchandise, except domestic status merchandise for which no permit for 
admission is required under @ 146.14, will be traceable to a Customs 
Form 214 and accompanying documentation. 
 
   (b) Reconciliation. Quantities received will be reconciled to a 
receiving report or document such as an invoice with any discrepancy 
reported upon discovery to the district director as provided in @ 146.37.
 
   (c) Incomplete documentation. Merchandise received without complete 
Customs documentation or which is unacceptable to the inventory control 
and recordkeeping system will be recorded in a suspense account or 
record until documentation is complete or the system is capable of 
accepting the information. The receiving report or document will provide 
sufficient information to identify the merchandise and distinguish it 
from other merchandise. The suspense account or record will be completely 
documented for Customs review to explain the differences noted and 
corrections made. 
 
   (d) Recordation. Merchandise received will be accurately recorded in 
manual and/or automated inventory system records from the receiving 
report or document using the lot control or unique identifier for 
traceability. The inventory record will state the quantity and date 
received, cost or value where applicable, zone status, and description 
of the merchandise, including any part or stock number. 
 
   @ 146.23 Accountability for merchandise in a zone. 
 
   (a) Identification of merchandise. (1) General. A zone lot or other 
unique identifier will be used to identify and track merchandise.  
 
   (2) Fungible merchandise. Fungible merchandise may be identified by 
an inventory method authorized by the Commissioner of Customs which is 
consistently applied, such as First-In-First-Out (FIFO). 
 
   (b) Inventory record. The inventory record will specify by lot number 
or unique identifier: 
 
   (1) Location of merchandise; 
 
   (2) Zone status; 
 
    (3) Cost or value; unless operator's or user's financial records 
maintaincost or value and the records are made available for Customs 
review;  
 
   (4) Beginning balance, cumulative receipts and disbursements or 
removals, adjustments, and current balance on hand by date and quantity;  
 
   (5) Destruction of merchandise; and 
 
   (6) Scrap, waste, by-products, and joint products. 
 
   (c) Physical Inventory -- (1) Annual. The Operator shall take at least 
an annual physical inventory of all merchandise in the zone (unless 
continuous cycle counts are taken as part of an ongoing inventory control
program) with prior notification of the date(s) given to Customs for any
supervision of the inventory deemed necessary. The operator shall notify 
the district director promptly of any adjustments required to reconcile 
the inventory record with a physical count of the merchandise taken as 
provided under @ 146.25.  
 
   (2) Overage. An inventory overage of merchandise except for domestic 
merchandise for which no permit is required, will require zone admission,
unless that merchandise is transferred to general order or an appropriate
entry filed.  
 
   (3) Shortage. An inventory shortage except for domestic merchandise 
for which no permit for admission is required, will be subject to the 
assessment of duties and taxes plus liquidated damages under the 
operator's bond.  
 
   @ 146.24 Removal of merchandise from a zone. 
 
   (a) Accountability. (1) All zone status merchandise removed from a 
zone, will be accurately recorded within the inventory control and 
recordkeeping system. All removals, excepts for domestic merchandise for 
which no permit for removal is required, will be accurately documented on
the appropriate Customs form traceable within the inventory control and 
recordkeeping system.  
 
   (2) The inventory control system for inventory relief (removal) must 
have the capability to trace a merchandise removal back to a zone 
admission, even where the merchandise is changed through manipulation, 
manufacture, or any other means. 
 
   (b) Information. The inventory control and recordkeeping system must 
be capable of providing all information necessary to make entry for 
transfer of merchandise to the Customs territory. 
 
   @ 146.25 Annual reconciliation. 
 
   (a) Statement. The operator shall prepare a reconciliation statement 
within 90 days after the end of the zone/subzone year. The operator shall 
retain that annual reconciliation for a spotcheck or audit by Customs, 
and need not furnish it to Customs unless requested. There is no form 
specified for the preparation of the statement. 
 
   (b) Information required. The statement must contain a description of
merchandise for each lot or other unique identifier, zone status, 
quantity on hand at the beginning of the year, cumulative receipts and 
removals (by unit), quantity on hand at the end of the year, and 
cumulative positive and negative adjustments (by unit) made during the 
year. 
 
   (c) Certification. The operator shall submit to the district director
within 10 working days after the annual reconciliation a letter signed 
by the operator certifying that the annual reconciliation has been 
prepared, is available for Customs review, and that it is accurate. The 
certification letter must contain the name and street address of the 
operator, where the required records are available for Customs review; 
and the name, title, and telephone number of the person having custody 
of the records. Reporting of shortages and overages based on the annual 
reconciliation will be made in accordance with @ 146.55. Those reports 
must accompany the certification letter. 
 
   @ 146.26 System review. 
 
   The operator shall perform an annual internal review of the inventory 
control and recordkeeping system and shall report to the district 
director any deficiency discovered and corrective action taken to ensure 
that the system meets the requirements of this part. 
 
   Subpart C -- Admission of Merchandise to a Zone 
 
   @ 146.31 Merchandise permitted in a zone. 
 
   Merchandise of every description, including over-quota merchandise, 
may be brought into a zone unless prohibited by law. A distinction is 
made between prohibited articles and conditionally admissible merchandise.
 
   (a) Prohibited article. District directors are required to exclude this
class of article and shall not permit it to be transferred to a zone if 
aware of its prohibited status. If there is a question as to whether the 
merchandise may be prohibited, district directors may permit the temporary
deposit of the merchandise in a zone pending a final determination of 
its status. Any prohibited article which is found within a zone will be 
disposed of in the manner provided for in the laws and regulations 
applicable to that article.  
 
   (b) Conditionally admissible merchandise. The admission of merchandise
of this class into a zone is subject to any requirements of the Federal 
agency concerned. 
 
   @ 146.32 Application and permit for admission of merchandise.  
 
   (a) Application on Customs Form 214 and permit. Except for merchandise 
temporarily admitted (@ 146.33), in-transit merchandise (@ 146.34), or 
domestic merchandise admitted without permit (@ 146.39(a)), merchandise 
may be admitted into a zone only upon application on a uniquely-numbered 
Customs Form 214, Application for Foreign-Trade Zone Admission and/or 
Status Designation, and the issuance of a permit by the district director.
The operator shall present the application to the district director in 
the number of copies that officer considers necessary, and shall include 
a statistical copy on Customs Form 214-A for transmittal to the Bureau 
of the Census, unless the operator has made arrangements for the direct 
transmittal of statistical information to that agency. 
 
   (b) Supporting documents -- (1) Commercial documentation. The operator
shall submit with the application two copies of an invoice or similar 
commercial document which meets the requirements of Subpart F, Part 141, 
of this chapter, for any merchandise to be admitted to a zone. The 
notation of tariff classification and value required by @ 141.90 of this 
chapter need not be made, unless the merchandise is to be admitted in 
privileged status.  
 
   (2) Evidence of right to make entry. The operator shall submit with 
the application a document like that which would be required as evidence 
of a right to make entry for merchandise in Customs territory under @@ 
141.11 or 141.12 of this chapter. 
 
   (3) Release order. Merchandise will not be authorized by Customs for 
delivery to a zone until a release has been executed by the carrier that 
brought the merchandise to the port, unless the merchandise is released 
back to that same carrier for delivery to the zone (see @ 141.11 of this 
chapter concerning Customs responsibility). When a release order is 
required, it will be made on Customs Form 7529 or by the following 
statement on the reverse side of the Customs Form 214: 
 
   Authority is hereby given to release the merchandise described in 
this application to 
 
 
 
   Name of carrier 
 
 
 
   Signature and title of carrier representative 
 
 
 
 
A blanket or qualified release order may be authorized for the transfer 
of merchandise to a zone as provided for in @ 141.111 of this chapter.  
 
   (4) Application to unlade. For merchandise unladen in the zone 
directly from the importing carrier, the application on Customs Form 214 
will be supported by an application to unlade on Customs Form 3171. 
 
   (5) Other documentation. The district director may require additional 
information or documentation as needed to conduct an examination of 
merchandise under Customs selective entry processing criteria, or to 
determine whether the merchandise is admissible to the zone. 
 
   (c) Conditions for issuance of a permit. Merchandise for which an 
application for admission to a zone is made will be admitted when: 
 
   (1) The application is properly executed and includes the zone status 
desired for the merchandise as provided in Subpart D of this part;  
 
   (2) The operator's approval appears either on the application or in 
a separate specific or blanket approval; 
 
   (3) The merchandise is retained for examination at the place of 
unlading, the zone, or other location designated by the district director,
except for a subzone or zone site specified in @ 146.13. The merchandise 
may be examined as if it were to be entered for consumption or warehouse; 
and  
 
   (4) The permit is granted by the district director, as representative 
of the Board, when satisfied that all requirements have been fulfilled.  
 
   (d) Blanket application for admission of merchandise. Merchandise may 
be admitted to a zone upon presentation of a Customs Form 214 covering 
more than one shipment of merchandise, i.e., a blanket application for 
admission, when:  
 
   (1) The shipments arrive under one trasportation entry as described in 
@ 141.55 of this chapter; or 
 
   (2) The shipments are destined to the same zone applicant on a single 
business day, and the applicant -- 
 
   (i) Submits statistical trade information concerning the merchandise 
directly to the Bureau of the Census under an agreement with the agency, 
and  
 
   (ii) Presents to the district director before the merchandise is 
released into the zone the invoices or other documentation required by 
paragraph (b) of this section. 
 
 
Each invoice must contain a unique identifier to relate the shipment to 
the manifest of the carrier that brought the merchandise to the port 
having jurisdiction over the zone, and the inventory control and 
recordkeeping system of the operator as described in Subpart B. 
 
   @ 146.33 Temporary deposit for manipulation. 
 
   Imported merchandise for which an entry has been made and which has 
remained in continuous Customs custody may be brought temporarily to a 
zone for manipulation and return to Customs territory under Customs 
supervision pursuant to section 562, Tariff Act of 1930, as amended 
(19 U.S.C. 1562), and @ 19.11 of this chapter. That merchandise will not 
be considered within the purview of the Act but will be treated as 
though remaining in Customs territory. No zone form or procedure will be 
considered applicable, but the merchandise will remain subject in the 
zone to any requirements necessary for the enforcement of section 562 
and other Customs laws. 
 
   @ 146.34 Merchandise transiting a zone. 
 
   The following procedure is applicable when merchandise is to be 
unladen from any carrier in the zone for immediate transfer to Customs 
territory, or if it is to be transferred from Customs territory through 
the zone for immediate lading on any carrier in the zone: 
 
   (a) Application. Application for permission to lade or unlade will be 
filed with the district director on Customs Form 3171 prior to transfer 
of the merchandise into the zone. 
 
   (b) Permit. The district director shall permit the transfer unless he 
has reason to believe that the merchandise will not be moved promptly 
from the zone or made the subject of an application for zone status on 
Customs Form 214 in accordance with @ 146.32(a). 
 
   (c) Treatment of merchandise. Upon the issuance of a permit to lade, 
or unlade, the merchandise will be treated as though the lading or 
unlading were in the Customs territory. 
 
   (d) Failure to lade merchandise without delay. Merchandise brought 
into a zone for lading on a carrier, but not laden without a delay which 
may endanger the revenue, must be made the subject of an application for 
zone status in accordance with @ 146.32(a) or be removed from the zone.  
 
   @ 146.3 Temporary deposit in a zone; incomplete documentation.  
 
   (a) General. If information or documentation necessary to complete the 
Customs Form 214 is not available at the time of arrival of merchandise 
at the port, the person with the right to apply for admission will be 
allowed, upon application and compliance with the conditions in paragraph 
(c) of this section, to deposit the merchandise in the zone for a 
period not to exceed 5 working days unless a longer period is granted by 
the district director. The merchandise will be subject to examination as 
provided in @ 146.36. 
 
   (b) Application. An application for temporary deposit will be made by 
submitting to the district director: 
 
   (1) A properly signed and uniquely-numbered Customs Form 214 in the 
number of copies requested by the district director; and 
 
   (2) A declaration that the information or ducumentation necessary to 
complete the Customs Form 214 is unavailable. 
 
   (c) Conditions. Merchandise temporarily deposited under the provisions
of this section will: 
 
   (1) Be segregated from all other zone merchandise; 
 
   (2) Have no zone status and be considered to be in the Customs 
territory;  
 
   (3) Be held under the bond, and at the risk, of the operator; and  
 
   (4) Be manipulated only to the extend necessary to obtain sufficient 
information about the merchandise to file the appropriate admission or 
entry documentation. 
 
   (d) Submission of completed Customs Form 214. A complete and accurate 
Customs Form 214 will be submitted as provided in @ 146.32 within 5 
working days plus any extension granted by the district director, or the 
merchandise may be placed in general order. 
 
   @ 146.36 Examination of merchandise. 
 
   All merchandise covered by a Customs Form 214 will be retained for 
Customs examination at the place of unlading, the zone, or another 
location, as designated by the district director. The district director 
may authorize release of the merchandise without examination, as provided 
in @ 151.2(a)(2) of this chapter. If a physical examination is conducted, 
the Customs officer shall note the results of the examination on the 
invoices. 
 
   @ 146.37 Operator responsibility. 
 
   (a) Maintenance of admission documentation -- (1) Lot file. The operator 
shall open and maintain a lot file containing a copy of the Customs Form 
214 and the examination invoice received from Customs, and all other 
documentation necessary to account for the merchandise covered by each 
Customs Form 214. The lot file will be maintained in sequential order by 
using the unique number assigned to each Customs Form 214 as the file 
reference number. In zones where a Customs-authorized inventory method 
other than specific identification of merchandise is used, e.g., First-
In-First-Out (FIFO), no lot file is required but the operator shall 
maintain a file of all Customs Form 214 in sequential order. 
 
