U.S. Foreign-Trade Zones Board

REMAND DETERMINATION:
MIAMI FREE ZONE CORPORATION V. UNITED STATES,
93-06-00324

This remand determination is submitted in accordance with this Court's January 19, 1996, decision and order in which the Court ordered that the Foreign-Trade Zones Board (hereinafter "FTZ Board") "explain fully its basis for approving the Wynwood application and point out what evidence on the record it relied upon in reaching that determination."

Summary of the FTZ Board's Determination
In making its 1991 determination, the Board considered the general factors applicable to all proposals for the establishment of new foreign-trade zones. Further, because the proposed Wynwood zone would be an "additional" zone within the Miami port of entry, the Board, pursuant to the FTZ Act, also considered whether the existing zones (FTZ 32, Dade County; FTZ 166, Homestead) would "adequately serve the convenience of commerce". 19 U.S.C. ' 81b(b). It is the findings with regard to the latter consideration that are challenged by the plaintiff.

In concluding that the requirements of the Act and the regulations were satisfied, the Board adopted the findings of the examiner that the existing zones would Anot adequately serve the convenience of commerce" and the conclusion that Athere is adequate evidence of the need for the additional zone project to serve the convenience of commerce in the Miami Customs Port of Entry area.@ Public Record (P.R.) 105 at 10-11. In making this determination, the Board considered whether there was need for an additional zone in the Miami port of entry area, taking into account the specific claim made in the application as to the need for zone services within the ynwood community.

As indicated in the Memorandum accompanying the decision, the scope of the Board's approval reflects the focus given to the special purpose this zone is intended to serve: the commercial needs of the Wynwood community, within the overall Miami area. The examiners report, in discussing certain "convenience of commerce" factors, noted that "there is a need for a zone project in the Wynwood area to encourage economic activity in that area and to accommodate prospective users who require a port area location, and that these services are beyond those currently being offered in the Miami area." P.R. 105 at 9. The Board considered the entire record, including the examiners report, and it adopted the findings and recommendations of that report.

Evidentiary Basis For the FTZ Board's Determination

In reviewing the "convenience of commerce" requirement and need for the "additional" zone, consistent with Board practice, the Board considered the factors which were discussed and summarized for the Board in the examiners report. These factors included: 1) the high level of international trade activity in the Miami port of entry area and the rising demand for international trade services, including FTZ services; 2) the need for FTZ services within the Wynwood community; 3) the competitive effect of the additional zone on the existing zones; and 4) the supportive views of state and local officials as to the need for additional zone services in the Wynwood area. The evaluation of factors included consideration of whether the public interest would best be served by approval of the new zone project.

1. The high level of international trade activity in the Miami port of entry
The Board noted that the Miami area is a major hub for international trade, with an international seaport and airport that rank among the major U.S. port complexes in terms of international trade, and that most other major U.S. port of entry areas have additional foreign-trade zones. The Miami area's importance as a major international trade center is expected to grow. As noted in the examiners report, Miami is one of the nation's busiest ports of entry. Its seaport ranks second in international cargo traffic, and its seaport ranks seventh in export shipments, and fourth in terms of rate of growth. The area is a hub for Central and South American trade and as the U.S. further strengthens trading relationships with these countries Miami's importance as a center for international trade will grow. Other major U.S. port communities have multiple zone projects and the level of international trade in Miami implies a high level of demand for zone services and provides a general basis for the consideration of approving additional zone services for an area.

P.R. 105 at 9-10. As the Board has detailed, approval of additional general-purpose zones within a port of entry is by no means uncommon. The record evidence demonstrating the high volume of international trade activity in the Miami port of entry was an important factor in the Board's determination that the convenience of commerce would be served by a higher level of zone services.

