Foreign Trade Zones Board
Ronald H. Brown
Secretary of Commerce
U.S. Foreign Trade Zones Background
Foreign-trade zones are secure areas under U.S. Customs supervision that are considered outside the Customs territory of the United States upon activation under the regulations of the U.S. Customs Service. Located in or near U.S. Customs ports of entry, they are the U.S. version of what are known internationally as free trade zones. Authority for establishing these facilities is granted by the Foreign-Trade Zones Board under the Foreign-Trade Zones Act of 1934, as amended (19 U.S.C. 81a-81u), and the Board's regulations (15 C.F.R. Part 400). The Executive Secretariat of the Board is located within the Import Administration of the U.S. Department of Commerce, Washington, D.C. 20230. Foreign and domestic merchandise may be moved into zones for operations not otherwise prohibited by law involving storage, exhibition, assembly, manufacturing, and processing. All zone activity, especially manufacturing, is subject to public interest review. Under zone procedures the usual formal Customs entry procedure and payment of duties is not required on the foreign merchandise unless and until it enters Customs territory for domestic consumption, in which case the importer normally has a choice of paying duties either on the original foreign materials or the finished product. Domestic goods moved into a zone for export are considered exported upon entering the zone for purposes of excise tax rebates and drawback. Zones are sponsored by qualified public or public-type corporations, which may themselves operate the facilities or contract for their operations with public or private firms. The operations are conducted on a public utility basis, with published rates. A typical general- purpose zone provides leasable storage/distribution space to users in general warehouse type buildings with access to all modes of transportation. Most zone projects include an industrial park site with lots on which zone users can construct their own facilities. Subzones are usually private plant sites authorized by the Board through zone grantees for operations that cannot be accommodated within an existing general-purpose zone. The regulations of the Foreign-Trade Zones Board are published in the Code of Federal Regulations at Title 15, Part 400 (15 C.F.R. Part 400), and the regulations of the U.S. Customs Service concerning zones at Title 19, Part 146 (19 C.F.R. Part 146). Agreements pursuant to Article XXIV of the GATT to reduce Customs tariffs and restrictions on trade between the member countries establish what are known as "free-trade areas" (e.g., the North American Free-Trade Area).
Report of the Executive Secretary
The Foreign-Trade Zones (FTZ) Board issued 71 formal orders
during fiscal 1995. Approvals were given for 7 new general-purpose
zones and 31 new subzones. Also, authority was granted for the
expansion of 8 existing general-purpose zones and 3 subzones.
Other actions granted authority for revisions to plans for extant
zones and subzones, including approvals for new manufacturing
activity. Applications were withdrawn by applicants prior to a
Board decision in 3 cases based on changed circumstances.1
The number of active FTZ projects increased to 134, compared to
last year's 124. Subzones were in operation as part of 51 projects.
Activation occurred at 31 new subzones and 8 were deactivated, thus
increasing the number of active subzones to 159.
The total value of merchandise received at general-purpose
zones and subzones was $143.5 billion compared to $119.5 billion
last year (Figure 1). Most zone activity took place at facilities
with subzone status (90%), continuing the pattern of the past 15
years. As adjuncts to general-purpose zones, the subzones received
shipments amounting to $129.8 billion ($106.4 billion last year).
Shipments into general-purpose zones increased by $54 million to
$13.7 billion.2
____________________________________________________
Merchandise Received FY l995($ bil) FY l994($ bil)
General-purpose zones 13.7 13.1
Subzones 129.8 106.4
_____ _____ _____
Total 143.5 119.5
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Of the shipments received at zones and subzones measured by value,
80 percent was of domestic origin. The level of domestically sourced
shipments is driven by market forces that remain unaffected by the
use of FTZ procedures. Products received at zones from foreign
sources are listed in Appendix E.
The industry sectors most involved in FTZ manufacturing activity
continue to be autos, oil refining, pharmaceuticals, office equipment,
computers/telecommunications and shipyards. During the year, 38 auto
assembly plants with subzone status operated under FTZ procedures
(37 last year). Pharmaceutical, oil refining, and computer/
telecommunications industries, in particular, showed significant
increases in the use of FTZ procedures. Over 90 percent of the
activity in subzones measured in terms of the value of shipments
received continues to involve assembly and manufacturing.
The Board received and filed 74 formal applications during the fiscal
year. The applications requested authority for 9 new general-purpose
zones and 30 subzones, as well as authorization for expansion and new
manufacturing at existing zone projects (Appendix F). In addition to
these applications, over 50 administrative cases were processed
(Appendix G). These actions involve routine changes to zone projects
such as boundary modifications and scope decisions. Some
administrative cases were processed under the "fast track" procedure
set forth in the FTZ regulations. This procedure is applicable to
cases involving requests for manufacturing authority under
circumstances where there is a recent precedent or proposed
activity that is for export only.
During the year, over 2,800 firms used zones, an increase of 100 over
last year. Employment at facilities operating under FTZ status
climbed to 316,000 persons, up 24,000 over last year.
Exports from facilities operating under FTZ procedures amounted to
$16.9 billion. While this is a slight decline over last
year's $17.4 billion, it does not appear to represent a significant
deviation from the long term upward trend of FTZ exports. The report
of last year showed an increase in exports of 50% (from $11.6 bil.
to $17.4 bil), which was well above the average annual increase of
the past two decades. Viewing the trend line of the past five years,
the level of shipments this year indicates a return to the mid-term
trend.
SUMMARY FTZ STATISTICS (FY)
($ bil)
1991 1992 1993 1994 1995
Merchandise Received
GP Zones 7.44 10.70 11.77 13.12 13.67
Subzones 76.99 87.99 92.21 106.45 129.85
Total 84.44 98.69 103.97 119.57 143.51
% Subzones 91% 89% 89% 89% 90%
Domestic Status Inputs*
GP Zones 1.09 1.74 1.61 3.06 4.14
Subzones 65.33 76.66 78.55 90.55 110.23
Total 66.42 78.39 80.16 93.61 114.37
Domestic Inputs Ratio (%) GP Zones 15% 16% 14% 23% 30% Subzones 85% 87% 85% 85% 85% Average 79% 79% 77% 78% 80% Foreign Status Inputs GP Zones 6.35 8.97 10.16 10.06 9.53 Subzones 11.67 11.33 13.65 15.90 19.62 Total 18.02 20.30 23.81 25.96 29.14
Exports GP Zones 2.96 2.77 3.16 4.51 3.77 Subzones 7.53 8.88 8.49 12.86 13.17 Total 10.48 11.65 11.65 17.37 16.94 Export/Import Ratio (%) GP Zones 47% 31% 31% 45% 40% Subzones 65% 78% 62% 81% 67% Average 58% 57% 49% 67% 58% Approved FTZ Projects 173 181 190 196 203 Active FTZ Projects** 104 113 122 124 134 GP Zones 89 92 103 103 107 Subzones 90 108 121 136 159