   (2) Examination invoice. The operator shall give a copy of the 
examination invoice to the person making entry to remove the merchandise
 from the zone, upon request of that person or the district director. 
 
   (b) Liability for merchandise. The operator will be held liable under
its bond for the receipt of merchandise in the quantity and condition as
described on the Customs Form 214, except as modified by a discrepancy 
report:  
 
   (1) Signed jointly by the operator and carried on the Customs Form 
214 or other approved form within 15 days after admission of the 
merchandise, and reported to the district director within 2 working days
thereafter; or  
 
   (2) Submitted on Customs Form 5931 under the provisions of Subpart A,
Part 158, of this chapter within 20 days after admission of the 
merchandise. The operator may file a Customs Form 5931 on behalf of the 
person who applied for admission of merchandise to the zone. 
 
   (c) Supervision of merchandise. The district director may authorize 
the receipt of zone status merchandise at a zone without physical 
supervision by a Customs officer (see @ 146.8). In that case, the 
operator shall supervise the receipt of merchandise into the zone, 
report the receipt and condition of the merchandise, and mark packages 
with the unique Customs Form 214 number so that the merchandise can be 
traced to a particular Customs Form 214. Packages that are accounted for 
under a Customs-authorized inventory method other than specific 
identification, need not be marked with a unique Customs Form 214 number 
but must be adequately identified so Customs can conduct an inventory 
count. The operator shall submit the Customs Form 214 to Customs at the 
location specified by the district director. 
 
   @ 146.38 Certificate of arrival of merchandise. 
 
   Whenever a certificate prepared by Customs as to the arrival of any 
merchandise in a zone is required by a Federal agency, the district 
director shall issue the document certifying only that authorization to 
deliver the merchandise to a zone has been made. The operator shall 
issue a certificate of arrival of merchandise at a zone. 
 
   @ 146.39 Domestic merchandise. 
 
   (a) Special procedure approved. After approval by the district director 
of an application submitted under @ 146.14 for domestic status mechandise,
no other application for admission of the merchandise will be accepted 
by Customs.  
 
   (b) Other domestic merchandise. Domestic status merchandise not 
covered by an approved application under @ 146.14 will require an 
application for admission on Customs Form 214 (without supporting 
documentation) as provided in @ 146.32(a).  
 
   @ 146.40 Subzone and noncontiguous zone site. 
 
   (a) Direct delivery -- (1) Authorization. The district director may 
allow direct delivery of merchandise to a subzone or zone site approved 
under @ 146.13 without prior application and approval on Customs Form 
214 or Customs examination of the merchandis. 
 
   (2) Right to examine. The district director retains the authority, 
notwithstanding paragraph (a)(1) of this section, to conduct a physical 
examination of merchandise before or upon its admission to a subzone or 
zone site. The district director may order such an examination whenever 
it is deemed necessary to protect the revenue or administer any Federal 
law or regulation.  
 
   (b) Arrival of conveyance. Upon arrival at a subzone or zone site of 
a conveyance containing foreign merchandise, the operator shall:  
 
   (1) Collect in-bond or cartage documentation from the carrier, and 
notify the district director before unloading the conveyance if the 
shipment should have been in bond but is not; 
 
   (2) Check the condition of any seal affixed to the conveyance, and if 
broken, missing or improperly affixed, notify the district director and 
receive instructions before unloading the merchandise; 
 
   (3) Check each incoming in-bond and cartage shipment to determine if 
the manifested quantity or the quantity on the cartage document agrees 
with the quantity actually received; 
 
   (4) Sign and date the in-bond or cartage documentation; and  
 
   (5) Forward the in-bond or cartage documentation so as to reach the 
district director within 2 working days after the date of arrival of the 
conveyance at the subzone or zone site. 
 
   (c) Admission of merchandise; alternative procedures -- (1) Cumulative 
Customs Form 214. The operatorf shall submit to the district director 
each business day a properly signed and uniquely-numbered Customs Form 
214 listing all merchandise, except for domestic status merchandise 
admitted under @ 146.14, recorded into the inventory control and 
recordkeeping system during the previous business day. The Customs Form 
214 must contain a list of all in-bond (I.T.) numbers or the unique 
number of any cartage document, as well as the number of invoices for 
each I.T. or cartage document, pertaining to merchandise which has been 
entered into the system. 
 
   (2) Individual Customs Form 214. If a cumulative Customs Form 214 is 
not submitted as provided in paragraph (c)(1) of this section, the 
operator shall file with the district director each business day an 
individual Customs Form 214 covering each shipment recorded into the 
inventory control and recordkeeping system during the previous business 
day. 
 
   (3) General order. Merchandise which is not admitted into a subzone or
zone site as provided in this section within 5 working days after its 
arrival there may be sent to general order unless: 
 
   (i) The district director grants the operator's request for an 
extension of the 5-working day period; or 
 
   (ii) The importer of record files an appropriate Customs entry for 
the merchandise and removes it from the zone premises. 
 
   (d) Operator responsibility for merchandise -- (1) Manifested 
quantities. The manifested quantity or the quantity stated on the 
cartage document will be considered the quantity admitted to the subzone 
or zone site unless:  
 
   (i) The in-bond or cartage documentation is amended by the operator 
and carrier in joint agreement noting any discrepancy, prior to 
forwarding that documentation to the district director; or 
 
   (ii) The operator independently submits to the district director a 
discrepancy report on Customs Form 5931, and that official finds the 
operator not liable for any discrepancy. 
 
   (2) In-bond manifest file. The operator shall maintain a file of open 
in-bond manifests in chronological order of date of conveyance arrival to
identify shipments that have arrived but the entire contents of which 
have not been admitted to the subzone or zone site as provided in this 
section. The operator shall notify the district director, by annotation 
on the Customs Form 214, when the entire contents of a shipment have been 
admitted. 
 
   (3) Inventory control and recordkeeping system. The operator shall 
establish and maintain a continuing input quality control program to 
ensure that information concerning merchandise in admission documents, 
verified or corrected by counts and checks, is accurately recorded in 
the inventory control and recordkeeping system. Quantities recorded in 
the system, after allowance by the district director for any discrepancies,
will be the quantities of merchandise for which the operator shall be 
held liable under its bond for admission to the subzone or zone site. A 
discrepancy involving a within-case shortage (or overage) need not be 
reported on Customs Form 5931, if the operator is able to report that 
information in another manner so the district director can determine 
whether there is liability for the discrepancy under the bond of any 
party to the importation. 
 
   Subpart D -- Status of Merchandise in a Zone 
 
   @ 146.41 Privileged foreign merchandise. 
 
   (a) General. Foreign merchandise which has not been manipulated or 
manufactured so as to effect a change in tariff classification will be 
given status as privileged foreign merchandise on proper application to 
the district director. 
 
   (b) Application. Each application for this status will be made on 
Customs Form 214 at the time of filing the application for admission of 
the merchandise into a zone or at any time thereafter before the 
merchandise has been manipulated or manufactured in the zone in a manner 
which has effected a change in tariff classification. 
 
   (c) Supporting documentation. Each applicant for this status shall 
submit to the district director with the application an invoice noted 
as provided for in @ 141.90 of this chapter. 
 
   (d) Determination of duties and taxes. Upon receipt of the application
and accompanying invoice, the district director may examine the 
merchandise to determine whether to approve the application. The 
merchandise will be subject to appraisement as provided in @ 146.65, and
tariff classification according to its condition and quantity, at the 
rate of duty and tax in force, on the date the application is filed in 
complete and proper form. 
 
   (e) Merchandise subject to tariff-rate quota. Classification of 
merchandise subject to a tariff-rate import quota will be made only at 
the higher non-quota duty rate in effect on the date privileged foreign 
status was granted. If entry is made under Subpart F, the entry will be 
liquidated at the higher non-quota duty rate. 
 
   (f) Status as privileged foreign merchandise 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 @ 146.65(c)(2)), as long as 
the merchandise remains within the purview of the Act. However, 
privileged foreign merchandise may be exported or withdrawn for supplies, 
equipment, or repair material of vessels or aircraft without the payment 
of taxes and duties, in accordance with @@ 146.68 and 146.70. 
 
   @ 146.42 Nonprivileged foreign merchandise. 
 
   All of the following will have the status of nonprivileged foreign 
merchandise: 
 
   (a) Foreign merchandise. Foreign merchandise properly in a zone which
does not have the status of privileged foreign merchandise or of 
zone-restricted merchandise; 
 
   (b) Waste. Waste recovered from any manipulation or manufacture of 
privileged foreign merchandise in a zone; and 
 
   (c) Certain domestic merchandise. Domestic merchandise in a zone which
by reason of noncompliance with the regulations in this part has lost 
its identity as domestic merchandise will be treated as foreign 
merchandise. Any domestic merchandise will be considered to have lost 
its identity if the district director determines that it cannot be 
identified positively by a Customs officer as domestic merchandise on 
the basis of an examination of the articles or consideration of any 
proof that may be submitted promptly by a party in interest. 
 
   @ 146.43 Domestic merchandise. 
 
   (a) General. Domestic status may be granted to merchandise:  
 
   (1) The growth, product, or manufacture of the United States on which 
all internal-revenue taxes, if applicable, have been paid; 
 
   (2) Previously imported and on which duty and tax has been paid; or  
 
   (3) Previously entered free of duty and tax. 
 
   (b) Application. Application for domestic status shall be included in 
the application on Customs Form 214 to admit the merchandise into the 
zone, but the documents in support of the application described in @ 
146.32(b) are not required. Domestic merchandise admitted without 
application and permit under @ 146.14 will be granted domestic status. 
 
   (c) Domestic packing and repair materials. If the district director 
is satisfied that the revenue will be protected, and the rights of 
importers will not be prejudiced, that official may permit the transfer 
to a zone of domestic packing and repair materials and related articles 
without requiring an application on Customs Form 214. 
 
   (d) Return of merchandise to Customs territory. Upon compliance with
the provisions of this section and @ 146.72, any of the merchandise 
specified in paragraph (a) of this section, may subsequently be returned 
to Customs territory free of quotas, duty, or tax. 
 
   @ 146.44 Zone-restricted merchandise. 
 
   (a) General. Merchandise taken into a zone for the sole purpose of 
exportation, destruction (except destruction of distilled spirits, wines,
and fermented malt liquors), or storage will be given zone-restricted 
status on proper application. That status may be requested at any time 
the merchandise is located in a zone, but cannot be abandoned once 
granted. Merchandise in zone-restricted status may not be removed to 
Customs territory for domestic consumption except where the Board 
determines the return to be in the public interest. 
 
   (b Application. Application for zone-restricted status will be made 
on Customs Form 214. 
 
   (c) Merchandise considered exported -- (1) For Customs purposes. If 
the applicant desires a zone-restricted status in order that the 
merchandise may be considered exported for the purpose of any Customs 
law, all pertinent Customs requirements relating to an actual exportation
shall be complied with as though the admission of the merchandise into 
the zone constituted a lading on an exporting carrier at a port of final 
exit from the United States. Any declaration or form required for actual 
exportation will be modified to show that the merchandise has been 
deposited in a zone in lieu of actual exportation, and a copy of the 
approved Customs Form 214 may be accepted in lieu of any proof of 
shipment required in cases of actual exportation. 
 
   (2) For other purposes. If the merchandise is to be considered 
exported for the purpose of any Federal law other than the Customs laws,
the district director shall be satisfied that all pertinent laws, 
regulations, and rules administered by the Federal agency concerned have 
been complied with before the Customs Form 214 is approved. 
 
   (d) Merchandise entered for warehousing transferred to a zone. 
Merchandise entered for warehousing and transferred to a zone, other 
than temporarily for manipulation and return to Customs territory as 
provided for in @ 146.33, will have the status of zone-restricted 
merchandise when admitted into the zone. The application on Customs Form 
214 will state that zone-restricted status is desired for the merchandise.
 
   Subpart E -- Handling of Merchandise in a Zone 
 
   @ 146.51 Customs control of merchandise. 
 
   No merchandise, other than domestic merchandise approved under @ 
146.14, will be manipulated, manufactured, exhibited, destroyed, or 
removed from a zone in any manner or for any purpose, except under 
Customs permit as provided for in this part. The district director may 
require segregation of any zone merchandise when that official considers 
it necessary for the protection of the revenue.  
 
   @ 146.52 Manipulation, manufacture, or exhibition. 
 
   (a) Application -- (1) Filing. The operator shall file with the district
director an application on Customs Form 216 for permission to manipulate, 
manufacture, or exhibit merchandise in a zone. None of those operations 
may be conducted until the district director has approved the application.
 
   (2) Blanket application. The district director is authorized to approve 
a blanket application for a period up to one year for a continuous or 
repetitive operation. The district director may disapprove or revoke 
approval of a blanket application and may require the operator to file 
an individual application when necessary to protect the revenue or 
administer any law or regulation.  
 
   (b) Approval of application -- (1) General. The district director 
shall approve the application unless the proposed operation would be in 
violation of law or regulation; the place designated for its performance 
is not suitable for preventing confusion of the identity or status of 
the merchandise or for safeguarding the revenue; or the Executive 
Secretary of the Board has not granted approval of a new manufacturing
operation. 
 
   (2) Privileged foreign merchandise. An application made under this 
section for permission to manipulate or manufacture privileged foreign 
merchandise will not be approved until the district director is 
satisfied that the examination provided for the @ 146.41(d) has been 
completed. 
 
