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Advocacy

2022Membership-email-Advocate

One of our most important roles is ensuring the unique interests of the foreign-trade zone community are effectively represented, recognized, and advanced in Washington. We advocate for the practical application of international trade policies and regulations to achieve maximum simplicity and effectiveness for the FTZ community.

The NAFTZ works hard to ensure congressional decision-makers and government agencies (including U.S. Customs and Border Protection [CBP], the Foreign-Trade Zone Board, U.S. Trade Representative (USTR) and others) understand the significant local and national economic impact of America’s foreign-trade zones. NAFTZ’s diverse membership contributes significant expertise and informed perspectives to major policy discussions in Washington.

CURRENT POLICY AGENDA

As part of its ongoing 5-year advocacy vision initiative along with the results of our member FTZ advocacy survey, NAFTZ monitors and works to advance the following policy issues with the Administration, Congress, and regulatory agencies.

The advocacy issues listed below are in order of priority from our NAFTZ Member Advocacy Survey based on the ratings from all respondents by the significance of impact on FTZ operations along with recent developments regarding forced labor/UFLPA issues.  

Illicit Trade/Forced Labor (UFLPA)

Background:

The US Government has sought to prohibit and increase enforcement of the importation of goods into the US produced by forced labor, most notably products made by Uyghurs in China.

Issues:

NAFTZ Continues to Advocate for Use of FTZs to Store Detained Merchandise under Forced Labor Review (Revocation of CSMS #57200992).  

On September 20th, the Commercial Customs Operations Advisory Committee (“COAC”) voted unanimously to accept a recommendation from the Intelligent Enforcement Subcommittee Forced Labor Working Group that U.S. Customs & Border Protection ("CBP") re-examine a previous COAC recommendation and continue to engage in a solution for the use of foreign-trade zones (FTZs), within or external to the initial port of entry, to hold merchandise under the Uyghur Forced Labor Prevention Act (“UFLPA”) pending a decision. The Working Group further recommended that if CBP is unable to adjust its position, CBP should provide legal justifications for that position. As part of the public meeting, NAFTZ Board member, Christopher Smith, added, “I look forward to CBP working with COAC and the Trade on this issue as it is needed to help bring this current policy in line with both the regulations and the UFLPA legislation. It is also needed to prevent significant cost to importers, as well as prevent additional staffing requirements on an already understaffed CBP at many of the ports.”

This COAC recommendation was made after CBP spoke on this topic (as well as other important topics to the trade community) at the NAFTZ 50th Anniversary Annual Conference in Miami Sept 11-13, 2023. During the conference, CBP suggested that FTZ Operators utilize a separate bonded warehouse or restructure the existing FTZ (by deactivating space and applying for a bonded warehouse) and store the subject goods in those areas, rather than utilizing their already established and secured FTZs. “The NAFTZ respectfully disagrees with the stance taken by CBP at the conference,” stated Shannon Fura, Chairwoman of the Board of the NAFTZ. “We have outlined our counterpoints to the statements made in a response letter sent to members of the Office of Trade on September 19th and are continuing to insist that action be taken to reverse the position of CBP in CSMS #57200992 and the previous policy be restored immediately.”

For the past 2½ years, the NAFTZ worked closely and collaboratively with CBP Headquarters to establish safeguards by which forced labor detained goods have been authorized for dedicated admission and segregated storage within a FTZ until questions of admissibility have been resolved. On August 3, 2023, CBP unilaterally reversed this policy by issuing CSMS #57200992 which stated that "Importers or their authorized filers may not move detained goods suspected of being made with forced labor into a Foreign Trade Zone for storage.

"The NAFTZ continues to request additional meetings with CBP Headquarters personnel to advocate for a reversal of this position and will continue that advocacy until the ability of FTZs to store forced labor detained goods has been restored.

Overall, there is no standard guidance from the Department of Homeland Security or CBP HQ to Port Directors detailing how to enforce UFLPA and other forced labor provisions. This lack of guidance has created enforcement discrepancies between port facilities across the country. This enforcement discrepancy and lack of guidance risks forcing user/ operators out of FTZs, thus endangering the program.

Advocacy effort:

Regulatory fix with potential for legislative action. NAFTZ successfully advocated for the ability to store goods under investigation of forced labor in FTZs until a determination is made. NAFTZ is in constant communication with CBP about issues that arise from enforcement of UFLPA. NAFTZ is considering legislative options to ensure a uniform and standardized enforcement process across port facilities.

