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FOREIGN-TRADE ZONES BOARD ORDER NO. 27 General Regulations Governing Foreign-Trade Zones in the United States, With Rules of Procedure Notice of Proposed Rulemaking
In view of the amendment of section 3 of the Act of June 18, 1934 (19 USC 81c), relating to foreign-trade zones, by section 1 of the Act of June 17, 1950 (Public Law 566), notice is hereby given, pursuant to section 4 of the Administrative Procedures Act (5 USC 1003), that the Foreign-Trade Zones Board proposes to amend certain of the general regulations governing foreign-trade zones in the United States, with rules of procedure, Chapter IV, Title 15, Code of Federal Regulations, to read as set forth in tentative form below. Prior to final adoption of such regulations, consideration will be given to any suggested revisions, views or arguments pertaining thereto which are submitted in writing, in triplicate, to the Secretary of Commerce, Chairman, Foreign-Trade Zones Board, Washington 25, DC, within the period of 30 days from the date of publication of this notice in the Federal Register. The proposed amendments to the general regulations are to be issued under the authority of the Act of June 18, 1934 (45 Stat. 998; 19 USC 81a-81u), as amended by section 1 of the Act of June 17, 1950 (Public Law 566, 81st Cong.) The aforesaid amendatory act of June 17, 1950, authorizes a number of new privileges affecting zone operations, subject, however, to such regulations as the Secretary of the Treasury may prescribe respecting identity of goods and for protection of the revenue. Thus, manufacturing and exhibition of goods are now permissible in a zone. It removes the limitation of two years within which merchandise, upon which there has been immediate liquidation, may be sent from a zone into customs territory; and the requirement of the bond for the payment of duties and taxes thereon. And, in connection with manipulating and manufacturing activities, allowance may be made, in assessing duties and taxes, for recoverable and irrecoverable waste; and when two or more products result, duties and taxes are to be distributed to the several products in accordance with their relative value at the time of separation, with due allowance for waste. Provision is made under certain specified conditions for the return to customs territory free of quotas, duty, or tax, of domestic articles, whether or not they have been involved in manufacturing activities in a zone. It is also now provided that certain materials of foreign or domestic origin entered into a zone for exportation, destruction, or storage, may be treated as exported for the purpose of satisfying the drawback, warehousing, and bonding provisions of the Tariff Act of 1930, and for certain other specified purposes. The Foreign-Trade Zones Act, as amended, vests certain authority and responsibility in the Foreign-Trade Zones Board and certain related but separate authority and responsibility in the Secretary of the Treasury. In general, the Board has to do with the establishment, maintenance and administration of zones; and the Secretary of the Treasury has to do with the protection of the revenue properly to be derived from goods involved in zone operations, including the determination of such means of identification as are necessary for that purpose. That division of functions is reflected insofar as possible in separate regulations; and in a few instances where the functions overlap, agreement has been reached by Board and Treasury representatives on identical regulations to be promulgated by each. Preceding the preparation of the Board and the Treasury regulations, there was consultation with the zone grantees, trade and transportation representatives and zone users. In addition, an on-the-spot survey of operations at each zone was made by a two-man team representing the Board and Treasury Department. The clear impression gained from that preparatory work was that priority and major emphasis should be given to the long-standing problem of improving and minimizing the burden of required customs procedures and formalities. Accordingly, substantial revisions are made at this time in the proposed customs regulations, and only such changes are made in the proposed Board regulations as are necessary mainly to conform to the amended act. It is intended, however, from time to time, to make such other changes in Board regulations as appear to be desirable in the light of experience under the amended act to carry out its purposes. Pursuant to the provisions of section 8 of the Foreign-Trade Zones Act of June 18, 1934 (48 Stat. 1000; 19 USC 81h), the General Regulations Governing Foreign-Trade Zones in the United States, with Rules of Procedure (15 CFR Part 400) are hereby amended as follows: 1. Amend Sec. 400.100 to read as follows: Sec. 400.100 Act. The term "Act" means the Foreign-Trade Zone Act of June 18, 1934 (48 Stat. 998-1003; 19 USC 81a-81u), as amended by Pub. Law 566, 81st Cong., approved June 17, 1950. 2. Amend Sec. 400.101 to read as follows: Sec. 400.101 Zone. The term "zone" means a "foreign-trade zone." It is an isolated, enclosed and policed area, operated as a public utility, in or adjacent to a port of entry, furnished with facilities for lading, unlading, handling, storing, manipulating, manufacturing, and exhibiting goods, and for reshipping them by land, water, or air. Any foreign and domestic merchandise, except such as is prohibited by law or such as the Board may order to be excluded as detrimental to the public interest, health or safety, may be brought into a zone without being subject to the customs laws of the United States governing the entry of goods or the payment of duty thereon; and such merchandise permitted in a zone may be stored, exhibited, manufactured, mixed or manipulated in any manner, except as provided in the act and other applicable laws or regulations. 