   (3) Lot system merchandise. When an operator maintains a zone inventory 
under a lot system, merchandise from different lots will not be mixed 
without approval by the district director on Customs Form 216. 
 
   (c) Appeal of adverse ruling. If the application is denied by the 
district director for any reason, the applicant or the grantee may appeal
the adverse ruling to the Board. If any revenue protection considerations 
are involved in the application, the Board shall be guided by the 
determinations of the Secretary of the Treasury with respect to them. 
 
   (d) Report -- (1) Separate application. The operator shall report on 
Customs Form 216 the results of an approved manipulation or manufacture 
of merchandise (other than that covered by a blanket application made 
under paragraph (a)(2) of this section, unless the district director 
chooses physically to supervise the operation. The operator shall retain 
the completed Customs Form 216 in its inventory control and recordkeeping 
system. 
 
   (2) Blanket application. The operator shall maintain an approved 
blanket application to manipulate or manufacture in its inventory control 
and recordkeeping system. In lieu of the report on Customs Form 216 
required in paragraph (d)(1) of this section, the operator shall maintain
a record of the operation in its inventory control and recordkeeping 
system so as to provide an accounting and audit trail of the merchandise 
through the approved operation.  
 
   @ 146.53 Destruction. 
 
   (a) Application. Each application to destroy merchandise in a zone will 
be filed with the district director on Customs Form 216. A blanket 
application may be approved or revoked under the same circumstances as 
provided for in @ 146.52.  
 
   (b) Approval of application and procedure. (1) The district director 
shall approve the application if satisfied that the destruction will be 
effective and complete, and the revenue will be protected. The district 
director may permit the destruction to be done outside the zone, in whole 
or in part and at the risk and expense of the applicant, and under such 
conditions necessary to protect the revenue, if proper destruction cannot 
be accomplished within the zone. Any residue of destruction which is 
entirely worthless may be removed to Customs territory for disposal. 
 
   (2) Distilled spirits, wines, and fermented malt liquors may not be 
brought into a zone for the purpose of destruction, as provided for in @
146.44(a). If those products have been admitted to a zone for another 
purpose and subsequently become unmerchantable, they may be destroyed 
under Customs supervision, with the approval of the appropriate official 
of the Bureau of Alcohol, Tobacco, and Firearms under the provisions of 
Title 27, Code of Federal Regulations.  
 
   (c) Report of destruction. The operator shall certify the destruction 
on Customs Form 216, and maintain the report in its inventory control and
recordkeeping system.  

   @ 146.54 Safekeeping of merchandise and records. 
 
   The operator is responsible for the safekeeping of merchandise and 
records concerning merchandise admitted to a zone. The operator, at its 
liability, may allow the zone importer or owner of the goods to store
, safeguard, and otherwise maintain or handle the goods and the inventory
records pertaining to them.  
 
   (a) Records maintenance. The operator shall maintain the inventory 
control and recordkeeping system in accordance with the provisions of 
Subpart B, retain all records pertaining to zone merchandise for 5 years
after the merchandise is removed from the zone, and protect proprietary 
information in its custody from unauthorized disclosure. 
 
   (b) Merchandise security. The operator shall maintain the zone and 
establish procedures adequate to ensure the security of merchandise 
located in the zone in accordance with applicable Customs security 
standards and specifications.  
 
   (c) Storage and handling. The operator shall store and handle 
merchandise in a zone in a safe and sanitary manner to minimize damage 
to the merchandise, avoid hazard to persons, and meet local, state, and 
Federal requirements applicable to a specific kind of goods. All trash 
and waste will be promptly removed from a zone. Aisles will be 
established and maintained, and doors and entrances left unblocked for 
access by Customs officers and other persons in the performance of their official 
duties. 
 
   @ 146.55 Shortage, overage, and damage. 
 
   (a) Report required. The operator shall report in writing to the 
district director upon discovery of: 
 
   (1) Theft or suspected theft of merchandise; 
 
   (2) Excess merchandise not properly admitted to the zone;  
 
   (3) Shortage of one percent (1%) or more of the quantity of merchandise
in a lot or covered by a unique identifier, if the missing merchandise 
would have been subject to duties and taxes of $100 or more upon entry 
into the Customs territory; or 
 
   (4) Damage amounting to one percent (1%) or more of the value of 
merchandise in a lot or covered by a unique identifier, if the damage is 
$1,000 or more.  
 
 
The operator shall record upon discovery all shortages, overages, and 
damage, whether or not required to be reported at that time to the 
district director, in its inventory control and recordkeeping system. The 
operator shall report shortages, overages, and damage to Customs as 
required in the annual reconciliation statement under @ 146.25. 
 
   (b) Certain domestic merchandise. Except in a case of theft or 
suspected theft, the operator need not file a report with the district 
director or note in the annual reconciliation statement, any shortage, 
overage, or damage concerning domestic status merchandise for which no 
permit for admission is required.  
 
   (c) Shortage -- (1) Operator responsibility. The operator is 
responsible under its Foreign-Trade Zone Operator's Bond for any loss of 
merchandise or for any merchandise which cannot be located or otherwise 
accounted for (except domestic status merchandise for which no permit for 
admission was required), unless the district director is satisfied that 
the merchandise was:  
 
   (i) Never received in the zone; 
 
   (ii) Removed from the zone under proper permit; 
 
   (iii) Not removed from the zone; or 
 
   (iv) Lost or destroyed in the zone through fire or other casualty, 
evaporation, spillage, leakage, absorption, or similar cause, and did 
not enter the commerce of the Untied States. 
 
   (2) Liability for duty and taxes. Upon demand of the district director,
the person with the right to make entry shall make entry for and pay 
duties and taxes applicable to merchandise which is missing or otherwise 
not accounted for. An entry for the payment of duties and taxes on that 
merchandise will not relieve the operator of liability under its bond, 
but the district director shall consider those acts in determining whether 
to assess liquidated damages, or to cancel a liquidated damage assessment 
upon payment of a lesser amount.  
 
   (d) Overage. The person with the right to make entry shall file, 
within 5 days after discovery of an overage, an application for admission
of the merchandise to the zone on Customs Form 214 or file a Customs 
entry for the merchandise. If a Customs Form 214 or a Customs entry is 
not timely filed, and the district director has not granted an extension 
of the time provided, the merchandise may be sent to general order. 
 
   (e) Damage. The liability of the operator under its Foreign-Trade 
Zone Operator's Bond may be adjusted for the loss of value resulting from 
damage to merchandise occurring in the zone. The operator shall segregate,
mark, and otherwise secure damaged merchandise to preserve its identity. 
The operator shall handle merchandise so as to minimize damage or 
deterioration, as provided for in @ 146.54. 
 
   Subpart F -- Removal of Merchandise From a Zone 
 
   @ 146.61 Constructive transfer to Customs territory. 
 
   The district director shall accept receipt of any entry in proper form
provided under this subpart, and the merchandise described therein will 
be considered to have been constructively transferred to Customs 
territory at that time, even though the merchandise remains physically in 
the zone. If the entry is thereafter rejected or cancelled, the 
merchandise will be considered at that time to be constructively 
transferred back into the zone in its previous zone status. 
 
   @ 146.62 Right to make entry. 
 
   Entry of merchandise under this subpart may be made only by the owner 
or purchaser or, when appropriately designated by the owner, purchaser, 
or consigneee, by a licensed customhouse broker. 
 
   @ 146.63 Entry for consumption. 
 
   (a) General. The provisions of this section are applicable to the 
following merchandise: 
 
   (1) Privileged foreign merchandise that has not been mixed, combined, 
or repacked in a zone; 
 
   (2) Products of manipulation or manufacture in a zone composed of, or 
derived from, privileged foreign and domestic merchandise; 
 
   (3) Articles composed entirely of, or derived entirely from, 
nonprivileged foreign and domestic merchandise; 
 
   (4) Articles composed in part of, or derived in part from, 
nonprivileged foreign and domestic merchandise; and 
 
   (5) Recoverable waste resulting from the manipulation or manufacture 
of foreign merchandise. 
 
   (b) Entry documentation -- (1) General. When merchandise is removed 
from a zone for consumption, entry will be made on Customs Form 3461, 
Customs Form 7501, or other applicable Customs form and will be 
accompanied by the entry documentation, including invoices, as provided 
in Parts 141 and 142 of this chapter. The importer of record shall 
submit any other supporting documents required by law or regulation that 
relate to the transaction removing the merchandise from the zone, and 
provide the information necessary to support the admissibility, the 
declared zone and dutiable value, quantity, and classification of the 
merchandise. If the declared zone and dutiable value are predicated on 
estimates or estimated costs furnished either in advance or at the time 
of entry, that information must be clearly stated in writing at the time 
an entry or entry summary is filed. 
 
   (2) Subzone or noncontiguous zone site. The district director may 
allow the importer of merchandise from a subzone or noncontiguous zone 
site approved under @ 146.13 to file an entry on Customs Form 3461 for 
the estimated removal of merchandise during the calendar week. The 
Customs Form 3461 filed with the district director must be accompanied 
by a pro forma invoice or schedule showing the number of units of each 
type of merchandise to be removed during the week and the zone and 
dutiable value of each unit to be removed. Merchandise covered by an 
entry made under the provisions of this section will be considered to be 
entered, and may be removed, only when the district director has 
accepted the entry on Customs Form 3461. If actual removals will exceed 
the estimate for the week, the importer of record shall file a 
supplemental Customs Form 3461 to cover the additional units before their 
removal from the subzone or zone site. The procedure described in this 
subparagraph will not be allowed if the importer of record is required to
file an entry summary at the time of entry as provided for in @ 142.13 
of this chapter. 
 
   (c) Entry summary. -- (1) Individual. When entry is made on Customs 
Form 3461, the importer shall file an entry summary for the merchandise 
within 10 working days after the time of entry. The entry summary must 
be accompanied by any duties and taxes estimated to be due on the 
merchandise, and a statement of the quantity, zone status, zone value, 
and dutiable value of the merchandise covered by the entry summary. 
 
   (2) Weekly. The importer of record in a subzone or noncontiguous zone 
site approved under @ 146.13 shall file an entry summary for the 
merchandise described on the weekly entry and any supplemental entries, 
within 10 working days after presentation of the initial Customs Form 
3461 for the calendar week. The entry summary must be accompanied by any 
duties and taxes estimated to be due on the merchandise, and a statement 
of the quantity, zone status, zone value, and dutiable value of the 
merchandise actually removed during the covered week, reconciled to the 
entry summary. Notwithstanding that a weekly entry may be allowed under 
paragraph (b) of this section, all merchandise will be dutiable in its 
actual condition at the time of its removal from the zone or zone site 
for consumption. When estimated removals exceed actual removals, that 
excess merchandise will not be considered to have been entered or 
constructively transferred to the Customs territory. Merchandise covered 
by a weekly entry and entry summary will be removed promptly from the 
zone or zone site, unless retained as domestic status merchandise as 
provided for in @ 146.73(d).  
 
   (d) Waiver of supporting documents. The district director may waive 
presentation of an invoice and supporting documentation (except the 
statement required in paragraph (c) of this section) with the entry or 
entry summary, if satisfied that presentation of those documents would 
be impractical, and the importer of record or operator either files 
invoices and supporting documentation with the district director or 
maintains and makes those records available for examination by Customs. 
 
   (e) Removal for transportation to another port for consumption -- (1) 
Application for transfer. When merchandise is to be transferred to 
Customs territory for transportation to another port for entry for 
consumption, an entry for transportation will be made on Customs Form 
7512, bearing the notations in @@ 146.66, and 146.71 when applicable, as 
an application for the transfer.  
 
   (2) Condition for acceptance of entry for transportation. The district
director shall not accept an entry for transportation for products of 
manipulation or manufacture of privileged foreign merchandise until 
satisified that the merchandise exists in the zone in its final form as 
described in the entry and that all other documents required to be 
submitted with the entry have been received. 
 
   (3) Release of merchandise for transportation. Upon acceptance of the 
entry, the district director shall release the merchandise to the 
operator for delivery to the bonded carrier. 
 
   (4) Entry for consumption at port of destination. An entry for 
consumption will be made at the port of destination on Customs Form 7501 
or other approved Customs form by the person who has the right to make 
entry.  
 
   @ 146.64 Entry for warehouse. 
 
   (a) Foreign merchandise. Merchandise in privileged foreign status or 
composed in part of merchandise in privileged foreign status may not be 
entered for warehouse from a zone. Merchandise in nonprivileged foreign 
status containing no components in privileged foreign status may be 
entered for warehouse in the same or at a different port. 
 
   (b) Zone-restriced merchandise. Foreign merchandise in zone-restricted 
status may be entered for warehouse in the same or at a different port 
only for storage pending exportation, unless the Board has approved 
another disposition.  
 
   (c) Time Limitation. An entry for warehouse must be made within the 
time limit provided for in section 557(a), Tariff Act of 1930 (19 
U.S.C. 1557(a)).  
 
   @ 146.65 Examination, classification, valuation, and liquidation.  
 
   (a) Examination. Customs may examine any merchandise on its removal 
from a zone. All requirements and restrictions applicable to imported 
merchandise entered for consumption or warehouse, e.g., labelling, 
radiation standards, trademarks, quotas, visas, etc., also may apply to 
merchandise constructively transferred to the Customs territory from a 
zone. 
 
   (b) Tariff classification -- (1) Privileged foreign merchandise. 
Privileged foreign merchandise provided for in this section will be 
subject to tariff classification according to its condition and quantity, 
at the rate of duty and tax in force on the date of filing, in complete 
and proper form, the application for privileged status. 
 