Every possible HTS/COO/MID/Zone Status Combination on Weekly Estimates

Background:

CSMS #53267891 along with guidance published in the ACE Frequently Asked Questions (https://www.cbp.gov/trade/automated/ace-faq) indicate if any good with an HTS/COO/MID/Zone Status combination not included on the weekly estimate is to be removed from the zone to go into the U.S. commerce, a supplemental 3461 including that HTS/COO/MID/Zone Status combination in sufficient quantity must be released by CBP prior to the removal of the good. 

Issue:

This suggests that FTZs must include all possible HTS/COO/MID/Zone Status combinations on the weekly estimate.  This may cause the number of lines on the estimate to exceed the current CBP ACE 999-line limit and require the management of multiple entries per week; cancelling those entries not used, and matching shipments to specific entries; and increased merchandise processing fees and brokerage fees for the FTZ.

Advocacy effort: 

Regulatory fix. NAFTZ holds regular meetings with officials from Commerce and CBP, and is actively working with these agencies to assist in finding ways to increase the ACE 999-line limit.

Increase the CBP ACE 999 Line Limit for Weekly Estimates:

Background:

Current 999-line limit on the cargo release filing (3461) forces some FTZs to file multiple weekly estimates in order to accommodate all HTS/COO/MID/Zone Status combinations or other factors of the unpredictability of goods removed from the zone in a given week.

Issue:

Increasing this line limit would make weekly entry easier to manage and reduce fees for FTZs.  

Advocacy effort: 

Regulatory fix. NAFTZ holds regular meetings with officials from Commerce and CBP, and is actively working with these agencies to assist in finding ways to increase the ACE 999-line limit.

321 de minimis for FTZs

Background:

CBP’s interpretation of language in the original FTZ Act of 1934 has led to the prohibition of FTZs from handling de minimis shipments.  The exponential increase in direct-to-consumer e-commerce has led to a corresponding increase in the amount of goods coming into the US under the de minimis threshold.  In fact, E-Commerce accounted for 14.5% of all retail sales in Q2 2022, up from less than 9% in 2017.  In FY22, there were 685.1 million packages that came into the US under de minimis.  

U.S. companies utilizing FTZs are unable to use de minimis entry although considered outside of the customs territory (like foreign competition or operations) because of a technically nuanced interpretation of U.S. Customs law verbiage that has remained unchanged since put into place under the Smoot-Hawley Tariff Act in 1930.  Foreign facilities do not undergo an authorization process before they can commence operations, nor are the strictly regulated by Customs and Border Protection (“CBP”) like U.S. FTZs.  The current prohibition on U.S. FTZs processing de minimis shipments creates an incentive for companies to offshore their warehouse and distribution facilities causing a loss of US jobs.

Issue:

This prohibition on FTZs to utilize the Section 321 de Minimis creates a significant competitive disadvantage for Zones and Zone user/operators compared to offshore distribution and warehousing facilities.

Advocacy Effort:

NAFTZ is a participating member of the “Ship Safe Coalition”, an industry group seeking legislative changes to address this unintended consequence by expanding the Section 321 procedures to include FTZs.  For more detailed information on this issue, click the links below from the Ship Safe Coalition.

Ship Safe Coalition

CBP Resources at the Port level

 

Background:

Increase training and number of personnel allocated to FTZ functions at the Port (local) level

 

Issue:

While no specific lists of ports facing staffing/resource challenges has been compiled, situations that may have occurred as a result could be FTZ projects being delayed or unapproved due to a lack of resources.

 

Advocacy effort:

Some regulatory changes, but mostly a legislative fix through the annual appropriations process. NAFTZ is working closely with high-level CBP officials to bring awareness of issues linked to staffing issues. Ultimately, most staffing issues will be resolved through the appropriations of additional funding for CBP personnel.

United States – Mexico – Canada Agreement (USMCA):  Necessary FTZ Related Changes 

Background:

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.  Following significant NAFTZ advocacy efforts with Congress, the U.S. International Trade Commission (USITC) was tasked by the U.S. Trade Representative (USTR) to conduct a comprehensive study on the effects of these and other tariff policies resulting from free trade agreements.  The USITC started this investigation in early 2022 with the full report expected to be released in April, 2023.

Issues:

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 – 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. 

These issues are germane to the USITC FTZ Competitiveness investigation, but the investigation will only document the current state.

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

Advocacy effort:

Legislative fix. NAFTZ anticipates Congress will begin work on a large-scale Customs reform/ modernization/ reauthorization package over the course of this year. NAFTZ’s in-person congressional visits on the hill following the Legislative Summit resulted in several offices soliciting proposed legislative language from NAFTZ on a number of FTZ issues. 

19 CFR 146 - Revisions for FTZ Regulations and FTZ Manual

Background:

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 completed a 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.    

