The Department of Commerce Foreign Trade Zones Board has published a Final Rule in the Federal Register that will change its regulations governing Foreign Trade Zones (FTZs). Most of the regulations contained  in the Final Rule will become effective on April 30, 2012. The Final Ruleis the culmination of a rulemaking process that began in December 2010, and which was summarized in a January 13, 2011 King & Spalding Client Alert...

FTZs are designated locations within the United States where foreign and domestic merchandise may be entered for storage, exhibition, assembly, manufacture, or other processing prior to formal “entry” into the U.S. customs territory. As a result, payment of duties is not required until the merchandise leaves the FTZ and enters the U.S. customs territory for domestic consumption. In many instances, U.S. duties can be reduced or avoided on foreign merchandise released from an FTZ if the merchandise is incorporated into a downstream product that is subject to a reduced or zero duty rate. The Department of Commerce Foreign Trade Zones Board approves applications for FTZ status and maintains regulations governing the operation of FTZs. U.S. Customs and Border Protection (CBP) separately approves “activation” of the FTZ, and zone activity remains under the supervision of CBP.

The Final Rule is comprehensive and constitutes a complete revision, replacing the present version of 15 CFR part 400. The Final Rule is intended to simplify many of the FTZ Board’s procedures, including those for users to obtain authority related to manufacturing and value-added activity; improve flexibility for U.S.-based operations, particularly for circumstances involving exports; enhance clarity; and strengthen compliance and enforcement. The Final Rule also reorganizes the regulations in the interests of ease-of-use and transparency.

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