   (2) Nonprivileged foreign merchandise. Nonprivileged foreign 
merchandise provided for in this section will be subject to tariff 
classification in accordance with its character and condition at the 
time the entry or entry summary is filed with Customs 
 
   (c) Valuation -- (1) Total zone value. The total zone value of 
merchandise provided for in this section will be determined in accordance
with the principles of valuation contained in sections 402 and 500 of 
the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979 
(19 U.S.C. 1401a, 1500). Generally, the total zone value would be that 
price paid or a payable to the zone seller in the transaction that caused 
the merchandise to be removed from the zone. Where there is no price paid 
or payable, the total zone value would be the cost of all materials and 
zone processing costs related to the merchandise removed from the zone. 
 
   (2) Dutiable value. The dutiable value of merchandise provided for in 
this section will reflect the cost or value of components having a 
foreign status, exclusive of any cost of processing or fabrication 
incurred in the zone, general expenses and profit, international freight 
and insurance costs, the United States inland freight costs. Generally, 
the dutiable value would be, or represent, the price paid or payable by 
the zone operator in the transaction that caused the merchandise or 
component to be admitted into a zone. Where there is no price paid or 
payable, or reasonable representation of that cost, the dutiable value 
may be determined by excluding from the total zone value any cost of 
processing or fabrication, general expenses and profit, international 
freight and insurance costs, the United States inland freight costs. The 
dutiable vaue of recoverable waste or scrap from a zone operation will be
the price paid or payable to the zone seller in the transaction that 
caused the recoverable waste or scrap to be removed from the zone. An 
allowance in the dutiable value of zone merchandise may be made by the 
district director in accordance with the provisions of Subparts B and C 
of Part 158 of this chapter, relating to damaged or defective merchandise
and casualty while merchandise is in Customs custody.  
 
   (d) Liquidation -- (1) General. The entry provided for in this section
will be liquidated in accordance with the provisions of Part 159 of this 
chapter.  
 
   (2) Extension to update cost data. When the declared value of the 
merchandise is based on an estimate, the importer of record may request 
an extension of liquidation pending the presentation of updated or actual
cost data. A request for an extension may be granted at the discretion 
of the district director. If the extension is granted, the importer of 
record shall submit the updated or actual cost data to the district 
director, within 90 days after the close of the accounting year. 
 
   @ 146.66 Entry for tranportation to another port. 
 
   The person making entry for merchandise to be transported to another 
port in accordance with any provision of this subpart shall note all 
copies of the entry to state that the merchandise covered by the entry 
is foreign-trade zone merchandise; the number of the zone from which the 
merchandise was removed; and the zone status of the merchandise. 
 
   @ 146.67 Transfer from one zone to another. 
 
   (3) Domestic merchandise. The transfer of domestic merchandise from 
one zone to another is not subject to Customs control, except that the 
removal of the merchandise from the first zone and its admission into 
the zone of destination will be in accordance with @@ 146.39, 146.43, 
146.72, and 146.73.  
 
   (b) Other merchandise -- (1) At the same port. A transfer of 
merchandise to another zone with a different operator at the same port 
(including a consolidated port) will be by a licensed cartman under an 
entry for immediate transportation on customs Form 7512 or other 
appropriate form with a customs Form 214 filed at the destination zone. 
A transfer of merchandise between zone sites at the same port (including 
a consolidated port) having the same operator may be made under a local 
control system approved by the district director wherein any loss of 
merchandise between sites will be treated as if the loss occurred in the 
zone. 
 
   (2) At a different port. A transfer of merchandise from a zone at one 
port of entry to a zone at another port will be by bonded carrier under 
an entry for immediate transportation on Customs Form 7512. All copies of 
the entry must bear a notation in addition to those required in @ 146.66 
that the merchandise is being transferred to another zone designated by 
its number. A transfer of merchandise from the first zone into Customs 
territory and its admission into the zone of destination will be in 
accordance with @ 146.32 and 146.66, respectively. 
 
   (c) Forwarding of merchandise history; documentation. When merchandise
is transferred under the provisions of this section, the operator of the 
removal zone shall provide the operator of the destination zone with the 
documented history of the merchandise being transferred. 
 
   (1) The following documentation must accompany merchandise maintained 
under a lot inventory control system: 
 
   (i) A copy of the original Customs Form(s) 214 with accompanying 
invoices for admission of the merchandise and all components thereof;  
 
   (ii) A copy of any Customs Form 214 filed subsequent to admission to 
change the status of the merchandise or its components; and 
 
   (iii) A copy of any Customs Form 216 to manipulate or manufacture the 
merchandise. 
 
   (2) The following documentation must accompany merchandise not under 
a lot system, and not manufactured in a zone: 
 
   (i) A copy of the original Customs Form(s) 214 with accompanying 
invoices for admission of the merchandise as attributed under the 
particular zone inventory method; 
 
   (ii) A copy of any Customs Form 214 filed subsequent to admission to 
change the status of the merchandise as attributed under the particular 
zone inventory method; and 
 
   (iii) A copy of any Customs Form 216 to manipulate the merchandise as 
attributed under the particular zone inventory method. 
 
   (3) If the documents specified in paragraph (c)(2) of this section, 
are not presented, the operator of the removal zone shall submit the 
following:  
 
   (i) A statement of the zone value, dutiable value, quantity, 
description, unique identifier, and zone status (showing any changes of 
status after admission and whether the merchandise was manipulated so as 
to change its tariff classification) of all the merchandise in the 
shipment covered by the transportation entry; and 
 
   (ii) A certification that the statement in paragraph (c)(3)(i) of this
section, is true and that the information contained therein is contained
in the inventory control and recordkeeping system of the removal zone.  
 
   (4) The following documentation must accompany merchandise not under 
a lot system, but manufactured in a zone: 
 
   (i) A statement by the removal zone operator of the zone value, 
dutiable value, quantity, description, unique identifier, and zone status
of all the merchandise (and components thereof, where applicable) 
covered by the transportation entry with a certification by the operator 
that the information is true and is reflected in the inventory control 
and recordkeeping system of the removal zone. The statment will also 
show any change in zone status in the removal zone, and whether the 
merchandise has been manufactured or manipulated in the zone so as to 
change its tariff classification; and  
 
   (ii) A certification by the operator of the removal zone that the 
statement in paragraph (c)(4)(i) of this section, is true and the 
information therein is contained in the inventory control and 
recordkeeping system of the zone.  
 
   (5) The operator of the removal zone shall transmit the 
historical documentation of the merchandise within 2 working days after 
it has been delivered to the bonded carrier for transportation. The 
documentation will be referenced to the I.T. number covering the 
merchandise. 
 
   (d) Arrival at destination zone. Upon arrival of the merchandise at 
the destination zone, it will be admitted under the procedure provided 
for in @ 146.32, except that no invoice or Customs examination will be 
required. When the historical documentation is received, the operator 
of the destination zone shall associate it with the Customs Form 214 for 
admission of the merchandise, and incorporate that information into the 
zone inventory control and recordkeeping system. 
 
   @ 146.68 Removal for exportation. 
 
   (a) Direct exportation. Any merchandise in a zone may be exported 
directly therefrom (without transfer into Customs territory) upon 
compliance with the procedures of this section, except as provided in 
@ 146.72.  
 
   (1) Application. The operator shall sign and submit to the district 
director, in triplicate, an application for direct exportation which must 
include:  
 
   (i) The proposed date of exportation; 
 
   (ii) The identification of the carrier; 
 
   (iii) The destination of the shipment; and 
 
   (iv) Identification of the merchandise by zone storage location, lot 
number or unique identifier, marks and numbers of packages, description, 
quantity, and zone status. If a form of tally, prepared and signed by 
the operator for its own purposes contains the required information, it 
may be accepted by the district director in lieu of the application 
provided for in this paragraph.  
 
   (2) Permit of exportation. If the district director approves the 
application, the original will be stamped to serve as a permit of 
exportation. The original and one copy will be returned to the operator. 
No document other than the permit of exportation will be required to 
release the merchandise to the operator for lading aboard the exporting 
carrier. 
 
   (b) Immediate exportation. Each transfer of merchandise other than 
domestic status merchandise, to the Customs territory for exportation at 
the port where the zone is located, will be made under an entry for 
immediate exportation on Customs Form 7512. The entry must describe the 
merchandise as foreign-trade zone merchandise, specify the zone status, 
and bear any special notation required in @@ 146.66 and 146.71. The 
person filing the export entry shall obtain an export bond on Customs 
Form 301 containing the bond conditions provided for in @113.62 of this 
chapter. 
 
   (c) Transportation and exportation. Each transfer of merchandise 
other than domestic, to the Customs territory for transportation to and 
exportation from a different port, will be made under an entry for 
transportation and exportation on Customs Form 7512, and must bear the 
notations as required in @@ 146.66 and 146.71. No exportation bond will 
be required of the person who files the transportation and exportation 
entry. The bonded carrier will be responsible for exportation of the 
merchandise in accordance with law and regulation.  
 
   (d) Export declaration. Every exporter of merchandise of any zone 
status shall submit a Shipper's Export Declaration as required by the 
regulations of the Bureau of the Census, Department of Commerce 
(see 15 CFR Part 30).  
 
   (e) Merchandise produced or manufactured in a zone returned to Customs
territory after exportation. Merchandise produced or manufactured in a 
zone and exported without having been transferred to Customs territory 
other than for exportation or for transportation and exportation will be 
subject, on its return to Customs territory, to the duties and taxes 
applicable to like articles of wholly foreign origin, unless it is 
conclusively established that it was produced or manufactured exclusively 
with the use of domestic merchandise. The identity of the domestic 
merchandise must have been maintained in accordance with the provisions 
of this part, in which case that merchandise will be subject to the 
provisions of Schedule 8, Part 1, Tariff Schedules of the United States 
(19 U.S.C. 1202). 
 
   @ 146.69 Removal for transportation or exportation; subzone or 
noncontiguous zone site. 
 
   (a) Weekly permit. The district director may allow a person with the 
right to make entry at a subzone or noncontiguous zone site, with an 
application for special procedures approved under @ 146.13, to file an 
application for a weekly permit to enter and release merchandise during 
a calendar week for exportation, transportation, or transportation and 
exportation. The application will be on Customs Form 7512 stating at the 
top the words "Application for Weekly Zone Permit," and will be filed 
with the district director. The application must be accompanied by a pro 
forma invoice or schedule like that required in @ 146.63(b)(2). If actual 
removals will exceed the estimate for the week, the person with the right 
to make entry shall file a supplemental Customs Form 7512 to cover the 
additional merchandise to be removed from the subzone or zone site. No 
merchandise covered by the weekly permit may be removed before approval 
of the application by the district director. 
 
   (b) Individual entires. After approval of the application for a weekly
permit by the district director, the person with the right to make entry
will be authorized to execute individual Customs Forms 7512 for 
exportation, transportation, or transportation and exportation of the 
merchandise covered by permit. Upon removal of the merchandise, the 
operator shall obtain a receipt from the carrier to assure its assumption 
of liability under the carrier's or cartman's bond. Customs will consider 
the time of entry to be when the removing carrier signs the receipt for 
the merchandise. The operator shall give the bonded carrier a copy of the
individual Customs Form 7512 and the destination copy (Customs Form 
7512-C), as provided for in @ 18.2(c) of this chapter. The operator also
shall ensure that the district director receives a copy of the Customs 
Form 7512 and the origin copy (Customs Form 7512-C) by the end of the 
next working day after the carrier has receipted for the merchandise.  
 
   (c) Statement of merchandise entered. The person with right to enter 
merchandise under an approved weekly permit shall file with the district
director, by the close of business on the second working day of the 
week following the week designated on the permit, a statement of the 
merchandise entered under that permit. The statement must list each 
Customs Form 7512 by its unique I.T. number, and will provide a 
reconciliation of the quantities on the weekly permit with the manifested 
quantities on the individual customs Forms 7512 submitted to Customs, as 
well as an explanation of any discrepancy.  
 
   @ 146.70 Supplies, equipment, and repair material for vessels or 
aircraft.  
 
   (a) Applicability. Any merchandise which may be withdrawn duty and 
tax-free in Customs territory under section 309 or 317 of the Tariff Act 
of 1930, as amended (19 U.S.C. 1309, 1317), and @@10.59 through 10.65 of 
this chapter may similarily be withdrawn from a zone, regardless of its 
zone status, under those statutes and regulations. Domestic merchandise 
is not subject to the provisions of this section and may be withdrawn 
from a zone in accordance with the provisions of @ 146.72. 
 
   (b) Merchandise for delivery within zone. The withdrawal of 
merchandise provided for in paragraph (a) of this section, for delivery 
within the zone where withdrawn to a qualified vessel or aircraft, or 
as ground equipment of a qualified aircraft, will be on Customs Form 7512 
(see @ 10.60 of this chapter).  
 
   (1) Who may make entry to withdraw. The entry to withdraw merchandise 
under this section will be made by the person specified in @ 146.62, 
except when the withdrawal is made under the provisions of @ 10.60 (b) 
and (c) of this chapter. 
 
   (2) Supporting documents. The entry must be supported by an 
application for lading in the same form as the application in @ 146.68(a)
(1), and a bond on Customs Form 301 containing the bond conditions 
provided for in @ 113.64 of the chapter. 
 
   (3) Release of articles. Upon acceptance of the application and bond, 
the district director shall release the merchandise to the operator for 
delivery to the qualified vessel or aircraft for lading in the zone.  
 