 

Issue:

The revisions are currently under internal CBP review and awaiting publishing for comment.  It is unclear if this hasn’t progressed because of prioritization, funding, or both.

 

Advocacy effort:

Regulatory fix. NAFTZ has been working with CBP since 2014 to update the 1986 Part 146 regulations updated. This effort remains a central tenant of NAFTZ’s regular discussions with CBP.

CBP Resource Funding at the HQ level

Background:

Increasing the number of personnel and other resources dedicated to FTZ topics & issues at CBP Headquarters. 

 

Issue:

There are currently a limited number of CBP personnel assigned to HQ who are directly responsible for overseeing the FTZ program. An increase in the number of personnel may help facilitate CBP enhancements to the FTZ program.

 

Advocacy effort:

Legislative fix through the annual appropriations process. Like automation, NAFTZ secured report language about CBP HQ staffing. NAFTZ expects this report to be in hand in the next few weeks.

Duty Drawback Parity between FTZ and Non-FTZ duty drawback claims

Background:

99% of Customs duties and with all taxes and fees paid on a Type 01 7501 entry can be claimed under duty drawback.

 

Issue:

If the same material is admitted to a Zone and entry made on a Type 06 7501 entry, a duty drawback claim can still be filed but taxes and fees are not available for drawback.  FTZs should be able to secure equal drawback refunds.

 

Advocacy effort:

Regulatory Fix. In addition to regular conversations with Commerce and CBP, NAFTZ is also beginning regulatory meetings with officials from the Treasury Department responsible for overseeing the revenue collections from trade programs.

ACE Programming

Background:

The NAFTZ Prioritization list for ACE programming is still active in the NAFTZ Automation Committee. Some specific items have risen in visibility and one in particular, the 999-line limit item, is a separate topic on this list because it is directly tied to a different advocacy topic.

Issue:

FTZ ACE programming has never been completed, and a number of other ACE programming issues remain import issues for consideration.

Advocacy effort:

Legislative fix through the annual appropriations process. NAFTZ successfully included report language in the FY23 omnibus that required CBP to provide the Appropriations Committee with a briefing on the necessity of funding for increase automation procedures. NAFTZ anticipates having a copy of that briefing in hand within the next few weeks.

FTZ Board Resource Funding at the Headquarters Level

Background:

Increasing the number of personnel and other resources dedicated to the FTZ Board in support of application processes, production of the FTZ Board Annual Report, and continuous improvement to the FTZ Board website as a resource to the FTZ community.

 

Issue:

The lack of increase personnel and resources dedicated to the FTZ Board adversely impacts the Boards approval and reporting process.

 

Advocacy effort:

Legislative fix. More resources for both personnel and other items for the FTZ Board can only be achieved through the annual appropriations process.

Fair Treatment of FTZ goods should trade remedy tariffs be suspended or lowered:

 

Background:

Ensure that goods admitted to FTZ in PF status for Section 232 and Section 301 tariffs are not subject to those additional tariffs when entered for consumption at a time when the same trade remedy tariff is reduced or no longer in effect. 

 

Issue:

This is not what was done when the Section 232 tariff on Ukrainian steel was suspended.  That order specially required FTZs to still pay the Section 232 tariff even though other U.S. importers were no longer required to pay the tariff to bring formerly subject goods into the U.S. Commerce.  AD/CVD duties on goods in FTZs have been managed in this way since the 1980s. By explicitly requiring FTZs to pay the increased tariff, the US government significantly diminished one of the assets of the Zones program.

 

Advocacy effort:

Regulatory fix with potential for legislative action. NAFTZ is currently beginning joint conversations with USTR and Commerce with the intended purpose of ensuring any trade remedies initiated or modified by the US government do not diminish the economic value of the FTZ program.

15 CFR Part 400 revisions (FTZ Board Scope of Authority)

 

Background:

15 CFR Part 400 includes the substantive and procedural rules for the authorization of zones and for the Board's regulation of zone activity. The purpose of zones as stated in the Act is to “expedite and encourage foreign commerce, and other purposes.” The 15 CFR 400 regulations provide the legal framework for accomplishing this purpose in the context of evolving U.S. economic and trade policy, and economic factors relating to international competition. 

 

Issue:

NAFTZ has listed this as an advocacy initiative for many years. For example, in the past this has included items such as FTZ scope methodology changes and retrospective notification, Chapter 99 management, Executive Secretary authority, and definitions.  

 

Advocacy effort:

Regulatory fix. By default, any changes to the Code of Federal Regulations (CFR) are usually done through a regulatory process. NAFTZ regularly discusses proposed modifications to 15 CFR Part 400 with both staff for the FTZ Board and Commerce.

HOW DO I GET INVOLVED?

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