In such a setting, the prospects for economic activity within the Wynwood community will be greatly affected by the extent to which it can serve the needs of companies involved in this growing international trade. Foreign-trade zone services would help to serve the commercial needs of the community by making available special Customs procedures that provide duty-free treatment on reexports and duty deferral on imports. The area's public officials (as discussed below) view this cost incentive as an integral part of the overall Wynwood development plan, which includes a number of other cost incentives intended to help attract job related business investment into the Wynwood community.

2. The need for FTZ services within the Wynwood community

The Wynwood FTZ is mainly intended to serve the "convenience of commerce" for companies involved in processing and manufacturing activity, most of which would be shipped in and out of the seaport complex. The existing zone sites in the area are not in the proximity of the seaport. P.R. 105 at 3-4. Wynwood is located within 2 miles of the seaport complex, whereas Foreign Trade Zone ("FTZ") #32 (operated by plaintiff Miami Free Zone Corp. ("MFZC")) is located some 14 miles to its west, outside the City of Miami in Dade County within 4 miles of the Miami International Airport. The Homestead FTZ is located 24 miles south of the airport, also outside Miami city limits and in a separate community.

Prior to submitting its application, WCEDC (Wynwood Community Economic Development Corporation) conducted a study which indicated that FTZ services are needed within the Wynwood community based on expressions of interest from companies who would require FTZ services near the seaport. A survey of over 190 companies indicated that "existing foreign-trade zone facilities in the Miami area are not fully serving the needs of the ocean freight-related activity near the Port of Miami." P.R. 105 at 7. The companies surveyed expressed the view that there was a need for additional zone services:

These companies require a location near the port because their products will be shipped from Miami by ocean freight. The companies are not current FTZ 32 tenants. The Wynwood project is located in the port of Miami area, whereas FTZ 32 has sites near Miami International Airport. The applicant indicates that while the majority of FTZ 32's incoming shipments arrive at the port, most leave from the airport. Wynwood is seeking to attract users whose inbound and outbound shipments require ocean freight. The Wynwood zone project plans to offer zone space for larger scale users that are conducting processing/manufacturing activities. FTZ 32's activity involves mostly warehousing and minor manipulation activity.

P.R. 105 at 9. The companies cited the importance of an FTZ to complement the incentives available under the Enterprise Zone and City programs available at Wynwood.

3. The competitive effect of the additional zone on existing zones

FTZ 32, operated by MFZC, is the only other active zone in the Miami area and the only one to oppose the application. (FTZ 166, Homestead, is actively promoting its project and expects to activate within the next year.) As to the competitive effects of the additional zone, the extent to which it might duplicate services already available was considered. The examiner reported to the Board that the focus of the Wynwood zone would differ from that of FTZ 32 by Aprovid[ing] zone services for the Wynwood community and the related economic development project . . . .@ P.R. 105 at 10.

The applicant indicated it would not seek to sponsor zone activity outside Wynwood, and the application was so presented to the FTZ Board. Noting that the proposed additional zone is specifically designed to serve the Wynwood community, the examiner found that the Wynwood zone project was not intended to duplicate zone services already available in the Miami area. (Because FTZ 32 is active and expressed opposition, the focus was on the impact on that zone.) While there might be some overlap, it is not expected that the additional zone would significantly erode the customer base of FTZ 32. Of the several companies identified by WCEDC as prospects, none are tenants of the existing zones. P.R. 105 at 9.

4. The supportive views of state and local officials as to the need for additional zone services for the Wynwood area

The need for FTZ services envisioned by WCEDC is for new activity stimulated by the Wynwood project, involving companies -- primarily those who wish to be close to seaport facilities -- desiring such services as part of the overall incentives available at Wynwood. Thus, the location and purpose for the new zone make it one that has a special purpose limited to a specific area.