   (c) Merchandise for delivery outside zone. The withdrawal of 
merchandise provided for in paragraph (a) of this section, for delivery 
at a place outside the zone in the same or at a different port to a 
qualified vessel or aircraft, or as ground equipment of a qualified 
aircraft, will be on Customs Form 7512 (See @ 10.60 of this chapter). 
The withdrawal must contain the notations required in @@ 146.66 and 
146.71. 
 
   (1) The person making the withdrawal and the procedure to be followed 
are described in paragraph (b), except that no application for lading 
need accompany the Customs Form 7512. 
 
   (2) Upon acceptance of the withdrawal, the district director shall 
release the merchandise to the operator for delivery to the bonded 
cartman, lighterman, or carrier, for transportation through the Customs 
territory to the qualified lading vessel or aircraft. 
 
   @ 146.71 Transfer of zone-restricted merchandise into Customs territory
 
   (a) Type of entry. Zone-restricted merchandise may be removed to 
Customs territory only for entry for exportation, for entry for 
transportation and exportation, for warehousing pending 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 of the Tariff Act of 1930, as amended 
(19 U.S.C. 1309, 1317), unless the Board has ruled that the return of 
the merchandise to Customs territory for domestic consumption is in the 
public interest. With Board approval, that merchandise may be entered 
for comsumption, for warehousing, for immediate transportation without 
appraisement, or under any other provision of the Customs laws, unless 
the Board has speified the form of entry to be made. 
 
   (b) Removal to Customs territory for consumption. If the return of 
zone-restricted merchandise to Customs territory for consumption has been 
ruled by the Board to be in the public interest, the entry shall be 
endorsed by the district director to show the authority under which it 
was made, and that the merchandise is subject to the provisions of 
Schedule 8, Part 1, Tariff Schedules of the United States (19 U.S.C. 1202)
 
   (c)  Removal to Customs territory for warehousing. 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 he 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 for 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 5 years from the date of importation and no 
merchandise may be placed in a Customs bonded warehouse after 5 years 
from the date of importation.  
 
   (d) Removal from zone for other purposes. Upon acceptance of an entry 
or withdrawal for zone-restricted merchandise for any purpose other than 
that described in a Board order, the entry shall be endorsed by the 
person making entry to show that actual exportation of the merchandise 
is required by the fourth proviso to section 3 of the Act, as emended, 
or the entry endorsed to require delivery to a qualified vessel or 
aircraft, under section 309 or 317 of the Tariff Act of 1930, as amended 
(19 U.S.C. 1309, 1317), in addition to the notations required in @ 146.66.
 
   @ 146.72 Transfer of domestic merchandise into Customs Territory.  
 
   (a) Description of transaction. Except as provided for in paragraph 
(d), when domestic merchandise which has not been mixed, combined or 
repacked in a zone with merchandise having a different zone status is to 
be transferred from the zone to Customs territory, the operator shall 
sign and submit to the district director, in triplicate, a description 
of the proposed transaction which must include: 
 
   (1) The proposed date of transfer; 
 
   (2) The identification of the carrier; 
 
   (3) The destination of the shipment; and 
 
   (4) Identification of the merchandise by zone storage location, lot 
number or unique identifier, marks and numbers of packages, description, 
quantity, and zone status. If a form of tally prepared and signed by the 
operator for its own purposes contains the necessary information, it may 
be accepted in lieu of the description required in this paragraph. 
 
   (b) Permit of delivery. If the transfer is approved by the district 
director, the original of the description will be so stamped to serve as 
a permit of delivery. The original and one copy will be returned to the 
operator. No document other than the permit of delivery will be required 
to release the merchandise to the operator and authorize its transfer into 
Customs territory.  
 
   (c) Blanket submission. The district director may accept from the 
operator a blanket submission describing all domestic merchandise 
transferred to the Customs territory in one day by the same zone tenant, 
on the next working day after the merchandise was physically removed from 
the zone. If the merchandise is subsequently found to be, or to include, 
merchandise in another zone status, the district director may demand 
redelivery of the merchandise to the zone and assess liquidated damages 
and penalties as provided for in law and regulation.  
 
   (d) When no permit required. Merchandise in domestic status which has 
been admitted under @ 146.14, and which has not been mixed or combined with
merchandise of another status, may be removed from the zone without Customs 
permit using prudent business procedures. 
 
   @ 146.73 Release and removal of merchandise from zone.  
 
   (a) In general. Except as provided for in @ 146.72 (c) or (d), no 
merchandise will be removed from a zone without a Customs permit on the 
appropriate entry or withdrawal form or other document as required in 
this part. The district director may authorize a removal under a permit 
without physical supervision of or examination by a Customs officer. Upon 
issuance of a permit, the district director will authorize delivery of 
the merchandise only to the operator, who then may release the 
merchandise to the importer or carrier.  
 
   (b) Liability for discrepancy. When a removal is not physically 
supervised by a Customs officer, the operator will be relieved of 
responsibility only for the merchandise in a zone in the condition any 
quantity as shown on the entry, withdrawal, or other appropriate form. 
The operator will be relieved of responsibility only if it receives the 
signed receipt on the removal document of the importer or the carrier 
named in that document. The responsibility of the operator may be 
adjusted by any discrepancy report made jointly by the operator and the 
bonded cartman, lighterman, or carrier, or the importer, and signed by 
the above or an authorized representative within 15 days after removal 
of the merchandise from the zone. Any adjustment must be noted on the 
permit copy of the entry, withdrawal, or other removal document. A copy 
of any joint report of discrepancy must be submitted to the district 
director within 2 working days of signing by the parties. 
 
   (c) Time limit for removal. Merchandise for which a Customs permit 
for removal has been issued, if not retained in or readmitted to a zone 
under paragraph (d) of this section, must be removed from the zone 
within 5 working days of issuance of the permit. The district director, 
upon request of the operator, may extend that period for good cause. 
Merchandise awaiting removal within the required time limit will not be 
further manipulated or manufactured in the zone, but will be segregated 
or otherwise identified by the operator as merchandise that has been 
constructively transferred to the Customs territory. The district 
director shall order merchandise not removed from the zone in the 
allotted time, to be carried away by a Government cartman to a location 
designated by the district director at the risk and expense of the 
importer named in the entry, withdrawal, or other removal document as 
required in this part. 
 
   (d) Retention in zone of merchandise entered for consumption. (1) 
Merchandise which has been entered for consumption may be retained in 
the same zone, without physical removal therefrom, in domestic status 
upon application to and permit granted by the district director for 
admission. The application must be filed within 5 working days after the 
entry of the merchandise, under the procedure set forth in @ 146.39(b). 
An application for multiple entries will be submitted within 5 working 
days of the date of the earliest entry of merchandise covered by the 
application. The application will clearly identify the merchandise to 
be retained and state that the merchandise was entered from the same 
zone as that of retention, and list the entry number(s) and date(s). 
Merchandise which has undergone a change from a foreign status to 
domestic status in a zone, whether or not physically removed from that 
same zone to effect the change, will not be further processed in the 
zone. "Further processing," for the purposes of this section, includes 
machining, grinding, drilling, threading, punching, forming, plating, 
bolting, welding, painting, assemblying, and like operations.  
 
   (2) A component of merchandise which has been entered, but not 
physically removed from a zone will be restored to its last zone status, 
provided the district director determines that the component was included 
in the entry through clerical error, mistake of fact, or other 
inadvertance not amounting to an error in the construction of the law. 
Such an error, including that in appraisement of any entry or 
liquidation due to the above circumstances, may be corrected pursuant 
to section 520(c)(1), Tariff Act of 1930, as amended (19 U.S.C. 1520(c)
(1)), in accordance with the procedures described in Part 173 of this 
chapter. If the district director decides there has been no error, 
mistake, or inadvertance, or that the information was not timely 
provided, the component will be considered as overage and subject 
to the provisions of @ 146.55(d).  
 
   Subpart G -- Liquidated Damages; Penalties; Suspension; Revocation  
 
   @ 146.81 Liquidated damages. 
 
   (a) Compliance with law and regulation. The principal named on Customs 
Form 301 shall comply with: 
 
   (1) The law and regulations relating to admission, zone status, 
storage, exhibition, manipulation, manufacture, destruction, and removal 
of merchandise to, in, or from a zone; and 
 
   (2) The regulations contained in this part concerning inventory 
control and recordkeeping systems, and their maintenance, covering 
merchandise in a zone.  
 
   (b) Payment of duty and tax. The principal and surety shall pay 
liquidated damages equal to one time the value determined by Customs) of 
merchandise other than domestic merchandise for which no permit for 
admission is required (three times the value for restricted and alcoholic 
merchandise), which is discovered to be missing from a zone or cannot be 
accounted for in a zone. Such liquidated damages will be in addition to 
the full amount of any duties, taxes, and/or charges due, or estimated 
to be due, on the merchandise. The duty, tax, and/or charge in question 
will be determined solely by Customs.  
 
   (c) Default not relating to merchandise. If the principal defaults 
with respect to any of the terms or conditions of the Customs Form 301 
provided for in @ 113.73 of this chapter or the regulations in this 
part, not relating to merchandise, the principal and surety shall pay as 
liquidated damages an amount to be determined by the district director, 
but not to exceed $200 for each and every default, subject to guidelines 
and advice from Customs Headquarters.  
 
   (d) If the principal defaults on payment of the annual fee when due, 
the principal and surety agree to pay on demand by the district director 
as liquidated damages an amount equal to the annual fee due but not paid, 
and an amount equal to one percent of the annual fee for each day of the 
first 7 days the annual fee is in arrears, two percent of the annual fee 
for each of the succeeding 7 days the annual fee is in arrears, and 
three percent of the annual fee for each day thereafter in which the 
annual fee is in arrears.  
 
   (e) Other agreement. The principal and surety shall: 
 
   (1) Exonerate the United States and its officers from any risk, loss, 
or expense arising from the operation of a zone; and 
 
   (2) Pay the compensation and expenses of any Customs officer, as 
required by law or regulation. 
 
   @ 146.82 Penalties. 
 
   (a) Amount. Upon violation of the Act, or any regulation issued under 
the Act, by the grantee, or any officer, agent, or employee thereof, the 
person responsible for or permitting the violation shall be subject to a 
fine of not more than $1,000. Each day during which a violation continues 
will constitute a separate offense. Liquidated damages, where applicable, 
will be imposed in addition to the fine (19 U.S.C. 81s). 
 
   (b) Review. All fines assessed by the district director under this 
section will be reviewed by the Director, Entry Procedures and Penalties 
Division, Headquarters, to determine whether further action against the 
grantee or operator, such as suspension or a recommendation for 
revocation of the grant, is warranted. 
 
   @ 146.83 Suspension. 
 
   (a) For cause. The district director may suspend for cause the 
activated status of a zone or a zone site, or the privilege to receive, 
manufacture, manipulate, exhibit, destroy, or remove merchandise, at a 
zone for a period not to exceed 30 days, except that the district director 
may continue the suspension in any case where the operator fails to 
rectify, or fails to make a good faith effort to rectify the cause of 
the suspension. An action to suspend will be taken in accordance with the 
procedure set forth in paragraph (b) of this section if: 
 
   (1) The approval of the application to bond the zone was obtained 
through fraud or the misstatment of a material fact; 
 
   (2) The operator neglects or refuses to obey any proper order of a 
Customs officer or any Customs order, rule, or regulation relating to 
the operation or administration of a zone; 
 
   (3) The operator, or any officer of a corporation which has been 
granted the right to operate a zone, is convicted of or has committed 
an act that would constitute a felony, or would constitute a misdemeanor 
involving theft, smuggling, or a theft-connected crime. 
 
   (4) The operator fails to furnish a current list of names, addresses, 
or other information as required by @ 146.7; 
 
   (5) The operator does not provide a secure facility or properly 
safeguard merchandise within a zone; 
 
   (6) The operator fails to pay within 30 days after the due date all 
annual fees associated with the operation of a zone; 
 
   (7) The bond required by @ 146.6(b) is determined to be insufficient 
in amount or lacking sufficient surety, and a satisfactory new bond with 
good and sufficient surety is not furnished within a reasonable time;  
 
   (8) The operator, or any officer, agent, or employee of the operator, 
discloses to an unauthorized person proprietary information on a Customs 
form or contained in the inventory control and recordkeeping system; or  
 
   (9) The inventory control and recordkeeping system is impaired to the 
point where the identity of merchandise in zone status has been lost and 
cannot be reestablished without a suspension of zone operations. 
 
   (b) Procedure -- (1) Notice. The district director may at any time 
serve notice in writing upon an operator to show cause why its right to 
continue operation of a zone should not be suspended as provided for in 
paragraph (a) of this section. The notice will advise the operator of 
the grounds for the proposed action and will afford the operator an 
opportunity to respond in writing within 15 days after receipt of the 
notice. Thereafter, the district director shall consider the allegations 
and any response made by the operator and issue a decision, unless the 
operator requests a hearing in the matter.  
 
   (2) Hearing. If the operator requests a hearing, it will be held 
before a hearing officer designated by the Comissioner of Customs or 
his designee within 30 days following the operator's request. The 
operator may be represented by counsel at the hearing, and any evidence 
and testimony of witnesses in the proceeding, including substantiation 
of the allegations and the response thereto will be presented, with 
the right of cross-examination to both parties. A stenographic record 
of the proceeding will be made and a copy will be delivered to the 
operator. At the conclusion of the hearing, the hearing officer shall 
transmit promptly all papers and the stenographic record of the hearing 
to the regional commissioner of the region in which the zone is located, 
together with a recommendation for final action. 
 