3. Add new Sec. 400.304. Sec. 400.304 Zone for specialized purposes. The establishment of a zone, or a sub-zone in an area separate from an existing zone, for one or more of the specialized purposes of storing, manipulating, manufacturing, or exhibiting goods, may be authorized if the Board finds that existing or authorized zones will not serve adequately the convenience of commerce with respect to the proposed purposes. 4. Delete Sec. 400.800 and substitute the following: Sec. 400.800 Operations in a zone, and forms and procedures. The merchandise and operations permitted in a zone, the disposition of merchandise in a zone, the zone status of the merchandise and special provisions applicable to each status, the subsequent importation of merchandise exported from a zone, and other operations in a zone authorized by the act, are hereinafter in this part generally described. The forms and procedures required are set forth in Customs regulations relating to foreign-trade zones (19 CFR Part 30) and the regulations and schedules of rates and charges made and fixed by the zone grantee and approved by the Board. 5. Delete Sections 400.801 and 400.802 and substitute the following: Sec. 400.801 Merchandise permitted in a zone. Foreign and domestic merchandise of every description, except such as prohibited by law, may, without being subject to the customs laws of the United States, except as otherwise provided in the act and regulations made thereunder, be brought into a zone. (a) Merchandise which is specifically and absolutely prohibited by law shall not be admitted into a zone. Any merchandise so prohibited by law which is found within a zone shall be disposed of in the manner provided for in the laws and regulations applicable to such merchandise. A distinction is made between (1) merchandise which is specifically and absolutely prohibited by law on the grounds of policy or morals, such as immoral or subversive literature, obscene articles, or lottery matter, and (2) merchandise which is subject to conditional prohibition only, for example, articles which are subject to permits or licenses for the protection of economic or national security or which may be reconditioned to bring them into compliance with the laws administered by various Federal agencies. Collectors of customs are required to exclude the first class of articles and may not permit them to be transferred to a zone if they are aware of their prohibited status, except that the collector may permit the temporary deposit of any such merchandise in the zone pending final determination of its status. The transfer of articles of the second class to a zone is subject to any requirements of the Federal agency concerned. There is no prohibition against placing over-quota merchandise in a zone pending its right to transfer to customs territory pursuant to the applicable quota provisions. (b) The application for the admission of merchandise into a zone shall be approved or disapproved by the collector, as the representative of the Board, where the merchandise is not excluded by any other Federal agency having jurisdiction over the merchandise. 6. Add new Sec. 400.802. Sec. 400.802 Disposition of merchandise in a zone. In general, merchandise lawfully brought into a zone may, in accordance with these and other regulations made under the provisions of the act be exported, destroyed, or sent into customs territory of the United States therefrom, in the original package or otherwise; but when foreign merchandise, and domestic merchandise whose identity has been lost, is so sent from a zone into customs territory of the United States it shall be subject to the laws and regulations of the United States affecting imported merchandise. 7. Change the number of Sec. 400.803, entitled "Exclusion from zone of goods or process of treatment", to Sec. 400.806. 8. Add new Sec. 400.803. Sec. 400.803 Manipulation, manufacture, and exhibition of merchandise. In general, merchandise, lawfully brought into a zone may, in accordance with these and other regulations made under the provisions of the act, be stored, sold, exhibited, broken up, repacked, assembled, distributed, sorted, graded, cleaned, mixed with foreign and domestic merchandise, or otherwise manipulated, or be manufactured, except as otherwise provided by the act. (a) Permission for any manipulation, manufacture, or exhibition in a zone shall be obtained from the collector, as the representative of the Board, subject to such application and procedure prescribed by the Secretary of the Treasury for the protection of the revenue. (b) In the event of the denial of any application by the collector for any reason, the applicant or the grantee of the zone may appeal the adverse ruling to the Board. If any revenue-protection considerations are involved in such an application, the Board shall be guided by the determinations of the Secretary of the Treasury with respect to them. 9. Delete Sec. 400.803a, entitled "Handling of gold." 10. Change the number of Sec. 400.804, entitled "Retail trade within zone", to Sec. 400.807. 