2022 Policy Agenda

As part of its ongoing advocacy initiative, NAFTZ monitors and works to advance the following policy issues with the Administration and Congress in 2022.

Policy Agenda

United States – Mexico – Canada Agreement (USMCA)

Over NAFTZ opposition, two unfair and punitive restrictions on FTZs in the North American Free Trade Agreement (NAFTA) were carried over into the USMCA and its implementing legislation. NAFTZ is supporting efforts to require the International Trade Commission (ITC) to conduct a comprehensive study on the effects of these and other tariff policies resulting from free trade agreements.

 

Export Restrictions – NAFTA included a restriction that required FTZ manufacturers to pay U.S. duties on any non-originating (i.e., non-North American) components in products being exported to Canada and Mexico. This restriction is contrary to one of the main intended benefits of the FTZ program – promoting U.S. exports by not imposing any domestic duties on components of products manufactured in an FTZ that are subsequently exported. Unfortunately, the USMCA text also incorporated the NAFTA export restriction on FTZs.

 

Rules-of-Origin Restrictions – NAFTA’s implementing legislation included a restriction that prevented FTZ manufacturers from using the agreement’s rules-of-origin provisions to make their products more cost-competitive with Canadian and Mexican products in NAFTA markets. Despite strong opposition by NAFTZ and a bipartisan Senate group of FTZ supporters, this restriction was eventually inserted in the 2020 USMCA Implementation Act through a “technical correction” following intense pressure by the Trump Administration’s U.S. Trade Representative.

 

By limiting the ability of FTZ manufacturers to export products duty-free to Canada and Mexico and denying them the benefits of the of the USMCA’s rules-of-origin provisions to make those products more cost-competitive with Canadian and Mexican products in the North American market, these restrictions will continue to hinder the ability of U.S. FTZs to achieve their full potential to advance the program’s goals and enhance U.S. manufacturing.

 

Next Steps: Proposed International Trade Commission (ITC) Study – NAFTZ will continue to work with congressional allies to address these issues in the 117th Congress. The first step is building support for a legislative initiative led by Sen. John Cornyn of Texas, directing the ITC to conduct a study of the adverse impact on FTZs as a result of domestic and foreign tariff policies under U.S. free trade agreements and to recommend ways to redress those impacts. Senator Cornyn’s bill is expected to be introduced soon and we expect a similar measure will follow in the House of Representatives. We are hopeful that strong bipartisan support for these bills will convince the Biden Administration’s new USTR, Ambassador Katherine Tai, to support the ITC study.

 

Read the Fact Sheet on USMCA Rules-of-Origin for FTZs

Illicit Trade/Forced Labor

Preventing illicit trade from entering the U.S. market, especially products made with forced labor, is a growing concern and challenge for every industry importing into the United States. NAFTZ will continue to work with Congress, the Administration, the Organization for Economic Cooperation and Development (OECD), the World Customs Organization (WCO), and the World Free Zones Organization (WFZO) on legislation, such as the “Uyghur Forced Labor Prevention Act,” and international initiatives to develop global policies and best practices that are workable, manageable, and consider the unique role of FTZs in the global supply chain. We will also continue to promote the U.S. FTZ program’s enforcement and compliance system as an effective model and tool to help reduce the risk of trade in illicit and forced-labor goods.

 

Read the Illicit Trade/Forced Labor Fact Sheet

321/de minimis

“Section 321” (19 U.S. Code § 1321/de minimis procedures) allows for duty free importation of goods below a specified value.  Section 321 procedures, coupled with the explosive growth of e-commerce, which was then accelerated by the COVID 19 pandemic, has put U.S. distributors at a competitive disadvantage, and has caused U.S. e-commerce distribution operations to move offshore.  NAFTZ is a participant in an industry group – the “Ship Safe Coalition” – seeking legislative changes to address this unintended consequence by expanding the Section 321 procedures to include FTZs.  Because of recent news articles highlighting the advantage foreign e-commerce distributors have over U.S. distributors, there is now significant interest from legislators about this issue.  The Coalition is hoping to attach legislation to a trade bill towards the end of 2021 or the beginning of 2022.  Please see more detailed information in the attached document from the Ship Safe Coalition.