   (3) Decision of regional commissioner. Within 10 calendar days after 
delivery to the operator of a copy of the stenographic record of the 
hearing, the operator may submit to the regional commissioner in writing 
any additional views or arguments. The regional commissioner thereafter 
shall render a decision in writing, stating reasons therefore. That 
decision will be served on the operator and will be considered the final 
Customs administrative action in the case.  
 
   @146.84 Revocation of zone grant. 
 
   (a) Recommendation of district director. The district director may at 
any time recommend to the Board that the privilege of establishing, 
operating, and maintaining a zone or subzone under Customs jurisdiction 
be revoked for willful and repeated violations of the Act (19 U.S.C. 
81r). If the district director believes that a substantial question of 
law exists as to whether willful and repeated violations of the Act 
have occurred, that officer should request internal advice under the 
provisions of Part 177 of this chapter from the Director, Carriers, 
Drawback and Bonds Division, Headquarters. A recommendation to the Board 
that a zone or subzone grant be revoked does not preclude, and may be in 
addition to, any liquidated damages, penalty, or suspension for cause.  
 
   (b) Decision of the Board. The procedure for revocation of a grant, 
the decision of the Board, and appeal, is covered by the provisions of 
the Act and  Title 15, Chapter IV, Part 400, Code of Federal Regulations.  
 
 
Conforming Amendments 
 
 
Parts 18, 24, 112, 141, 144, and 191 
 
   To conform the Customs Regulations to the changes made by the proposed 
revision of Part 146, Customs Regulations, it is proposed to amend Parts 
18, 24, 112, 141, 144, and 191 in the following manner: 
 
   PART 18 -- TRANSPORTATION IN BOND AND MERCHANDISE IN TRANSIT  
 
   It is proposed to amend @ 18.2, Customs Regulations, in the following 
manner:   
   1. By revising the heading to paragraph (a)(1) to read "Merchandise 
other than from warehouse or foreign-trade zone delivered to bonded 
carrier."  
 
   2. By removing the words "subparagraph (2)" in the first sentence of 
paragraph (a)(1) and inserting, in their place, the words "paragraphs 
(a)(2) and (a)(3) of this section." 
 
   3. By adding a new paragraph (a)(3) to read as follows:  
 
   @18.2 Receipt by carrier; manifest. 
 
   (a) * * * 
 
   (3) Merchandise delivered from foreign trade zone. When merchandise is 
delivered from a foreign-trade zone to a bonded carrier for transportation
in bond, supervision of lading will be accomplished in accordance with 
the procedure set forth in @ 146.73(a) of this chapter. 
 
 
* * * * * 
 
   PART 24 -- CUSTOMS FINANCIAL AND ACCOUNTING PROCEDURE  
 
   @ 24.13 [Amended] 
 
   It is proposed to amend the first sentence of paragraphs (c) and (f) 
of @ 24.13, Custom Regulations, to insert the words "a foreign-trade zone
operator," before the words "and bonded warehouse proprietors" and "a 
Customs bonded warehouse proprietor," respectively. 
 
   PART 112 -- CARRIERS, CARTMEN, AND LIGHTERMEN 
 
   It is proposed to revise the last sentence of @ 112.12(b)(3), Customs 
Regulations, to read as follows: 
 
    112.12 Application for authorization. 
 
 
* * * * * 
 
   (b) Special requirements. 
 
 
* * * * * 
 
   (3) Private carriers. * * * If the private carrier is the proprietor 
of one or more Customs bonded warehouses or bonded container stations, 
or the operator of a foreign-trade zone, to which imported merchandise 
will be transported, he shall accompany the bond and copies of the bond 
by a statement showing the location of each warehouse and container 
station, or zone.  
 
 
* * * * * 
 
   PART 141 -- ENTRY OF MERCHANDISE 
 
   It is proposed to revise @ 141.111(d), Customs Regulations, to read 
as follows: 
 
   @ 141.111 Carrier's release order. 
 
 
* * * * * 
 
   (d) Qualified release order. In the case of merchandise which is 
entered for warehousing, for transportation in bond, for exportation, or 
is to be admitted to a foreign-trade zone, the release order may be 
qualified as follows:  
 
   (1) "For transfer to the bonded warehouse designated in the warehouse 
entry," if the merchandise is entered for warehousing; 
 
   (2) "For transfer to the bonded carrier designated in the 
transportation entry," if the merchandise is entered for transportation 
in bond;  
 
   (3) "For transfer to the carrier designated in the export entry," if 
the merchandise is entered for exportation; or 
 
   (4) "For transfer to the foreign-trade zone designated in Customs Form
214," if the merchandise is to be admitted to a foreign-trade zone.  
 
   PART 144 -- WAREHOUSE AND REWAREHOUSE ENTRIES AND WITHDRAWALS  
 
   1. It is proposed to revise @ 144.36(g), Customs Regulations, to read 
as follows: 
 
   @ 144.36 Withdrawal for transportation. 
 
 
* * * * * 
 
   (g) Procedure at destination. Upon arrival at destination, the 
merchandise may be: 
 
   (1) Entered for rewarehouse in accordance with @ 144.41;  
 
   (2) Entered for combined rewarehouse and withdrawal for consumption in 
accordance with @ 144.42; 
 
   (3) Exported in accordance with paragraph (h) of this section;  
 
   (4) Forwarded to another port or returned to the port of origin in 
accordance with @ 18.5 (c) or (d) of this chapter; or 
 
   (5) Admitted to a foreign-trade zone as provided in @ 146.32 of this 
chapter.  
 
 
* * * * * 
 
   2. It is proposed to amend @ 144.37, Customs Regulations, by adding a 
new paragraph (g), to read as follows: 
 
   @ 144.37 Withdrawal for exportation. 
 
 
* * * * * 
 
   (g) Exportation at a foreign-trade zone. Merchandise may be withdrawn 
for exportation at a foreign-trade zone in the same or at a different 
port. The merchandise will be considered exported upon admission to a 
zone in zone-restricted status, as provided in @ 146.44(c) of this 
chapter.  
 
   PART 191 -- DRAWBACK 
 
   1. It is proposed to amend @ 191.162, Customs Regulations, by removing
reference to "@ 146.25," and inserting, in its place reference to 
"@ 146.44."  
 
   2. It is proposed to revise @ 191.163 (c) and (d), Customs Regulations, 
to read as follows: 
 
   @ 191.163 Articles manufactured or produced in the United States.  
 
 
* * * * * 
 
   (c) Action of the district director on the notice of transfer. The 
district director shall assign a number to each notice of transfer, 
return one copy to the transferor and forward another copy to the zone 
operator at the foreign-trade zone. 
 
   (d) Action of foreign-trade zone operator. After articles have been 
received in the zone, the zone operator at the zone shall certify on a 
copy of the notice of transfer the receipt of the articles (see @ 
191.164(d)(2)) and forward the notice to the transferor or the person 
designated by the transferor. The transferor shall verify that the notice 
has been certified before filing it with the drawback entry. 
 
 
* * * * * 
 
   3. It is proposed to revise paragraphs (b) and (c) of @ 191.164, 
Customs Regulations, to read as follows: 
 
   @ 191.164 Merchandise transferred from continuous Customs custody.  
 
 
* * * * * 
 
   (b) Drawback entry. Before the transfer of merchandise from continuous 
Customs custody to a foreign trade zone, the importer or a person 
designated in writing by the importer for that purpose shall file with 
the district director a direct export entry on Customs Form 7512 in 
duplicate. The district director shall forward one copy of Customs Form 
7512 to the zone operator at the zone.  
 
   (c) Certification by zone operator. After the merchandise has been 
received in the zone, the zone operator at the zone shall certify on the 
copy of Customs Form 7512 the receipt of the merchandise (see paragraph 
(d)(2) of this section) and forward the form to the transferor or the 
person designated by the transferor. After executing the certifications 
provided for in paragraph (d)(3) of this section, the transferor shall 
resubmit Customs Form 7512 to the district director in place of the bill 
of lading required by @ 191.136.  
 
 
* * * * * 
 
   4. It is proposed to revise paragraphs (b) and (c) of @ 191.165, 
Customs Regulations, to read as follows: 
 
   @ 191.165 Same condition drawback merchandise and merchandise not 
conforming to sample or specifications or shipped without the consent of 
the consignee.  
 
 
* * * * * 
 
   (b) Drawback entry. Before transfer of the merchandise to a foreign-
trade zone, the importer or a person designated in writing by the 
importer for that purpose shall file with the district director an entry 
on Customs Form 7539 in duplicate. The district director shall forward 
one copy of Customs Form 7539 to the zone operator at the zone. 
 
   (c) Certification by zone operator. After the merchandise has been 
received in the zone, the zone operator at the zone shall certify on the 
copy of Customs Form 7539 the receipt of the merchandise and forward the 
form to the transferor or the person designated by the transferor. After 
executing the certifications provided for in paragraph (d)(3) of this 
section, the transferor shall resubmit Customs Form 7539 to the district 
director in place of the bill of lading required by @ 191.136. 
 
 
* * * * * 
 
 
Alfred R. De Angelus, 
 
   Acting Commissioner of Customs. 
 
   Approved: June 29, 1984. 
 
 
John M. Walker, Jr., 
 
   Assistant Secretary of the Treasury.  
                           Parallel Reference Table 
     [This table shows the relationship of sections in revised Part 146 to 
                             superseded Part 146] 
Revised section                         Superseded section 
146.0                                   146.0. 
146.1(a)                                146.1(a). 
146.1(b)                                New. 
146.1(c)                                New. 
146.1(d)                                146.1(b). 
146.1(e)                                146.1(c). 
146.1(f)                                New. 
146.1(g)                                146.1(d). 
146.1(h)(1), (2)                        146.1(e)(1), (2). 
146.1(h)(3), (4)                        New. 
146.1(i)                                New. 
146.1(j)                                New. 
146.1(k)                                New. 
146.1(l)                                146.1(f). 
146.2                                   146.2. 
146.3(a)                                146.3. 
146.3(b)                                New. 
146.4                                   New. 
146.5                                   146.4. 
146.6                                   New. 
146.7                                   New. 
146.8                                   New. 
146.9                                   146.5. 
146.10                                  146.6. 
146.11(a), (b), (c)                     146.7(a), (b), (c). 
146.11(d)                               New. 
146.12                                  146.8. 
146.13                                  New. 
146.14                                  New. 
146.15                                  New. 
146.16                                  New. 
146.17                                  New. 
146.21                                  New. 
146.22                                  New. 
146.23                                  New. 
146.24                                  New. 
146.25                                  New. 
146.26                                  New. 
146.31                                  146.11. 
146.32(a)                               146.12(a). 
146.32(b)(1)                            New. 
146.32(b)(2)                            146.12(b)(1)(ii). 
146.32(b)(3)                            146.12(b)(1)(i). 
146.33                                  146.13. 
146.34                                  146.14. 
146.35                                  New. 
146.36                                  New. 
146.37                                  New. 
146.38                                  146.15. 
146.39                                  New. 
146.40                                  New. 
146.41(a), (b), (c)                     146.21(a), (b), (c)(1)(2). 
146.41(d)                               146.21(c)(3)(i), (v). 
146.41(e)                               146.21(c)(3)(iv). 
146.41(f)                               146.21(d). 
146.42                                  146.23. 
146.43                                  146.22, 146.24. 
146.44(a), (b), (c)(d)                  146.25(a), (b), (c)(d). 
146.51                                  146.31(a), (b). 
146.52(a)(1)                            146.32(a). 
146.52(a)(2)                            New. 
146.52(b)(1)                            146.32(b). 
146.52(b)(2)                            146.21(f). 
146.52(c)                               146.32(c). 
146.52(d)(1)                            146.32(d)(1). 
146.52(d)(2)                            New. 
146.53(a), (b)                          146.33(a), (b). 
146.53(c)                               New. 
146.54                                  New. 
146.55(a)(1), (3), (4), and (b)         146.31(c). 
146.55(a)(2), (c), (d), and (e)         New. 
146.61                                  146.48(b). 
146.62                                  146.45(b)(2), (c)(2). 
146.63(a)(1)                            146.45(a). 
146.63(a)(2)                            146.46(a). 
146.63(a)(3)                            146.48(a)(1). 
146.63(a)(4)                            146.48(a)(2). 
146.63(a)(5)                            146.48(a)(3). 
 
                                        146.45(b)(1), 146.46(b)(1),146.48(c)
146.63(b)(1)                            (d). 
146.63(b)(2)                            New. 
146.63(c)                               New. 
146.63(d)                               New. 
146.63(e)(1)                            146.45(c)(1), 146.46(c). 
146.63(e)(2)                            146.46(b)(2). 
146.63(e)(3)                            146.45(c)(4). 
146.63(e)(4)                            146.45(c)(2). 
146.64(a)                               146.48(c). 
146.64(b)                               146.47(e)(4). 
146.64(c)                               New. 
146.65(a)                               New. 
146.65(b)(1)                            146.21(c)(3)(i),146.45(b)(4),(c)(6)
146.65(b)(2)                            146.(e)(1). 
146.65(c)                               146.48(e)(2). 
146.67(b)(2)                            146.43(b)(1). 
146.67(c)                               146.43(b)(2). 
146.67(d)                               New. 
146.68(a)                               146.41. 
146.68(b), (c)                          146.45(d), 146.46(d). 
146.68(d)                               New. 
146.68(e)                               146.46(e). 
146.69                                  New. 
146.70                                  146.42. 
146.71(a)                               146.47(a). 
146.71(b)                               146.47(e)(3). 
146.71(c)                               146.47(e)(4). 
146.71(d)                               146.47(e)(3). 
146.72(a)(b)                            146.44(a), (b). 
146.72(c)                               New. 
146.72(d)                               New. 
146.73                                  New. 
146.81                                  New. 
146.82                                  New. 
146.83                                  New. 
146.84                                  New. 
 