11. Add new Sec. 400.804. Sec. 400.804 Status of merchandise in a zone. For the purposes of the act and the regulations of this part, all merchandise within a zone, except merchandise in transit through a zone as provided in Sec. 30.5 of Customs regulations (19 CFR 30.5), shall be given a zone status as - (a) Privileged foreign merchandise, (b) Privileged domestic merchandise, (c) Non-privileged foreign merchandise, (d) Non-privileged domestic merchandise, or (e) Zone-restricted merchandise, in accordance with sections 30.6, 30.7, 30.8, 30.9, and 30.10 of Customs regulations (19 CFR 30.6-30.10). 12. Delete Sec. 400.805, entitled "Vessels entering and leaving a zone." 13. Add new Sec. 400.805. Sec. 400.805 Subsequent importation of zone merchandise. Articles produced or manufactured in a zone and exported therefrom shall, on subsequent importation into the customs territory of the United States, be subject to the import laws applicable to like articles manufactured in a foreign country, except that articles produced or manufactured in a zone exclusively with the use of domestic merchandise, the identity of which has been maintained in accordance with the second proviso of section 3 of the act, as amended, may, on such importation, be entered as American goods returned. 14. Change the numbers of sections as follows: a. Section 400.806, entitled "Residence within zone", to Sec. 400.808. b. Section 400.807, entitled "Employees and persons entering and leaving the zone", to Sec. 400.809. c. Section 400.808, entitled "All persons entering zone bound by regulations", to Sec. 400.810. d. Section 400.809, entitled "Identification of employees within zone", to Sec. 400.811. 15. Change the number of Sec. 400.810 to Sec. 400.812, and amend to read as follows: Sec. 400.812 Hours of business and service. Hours of business and service, for customs purposes, shall be the same as those prescribed in Customs regulations. 16. Change the number of Sec. 400.811 to Sec. 400.813, and amend to read as follows: Sec. 400.813 Payment of customs officers and employees. (a) The cost of maintaining the customs service in a zone shall be paid monthly by the grantee of such zone to the collector of customs. (b) Customs officers and employees performing services in a zone at night, or on Sundays and holidays, shall receive extra compensation, to be computed as and under the conditions prescribed by Customs regulations. (c) For the purpose of computing extra compensation the word "night" shall be construed to mean the time from 5:00pm to 8:00am, and the word "holiday" shall include only national holidays, viz., January 1, February 22, May 30, July 4, the first Monday in September, November 11, the fourth Thursday in November, and December 25, and such other days as may be made national holidays. (d) In a zone at a port where customary working hours are other than those herein mentioned, the collector of customs is authorized to regulate the hours of customs officers and employees assigned to the zone so as to agree with prevailing working hours in said port, but nothing herein shall be construed in any manner to affect or alter the length of a working day for customs officers or employees, or the overtime pay. 17. Change the number of Sec. 400.812, entitled "Erection of buildings within zone by persons other than grantee", to Sec. 400.814. 18. Delete Sec. 400.1000 and substitute the following: Sec. 400.1000 Operation, maintenance, and administration. The zone shall be operated, maintained, and administered by the grantee under (a) the supervision, direction, and control of the Board in accordance with the provisions of the act and the regulations of the Board in this part, (b) the regulations relating to foreign-trade zones of the Bureau of Customs for the protection of the revenue (19 CFR Part 30) and any other law, regulation or instruction the Customs service is required or authorized to enforce, (c) such other applicable laws and regulations thereunder of other Federal agencies, and (d) the regulations and schedules of rates and charges made and fixed by the grantee and approved by the Board. The collector in whose district the zone is located shall, in addition to his duties as Collector of Customs, be in local charge of the zone as the resident representative of the Board. He may call upon the district engineer and local representatives of other governmental departments and agencies for advice in matters of operation, maintenance and administration. 19. Amend Sec. 400.1001 to read as follows: Sec. 400.1001 Regulations promulgated by grantee, and posting of regulations within zone. The grantee shall, before beginning operation of a zone submit to the Board its own rules, regulations, and practices for the operation of the zone, subject to disapproval by the Board. There shall be posted in a conspicuous place within the zone copies of the regulations issued by the Board and the approved regulations of the grantee, or of such extracts from either or both of such regulations as the Board may designate. 20. Amend Sec. 400.1002a to read as follows: Sec. 400.1002a Uniform system of accounts, records, and reports. Every grantee of a zone shall keep its books, records, and accounts in the form and manner prescribed in "Uniform System of Accounts, Records, and Reports", approved February 6, 1939. 21. Delete Sec. 400.1315, entitled "Operation, maintenance and administration." Signed at Washington, DC, this 17th day of October 1951. Foreign-Trade Zones Board Charles Sawyer Secretary of Commerce, Chairman and Executive Officer, Foreign-Trade Zones Board Attest: G. R. Kieferle Acting Executive Secretary