The special programs that have been established for the Wynwood community, such as the State's Enterprise Zone designation and the City's Safe Neighborhood Improvement Program, are based on findings by state/local officials that the community's economic restoration requires economic incentives. The record contains numerous letters of support from Congressional, state and local public officials, who cited the importance of the proposed new zone as a component of Wynwood economic development efforts. Miami's Comprehensive Neighborhood Plan 1989-2000, in fact, specifically included reference to the role of a foreign-trade zone at Wynwood in complementing the services of the seaport. Based on these facts, the examiner reported to the Board that any incidental competitive effects for the FTZ 32 operator are outweighed by the significant public benefits resulting from assisting the economic development of the Wynwood area, which state and local officials have indicated, through their programs and assistance such as the state enterprise zone, is in the public interest.

P.R. 105 at 10. The official expressions of support for increased economic activity in the Wynwood area, combined with the evidence noted above of the demonstrated need for additional zone services in the area, lend considerable support for the Board's conclusion that the "convenience of commerce" would be served by approval of an additional zone to serve those needs.

Opposition to the Wynwood Application
While MFZC opposes approval of the Wynwood application, the gist of its opposition is not to the establishment of an additional FTZ site, as such, rather it is to the establishment of a new zone site under a new grantee and operator. P.R. 105 at 4. Rather than directing the thrust of its opposition to the need for additional services in the Miami area, MFZC=s objections to the additional zone are mainly to such a zone under a separate and new zone grantee.

In considering the need for the additional zone, the Board took into account the reasons there were to support sponsorship by WCEDC. The application indicates that the sponsorship by WCEDC is a critical element of the Wynwood proposal. WCEDC not only wishes to have zone services available within Wynwood, but it views them as an integral part of the Wynwood development plan. As the Florida non-profit corporation formed to direct the plan, WCEDC expressed concern that sponsorship of its proposed foreign-trade zone under FTZ 32 (with Miami Free Zone as operator) would not provide the focus it considers necessary to serve the needs of the types of companies that expressed interest in the Wynwood zone. Also, it expressed concern that the costs associated with such an operational plan would not be in line with the low-cost environment that must be offered by Wynwood. P.R. 105 at 5.

In making its findings and decision, the Board considered all of the factors discussed above, including the impact of a new zone on the existing zones. The Board weighed all of the evidence and information on record in terms of the public interest and how the "convenience of commerce" would be served by the establishment of an additional zone under sponsorship of WCEDC, notwithstanding some possible competition with existing zones. The overwhelming support for the zone plan, as proposed, which came from the state/local public sector, including the City which owns the land involved, provided strong corroborative testimony which weighed significantly in the Board's review.

Conclusion
The discussion above explains the basis for the Board's decision approving the Wynwood application, with a focus on the Aconvenience of commerce@ provision. Reference is made to the evidence on the record, including the examiners report, which the Board relied upon in making its determination.

Adopted and signed in Washington, DC, this _____ day of __________ 1996.

Susan G. Esserman
Assistant Secretary of Commerce
for Import Administration
Alternate Chairman
Foreign-Trade Zones Board

Conclusion
The discussion above explains the basis for the Board's decision approving the Wynwood application, with a focus on the Aconvenience of commerce@ provision. Reference is made to the evidence on the record, including the examiners report, which the Board relied upon in making its determination.

Adopted and signed in Washington, DC, this _____ day of __________ 1996.

Susan G. Esserman
Assistant Secretary of Commerce
for Import Administration
Alternate Chairman
Foreign-Trade Zones Board

Concur:Kyle E. Shilling
Director, Water Resources Support Center
FTZ Board Alternate

Conclusion
The discussion above explains the basis for the Board's decision approving the Wynwood application, with a focus on the Aconvenience of commerce@ provision. Reference is made to the evidence on the record, including the examiners report, which the Board relied upon in making its determination.

Adopted and signed in Washington, DC, this _____ day of __________ 1996.

Susan G. Esserman
Assistant Secretary of Commerce
for Import Administration
Alternate Chairman
Foreign-Trade Zones Board

Concur: John P. Simpson
Deputy Assistant Secretary of the Treasury
(Regulatory, Tariff and Trade Enforcement)
FTZ Board Alternate