                           Parallel Reference Table   [This table shows 
the relationship of sections 	in superseded Part 146 to revised Part 146]
Old section                             New section 
146.0                                   146.0. 
146.1(a)                                146.1(a). 
146.1(b)                                146.1(d). 
146.1(c)                                146.1(e). 
146.1(d)                                146.1(g). 
146.1(e) (1) and (2)                    146.1(h) (1) and (2). 
146.1(f)                                146.1(l). 
146.2                                   146.2. 
146.3                                   146.3(a). 
146.4                                   146.5. 
146.5                                   146.9. 
146.6                                   146.10. 
146.7 (a), (b), and (c)                 146.11 (a), (b), and (c). 
146.8                                   146.12. 
146.11                                  146.31. 
146.12(a)                               146.32(a). 
146.12(b)(1)(i)                         146.32(b)(3). 
146.12(b)(1)(ii)                        146.32(b)(2). 
146.12(b)(2)                            146.32(b)(4). 
146.12(c) (1), (2), and (3)             146.32(c) (1), (2), and (4). 
146.13                                  146.33. 
146.14                                  146.34. 
146.15                                  146.38. 
146.21 (a), (b), and (c)(1)(2)          146.41 (a), (b), and (c). 
146.21(c)(3) (i) and (v)                146.41(d); 146.65(b)(1). 
146.22                                  146.43. 
146.23                                  146.42. 
146.24                                  146.43. 
146.25                                  146.44. 
146.31(a)(b)                            146.51. 
146.31(c)                               146.55(a) (1), (3), (4), and (b). 
146.32(a)                               146.52(a)(1). 
146.32(b)                               146.52(b)(1). 
146.32(c)                               146.52(c). 
146.32(d)(1)                            146.52(d)(1). 
146.32(d)(2)                            Removed. 
146.33                                  146.53 (a) and (b). 
146.41                                  146.68(a). 
146.42                                  146.70. 
146.43(a)                               146.67(a). 
146.43(b)(1)                            146.67(b)(2). 
146.43(b)(2)                            146.67(c). 
146.44                                  146.72 (a) and (b). 
146.45(a)                               146.63(a)(1). 
146.45(b)(1)                            146.63(b)(1). 
146.45(b)(2)                            146.62. 
146.45(b)(3)                            Removed. 
146.45(b)(4)                            146.65(b)(1). 
146.45(b)(5)                            Removed. 
146.45(c)(1)                            146.63(e)(1). 
146.45(c)(2)                            146.62; 146.63(e)(4). 
146.45(c)(3)                            Removed. 
146.45(c)(4)                            146.63(e)(3). 
146.45(c)(5)                            Removed. 
146.45(c)(6)                            146.65(b)(1). 
146.45(d)                               146.68(b). 
146.46(a)                               146.63(a)(2). 
146.46(b)(1)                            146.63(b)(1). 
146.46(b)(2)                            146.63(e)(2). 
146.46(c)                               146.63(e)(1). 
146.46(d)                               146.68(c). 
146.46(e)                               146.68(e). 
146.47(a)                               146.71(a).146.47(b),(c),(d),(e),
(1) and (2)  Removed. 
146.47(e)(3)                            146.71 (b) and (d). 
146.47(e)(4)                            146.64(b); 146.71(c). 
146.47(f)                               Removed. 
146.48(a)(1)                            146.63(a)(3). 
146.48(a)(2)                            146.63(a)(4). 
146.48(a)(3)                            146.63(a)(5). 
146.48(b)                               146.61. 
146.48 (c) and (d)                      146.63(b)(1); 146.64(a). 
146.48(e)(1)                            146.65(b)(2). 
146.48(e)(2)                            146.65(c). 
146.48(f)                               146.65(d)(1).
[FR Doc. 84-18734 Filed 7-16-84; 8:45 am] 
 
   BILLING CODE 4820-02-M 
 
   Appendix A -- Calculation of Foreign Trade Zone Activation and 
Alteration Fees 
 
   Note. -- The following appendix will not appear in the Code of Federal 
Regulations. 
 
 
A. Activation and Alteration Process 
 
   Before an application for a foreign trade zone, noncontiguous zone 
site with an operator different from already-activated site(s), or a 
subzone is approved by the District Director, the following tasks must 
be accomplished:  
 
   1. Determine that the application is in proper form; 
 
   2. Survey the premises to determine if all physical requirements are 
met;  
 
   3. Perform a background investigation of the applicant and the 
applicant's officers and employees; 
 
   4. Prepare a report of the survey and investigation; and  
 
   5. Review the application, survey and investigation reports, and other
pertinent information, and prepare a response to the applicant.  
 
   Customs must also preform a background investigation of any new 
operator selected for an operating agreement with the grantee, after 
initial activation, and assumes that a new operator is selected on the 
average of every seven years.  
 
   Tasks similar to those for activation must be accomplished when an 
application for alteration is filed with the District Director, except 
that no background investigation is required. 
 
 
B. Activation Fee for General-Purpose Zones 
 
   The following cost elements are included in the activation fee for 
general-purpose zones. The costs of the tasks performed by a Customs 
Special Agent have been increased by one-seventh to cover the cost of 
subsequent background investigations of new zone operators, rather than 
charge a separate fee upon application for approval of new operators.   
Element                      Title          Average grade   Average  Hourly 
                                                              hours    rate 
Initial application review   Clerk          (GS-5/5)            (1) ($8.81) 
Premises survey              Inspector      (GS-11/5)          (15) (18.28) 
Background investigation     Agent          (GS-12/5)          (27) (21.92) 
Typing reports and response  Clerk          (GS-5/5)            (4)  (8.81) 
Final review                 Administrator  (GS-13/5)           (3) (26.07) 
 
   Travel -- 3 round trips X 40 miles X 20 cents per mile ($24).  
 
   The fee is rounded off to the nearest $10 ($1,020). 
 
 
C. Activation Fee for Subzones and Certain Noncontiguous Zone Sites  
 
   The following cost elements are included in the activation fee for 
subzones and for noncontiguous zone sites having a different operator than 
the already-activated site(s). Normally, the operator of a noncontiguous 
zone site with an operator different from other sites is a manager of a 
single enterprise that occupies the entire site, and is treated, for 
activation purposes, as a subzone operator.   
Element                      Title          Average grade   Average  Hourly 
                                                              hours    rate 
Initial application review   Clerk          (GS-5/5)            (2) ($8.81) 
Premises survey              Inspector      (GS-11/5)          (18) (18.28) 
Background investigation     Agent          (GS-12/5)          (66) (21.92) 
Typing reports and response  Clerk          (GS-5/5)            (6)  (8.81) 
Final review                 Administrator  (GS-13/5)           (4) (26.07) 
 
   Travel -- 3 round trips X 60 miles X 20 cents per mile ($36).  
 
   The fee is rounded off to the nearest $10 ($1,960). 
 
 
D. Alteration Fee for Zones and Subzones 
 
   The following cost elements are included in the alteration fee for all 
zones, zone sites, and subzones. No background investigation is made upon 
alteration, so no cost for that element is included.   
Element                      Title          Average grade   Average  Hourly 
                                                              hours    rate 
Initial application review   Clerk          (GS-5/5)            (1) ($8.81) 
Premises survey              Inspector      (GS-11/5)          (14) (18.28) 
Typing reports and response  Clerk          (GS-5/5)            (3)  (8.81) 
Final review                 Administrator  (GS-13/5)           (2) (26.07) 
 
   Travel -- 2 round trips X 40 miles X 20 cents per mile ($16).  
 
   The fee is rounded off to the nearest $10 ($360). 
 
 
E. Administration of Fees 
 
   The above amounts in parentheses indicate cost estimates for Customs 
for Calendar Year 1983 and 1984. The fee will be adjusted annually to 
take into account changes in Customs employee pay scales, and adjusted 
periodically for changes in investigation and survey practices and other 
factors that affect the way applications for activation and alteration 
are processed. On December 1 of each year, the fee will be announced to 
the public for collection during the coming calendar year. 
 
   The hourly rate listed for Customs employees includes an amount (37 
percent) added for fringe benefits. The fringe benefit amount is 
calculated according to @ 24.17(d), Customs Regulations. 
 
   The activation fee covers all sites of a zone or subzone at the time 
of the original activation. The alteration fee is separate for each site 
in respect to which an alteration takes place. 
 
   Example: If an already activated zone wishes to activate two new 
noncontiguous sites under the same operator, the fee is 2 X $360 or $720.
 
   The fee is payable with the applications for activation or alteration. 
The District Director will provide a receipt for the fee to applicants 
on Customs Form 5104, Cash Receipt. 
 
   Appendix B -- Calculation of Annual Fees 
 
   Note. -- The following appendix will not appear in the Code of Federal 
Regulations. 
 
 
A. Distinction Between Small and Large General-Purpose Zones  
 
   Small zones are those with less than $10,000,000 worth of combined 
receipts and deliveries of merchandise, foreign and domestic, for the 
latest reporting year. Large zones are those with more than $10,000,000 
of receipts and deliveries. The dollar volume is the amount reported to 
the Foreign Trade Zones Board for the latest year in which they are 
available to the District Director. New general-purpose zones for which 
no amount has yet been reported are assumed to be small zones. Subzones to
which the special subzone fee (see B. of this appendix) does not apply 
will have the same fee as a general-purpose zone of a corresponding 
dollar value of receipts and deliveries. 
 
 
B. Fee for Small General-Purpose Zones 
 
   The annual fee for small general-purpose zones will be computed from 
the following annual Customs cost elements:  
Element                       Average     Title      Average         Hourly 
                                hours                grade             rate 
                                                                         ($ 
Merchandise examination           (6)   Inspector    (GS-9/5)        15.12) 
Spot check inspections           (16) Sr. Inspector  (GS-11/1)      (16.17) 
Audits                           (67)    Auditor     (GS-12/1)      (19.35) 
Clerical support                 (10)  Clerk/typist  (GS-5/1)        (8.81) 
Management and supervision        (5)   Supervisor   (GS-14/1)      (27.18) 
 
   Plus travel and per diem costs, mostly for audits ($691).  
 
   Fee will be rounded off to nearest $100 ($2,600). 
 
   The amounts above in parentheses represent estimates for Calendar Year 
1983 and 1984. 
 
 
C. Fee for Large General-Purpose Zones 
 
   The annual fee for large general-purpose zones will be computed from 
the following annual Customs cost elements:  
 
Clerical support                   15  Clerk/typist  GS-5/1            8.81 
Management and supervision          7   Supervisor   GS-14/1          27.18 
 
   Plus travel and per diem, mostly for audits ($1,084).  
 
   Fee rounded off to nearest $100 ($7,600). 
 
 
D. Fee for Subzones and Noncontiguous Zone Sites 
 
   The annual fee for subzones and noncontiguous zone sites will be 
tailored according to the characteristics of the particular zone 
situation. Customs costs will be estimated by the Regional Commissioner 
in November of each year for the following calendar year and reported to 
each affected subzone and zone site operator in the region not later than 
December 1 of each year. For new subzones and noncontiguous zone sites 
the estimated costs will be those incurred by Customs between approval of 
the application for activation and the end of the current calendar year, 
and reported to the subzone or zone site operator before approval of the 
application. 
 
   The costs will be calculated by the Regional Commissioner according to 
the following guidelines: 
 
   1. Merchandise examinations 
 
   Number of examinations per year X avarage time for examination X 
hourly rate plus 37 percent of average grade level of officers who 
perform examinations. Examination costs for covered subzones and zone 
sites should be low because the nature of these sites precludes 
examination of most merchandise.  
 
   2. Spot check inspections 
 
   Number of spot checks per year X number of officers per spot check X 
average time per spot check, including tactical planning X hourly rate 
plus 37 percent of average grade level of officers who conduct spot checks.
 
   3. Audits 
 
   Number of staff-hours per audit divided by frequency of audit X hourly 
rate plus 37 percent of average grade level of officers who conduct audit.
 
   4. Clerical support 
 
   Number of staff-hours for filing Customs Form 214 for spot check 
planning, typing and filing spot check reports, typing and filing audit 
reports, typing and filing liquidated damages notices, preparing work 
schedules, and performing miscellaneous clerical support tasks related to 
individual subzone or noncontiguous zone site X hourly rate plus 37 
percent of average grade level of employees who provide clerical 
support. 
 
   5. Management and supervision 
 
   Number of staff-hours for planning spot check and audit programs, 
reviewing spot check and audit reports, supervising spot check and audit 
personnel, reviewing liquidated damages notices and petitions, meeting 
with operators concerning results of spot checks and audits, and 
providing Headquarters and regional operational program support X hourly 
rate plus 37 percent of average grade level of supervisors and managers 
who perform these tasks in relation to the subzone or zone site. 
 
   6. Travel and per diem 
 
   a.Spot checks. Number of spot checks per year X round trip mileage to 
site X current mileage reimbursement rate (or number of spot checks X 
common carrier passenger fare), plus other reimbursable costs to officer 
(tolls, parking, per diem or actual expenses), where applicable. 
 
   b. Audits. Round trip common carrier passenger fare (or round trip 
mileage to site X current mileage reimbursement rate), plus per diem or 
actual expenses as fixed by the U.S. Government, plus other reimbursable 
costs (rental vehicle, tolls, parking, etc.), all of the foregoing 
divided by the frequency of the audit, i.e., the number of years from 
one audit to the next.  
 