 

Ship Safe Coalition

Revise Customs Part 146 FTZ regulations/FTZ Manual

Customs regulations on FTZs (19 CFR Part146) have changed little since 1986. In 2018, NAFTZ relaunched an effort with CBP through the Customs Operations Advisory Committee (COAC) to modernize these regulations to account fully for the revolution in CBP automation as well as sweeping changes in global supply-chain management. NAFTZ has worked with CBP and now has a completed working draft that would transform the regulations to meet the 21st century needs of CBP, the FTZ community, and a more globally-integrated U.S. economy. Among other things, NAFTZ seeks to protect and expand direct delivery; eliminate the outdated five-day rule and the blanket 216 for manufacturing, manipulation, and exhibition; address treatment of withhold release order (WRO) merchandise in FTZs; provide for a more-streamlined and automated compliance review mechanism; and update CBP’s FTZ Manual.

 

Read the Rewrite of Part 146 Policy Brief

 

Read the Expansion of Blanket 216 Policy Brief

Revise the FTZ Board’s “production scope of authority” regulations

Current Foreign Trade Zones Board regulations on FTZs (15 CFR Part 400) do not allow FTZ operator/user companies sufficient flexibility to quickly modify their approved list of imported components and/or finished products in response to changing demands of global competition. As part of a larger effort to update Part 400, NAFTZ continues to urge the FTZ Board to introduce changes to allow use of six-digit Harmonized Tariff Schedule (HTS) numbers to define the scope of production authority (versus the current focus on written commercial description), and a retrospective notification process to allow companies to maintain full compliance and keep assembly lines in operation. NAFTZ seeks a pilot program for both concepts, and new regulations where necessary.

 

Read the Scope of Authority Policy Brief

ACE programming for the FTZ e214 admission

A milestone in the ITDS single-window initiative occurred in 2017 with integration of thee214 FTZ admission process from the legacy Automated Commercial System (ACS) software platform into ACE. The next step is to add Partner Government Agencies (PGAs) message sets into the e214 through ACE for those PGAs requiring compliance data for FTZ goods before entry from a zone into U.S. Customs territory, while also ensuring the future viability of the FTZ direct-delivery procedure for program stakeholders. NAFTZ continues to work with the PGAs and CBP to facilitate this process and adopt a viable compliance process that fulfills the PGAs’ enforcement mandate while minimizing unnecessary burdens on FTZ filers.

How do I get Involved?

Our members play an important role in our advocacy efforts. Here are some ways that you can contribute:

Keep up to date on the industry

Our email blasts inform members of breaking developments in FTZ regulations and our monthly Zones Reports contain a section devoted to regulatory changes and policy developments that affect the FTZ community.

Participate in the Grantee or Operator/User Roundtable discussions

At our Spring Seminars and Annual Conferences, we host roundtable discussions to receive input on what issues are of greatest importance for our Grantees and Operators.

Take part in Congressional Visits/Congressional Updates

As part of our annual Legislative Summit, the NAFTZ encourages members to visit their elected Senators and Representatives on Capitol Hill, to share the impact of the FTZ program in their home states and districts. This allows members a first-hand opportunity to tell the story of how FTZs contribute to the U.S. economy and to educate Congress about issues affecting business. The NAFTZ encourages its members to update elected Senators and Representatives on the positive investment and employment in zone projects on a direct continuing basis.

Join a Committee, Working Group, or Task Force

Members are presented with ongoing opportunities to shape and engage in our policy work. Our Committees meet regularly to discuss concerns and recommend action by the NAFTZ.

Learn More About Our Committees

Our Working Groups are organized around major policy or issue areas and they meet on an ongoing basis. The working groups are to designed to help us think long-term; identify new opportunities; and to mobilize members to address specific issues. We have recently had several very active working groups formed to address the ACE transition of specific PGA’s. Task forces bring members together on a short-term basis to gather insights, expertise, and information to meet a particular policy challenge. We have a very active ACE Taskforce for example.

Contact us if you are interested in participating on a working group or task force.