 
E. General Information About Fees 
 
   1. The estimates for general-purpose zones will be adjusted annually 
to reflect U.S. employee pay changes and periodically to reflect changes 
in average grade levels for the tasks and time consumed in the activity 
element. All elements for subzones and covered non-contiguous zone sites 
will be adjusted annually. All fees will be rounded off the nearest $100.
 
   2. The hourly rates will be at the current General Schedule pay levels
as of December 1 of each year, plus 37 percent for fringe benefits, 
calculated as noted in @ 24.17(d), Customs Regulations. 
 
   3. All costs are estimates for the calendar year and will remain the 
same for the zone regardless how much time is consumed or how many 
employees are actually involved in zone supervision activities. The 
amount of Customs staff-hours actually spent in a zone in a given year 
is not necessarily indicative of Customs estimated costs for the 
following year. 
 
   4. Audit costs are prorated over the number of years anticipated from 
one audit to the next. 
 
   5. Costs for general purpose zones are prorated over the number of 
zones in the same large or small size category. 
 
   6. The annual fees will be recalculated each year and announced on 
December 1 for the coming calendar year. They will be announced by the 
District Director for the zones within his or her jurisdiction. 
 
   7. The fees are due and payable upon approval of the application for 
activation and on January 1 of each subsequent calendar year. The annual 
fee paid upon approval of the application shall be prorated by the 
District Director over the full and partial months remaining in the 
calendar year.  
 
   8. The fees shall be paid within 14 calendar days of the due date. If 
not timely paid, liquidated damages shall be assessed under the bond 
rider. Action may be taken to suspend activation when payment of the fee 
is in arrears more than 30 days. There shall be no refund of any annual 
fees paid to the District Director because of deactivation or suspension 
of activation of a zone, or termination of activation. 
 
   9. The fees cover all of the sites of a zone or subzone operated by 
the same operator within the jurisdiction of the same port. 
 
   10. Payment of the fees shall be made according to the procedures in 
@ 24.1, Customs Regulations. The District Director shall provide a 
receipt on Customs Form 5104, Cash Receipt. 
 
   Appendix C -- Initial Regulatory Flexibility Analysis on Proposed 
Customs Regulations Amendments Relating to Foreign Trade Zones 
 
   Note. -- The following appendix will not appear in the Code of Federal 
Regulations. 
 
 
Introduction 
 
   The economic impact review below constitutes the Customs Service 
initial regulatory flexibility analysis in compliance with the 
requirements of section 3 of the Regulatory Flexibility Act (5 U.S.C. 
603). The Act requires that regulatory effects be analyzed so as to 
determine and quantify, if possible, the economic effects of proposals 
on small business operations. The Act's key concepts revolve around 
identifying "significant economic impacts on a substantial number of 
small entities." The initial analysis will be modified as necessary into 
a final regulatory flexibility analysis upon receipt and review of public 
comments resulting from Federal Register publication of this notice of 
proposed rulemaking. 
 
 
Rationale 
 
   The number of Foreign Trade Zones, complexity of operations and volume 
of trade passing through zones has increased significantly in recent 
years. From less than 20 zones in the early 1970's, activated zones and 
sub-zones at the end of 1982 numbered 65, with 22 pending applications 
for new zones and 19 approved but not activated zones. 
 
   Meanwhile, Customs inspection and supervision of zone activity has 
changed little in practice. Secular reductions in agency resources have 
combined with unchanged practices to produce (1) operational hardships 
on zone grantees and tenants and (2) uncertain inspection and control 
of zone activity.  
 
   The proposed revisions to 19 CFR Parts 18, 24, 112, 141, 144 and 146 
(relating to Customs administration of foreign trade zones) and 191 is 
an administrative attempt to update zone supervision in accordance with 
current business practices. Objectives 
 
   The proposal is intended to bring about three fundamental changes:  
 
   (1) The method of accountability of merchandise admitted stored, 
manipulated, exhibited, manufactured and removed from zones; 
 
   (2) The method of enforcement of Customs laws through audits and 
spot checks instead of more costly physical presence of inspectional 
resources; and  
 
   (3) The method of reimbursing Customs for its zone-related operational 
expenses.  
 
Legal Basis for Proposal 
 
   This regulatory project is initiated 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). 
 
 
Estimated Number of Small Entities Affected 
 
   Tallies of zone activity in Customs regions indicate that approximately 
1,500 tenants occupy space in zones and carry out the range of permitted 
manipulation, manufacturing and storage activities. Of these, 600 operate 
on a full-time, year-round basis. The remaining 900 operate on a part-
time basis. These estimates do not include tenants in foreign trade sub-
zones. Sub-zone tenants tend to be large (oftentimes multinational) 
corporations and thus do not fit within the purview of the requirements 
of the Regulatory Flexibility Act which concentrate on small business 
concerns. 
 
 
Economic Effects of Compliance With the Proposal 
 
   After review of the proposal's work plan, we have identified within the 
proposal the following six procedural/administrative and fee-related 
changes likely to affect economic concerns of small business: 
 
 
A. Procedural administrative changes 
 
   1. Inventory, record keeping and control system 
 
   2. Operators' control over admission and removal of goods.  
 
   3. Elimination of Customs forms 7502/7505/215 
 
   4. Mandatory bonding 
 
 
B. Fee changes 
 
   1. Elimination of present form of reimbursement to Customs  
 
   2. Annual fee covering audits and spot checks 
 
   3. Zone activation and boundary alteration fee. 
 
   A. Procedural/Administrative Changes 
 
   Inventory record keeping and control system. An inventory record 
keeping and control system with Customs prescribed data will result 
from this proposal. A similar system (Alternative Inventory Control 
System) has been in effect since 1976 and currently operates at 7 
general purpose zones. Data required for the new system will consist 
of standard business data currently collected and tabulated for small 
tenants by each zone's operator/grantee. We do not anticipate a 
significant net reporting burden on tenants or operators as a result of 
this segment of the proposal. 
 
   Operators' control over admission and removal of goods. Under present 
Customs supervision, a Customs officer must be present to clear 
admissions of merchandise to and removals of merchandise from a zone, 
thus limiting these transactions to the availability of a Customs officer.
Under the present proposal, an operator will be able to admit and remove 
merchandise without a Customs officer being present, after receiving 
Customs approval. However, Customs approval for admission will require an 
invoice in support of the application for admission on CF 214 and that the
merchandise be retained for Customs examination at the place of unlading, 
the zone, or other locations designated by the district director. 
Presentation of an invoice and merchandise examination prior to admission
are not currently required and will represent an additional paperwork 
requirement and possible delay in the arrival of merchandise at the zone.
Customs approval for removals will be simplified by a reduction in 
paperwork as outlined in the next section. In total, the additional 
admission requirements will be offset by the simplified removal procedure
and the enhanced business flexibility derived from being able to admit 
or remove merchandise freely into and out of the zone after Customs 
approval has been received. 
 
   Forms elimination -- Customs Forms 7502/7505/215. Under present 
practice, Customs forms 7502 and 214 are required to obtain privileged 
foreign status. Removal of privileged foreign status merchandise from a 
zone requires filing CF 7505 for consumption. CF 215 is required to 
remove all zone status merchandise, except merchandise in privileged 
status or wholly composed of merchandise in privileged status. The 
estimated number of forms filed in FY 1982 appear in Table 1 below.   
                                    Table 1Form: 
7502                                                       10,000 
7505                                                       20,000 
215                                                        40,000 
 
   Under a provision of this proposal, a request for privileged foreign 
status would require a CF 214 and invoice (as before) but would eliminate
the CF 7502. Upon removal of privileged foreign status goods from a zone,
the applicable entry form would replace the 7505 (no net gain or loss). 
Further, the CF 215 will be eliminated under this proposal. Current 
clerical, data base management and brokerage costs for an estimated 
50,000 forms 7502/215 would be eliminated, giving small businesses a net
gain on the order of $550,000 yearly from this procedural change. 
 
   Mandatory bonding. One of the major proposed changes in zone 
administration is to involve the operator/grantee in data keeping and 
reporting. A new mandatory bond at a minimum level of $50,000 would be 
required in another provision of the proposal, with the goal of 
encouraging operator/grantee accuracy in compliance with his new 
responsibilities. The new bond would cover non-compliance with these 
proposed regulations as well as losses of merchandise. In terms of 
practical effects of this provision on small businesses, we anticipate 
no net appreciable added burden or cost. Most activated zones currently 
have bonds which meet or exceed the proposed minimum level.  
 
   B. Fee Changes 
 
   Elimination of present form of customs reimbursement. Under present 
practices, operators/grantees reimburse Customs for inspectional 
services rendered at zones. In fiscal year 1982, payments to Customs 
totaled an estimated $1.6 million, of which $1.2 million pertain to 
operations at general purpose zones. Assuming operators charge tenants 
flat fees to recover these payments, then each small tenant pays an 
average of $800 per year for these present Customs services. The proposed
revisions would eliminate this $1.2 million present fee, substituting in 
its place (see below) tiered fees which would cover Customs costs in 
carrying out audits and spot checks. 
 
   A particular concern is underscored at this point, concerning the 
distribution of this $1.2 million benefit (eliminated Customs 
reimbursement). The 52 general purpose zones at the end of FY 1982 are 
widely distributed around the country. A small business interested in 
participating in a foreign trade zone generally finds itself limited to 
one and only one zone provider in its operating area. The offering of 
foreign trade zone services could thus be regarded as a monopolistic 
market condition. Significant administrative and application costs in 
seeking approval and setting up a zone essentially prevents access by 
(especially small) businesses. In essence, then they must generally 
contract with the sole established zone operator in that geographic area.
 
   In economic theory, the pricing practices of a good/service provided 
under monopolistic conditions are oriented towards extracting a maximum 
profit for the unique provider, and, in practice, the level of fees 
charged by some zone operators/grantees is a known concern of the 
Commerce Department's Foreign Trade Zone Board. 
 
   As stated above, average savings per tenant from elimination of Customs
reimbursement is expected to approximate $800 per year. Based on actual 
trade zone market conditions, however, real actual savings to tenants 
may total well below the average $800/year. We expect that zone operator/
grantees will pass through to small tenants only a portion (quite 
possibly small) of the total $1.2 million estimated benefit of this 
provision of the proposed regulation. Data submitted on this subject 
during the period of public comments would be especially valued in either
firming up or altering our estimate of this provision's benefit to small 
business concerns. 
 
   Annual fee. Calendar years 1983 and 1984 based fee schedule is tiered.
"Small" general purpose zones are defined as those whose receipts and 
deliveries total $10 million or less per year; "large" zones, greater 
than $10 million. At the end of FY 1982, about 35 of the 52 active 
general purpose zones were "small" for the purposes of this proposal. 
Small zones are to be charged an annual fee of $2,600; large zones, 
$7,600. Fees for sub-zones and single-purpose zones are to be determined 
locally by the appropriate Customs regional commissioner. Since sub-zone 
tenants are generally large companies, the effects of fees on them do not
fall within the purview of the RFA and this analysis and thus will not be
considered in this economic review. While these fees are subject to annual
revision and adjustments in order to insure recovery of Customs costs, 
prospects of federal pay and benefit restraint act to limit prospective 
fee increase to modest levels. The net burden on small business from 
this fee schedule (yielding $224,000/yr.) would be minimal, approximating
$150 per tenant per year. Elimination of the current reimbursement method,
even under the caveats noted above, would more than cover these new 
audit-approach fees.  
 
   New zone activation and boundary alteration fees. Under present 
procedures, zone applicants are not billed for necessary Customs 
preparatory work prior to a zone's activation or alteration. The proposed
revisions contain a provision allowing Customs to recover its costs for 
such tasks, among others, as site surveys, background investigations, 
zone approval processing, inventory systems review and associated clerical
costs. These fees would be applicable to zones which are activated, 
reactivated (in certain situations) or altered on or after the effective
date of final rulemaking. 
 
   Prospective fees are currently estimated at the following:  
 
   (a) $1,020 for general purpose zone activation/reactivation;  
 
   (b) $1,960 for sub-zone activation/reactivation; and 
 
   (c) $360 for zone and sub-zone alterations. 
 
   Concerning effects on small businesses, we expect average added cost 
pass-throughs from this source to be insignificant. 
 
 
Overlapping Rules 
 
   None identifiable. 
 
 
Alternative Proposals 
 
   None feasible. The Status Quo becomes more untenable as complex zone 
manufacturing operations increase in number while Customs resources 
diminish.  
 
 
Summary of Economic Effects 
 
   Based on present available data, the proposed revisions would appear 
to provide net yearly benefits to zone operators and tenants of $1.5-
$1.6 million, as summarized below:  
                      [Quantified cost (-)/benefits (+)] 
Document reduction                               +$550,000 
Current reimbursement eliminated                +1,200,000 
New annual fees for audit approach                -224,000 
 
                                              Non-qualified factors 
                                               Added     New   Neutral 
                                                     benefit 
                                               costs       s    effect 
Admission of goods                                 X 
Removal of goods                                           X 
Inventory control and record keeping system                          X 
Mandatory bonding                                                    X 
 
 
E.O. 12291 
 
   Executive Order 12291 relates to regulatory changes which are 
classified as "major rules", that is, proposals which will have (1) an 
aggregate economic cost factor of $100 million or more, (2) a major 
increase in prices or costs or (3) a significant adverse effect on 
competition. Under those criteria, we do not consider this proposal to 
be a "major rule", and thus the agency does not intend to perform an 
initial regulatory impact analysis that would be required by the Order.