Weekly Entry Procedure for Foreign Trade Zones

DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 146

RIN 1515-AC05

Weekly Entry Procedure for Foreign Trade Zones

AGENCY: U.S. Customs Service, Treasury.

ACTION: Proposed rule.

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SUMMARY: This document proposes to amend and expand the weekly entry

procedure for foreign trade zones under certain circumstances to

include merchandise involved in activities other than exclusively

assembly-line type production operations. Under the proposed expanded

procedure, weekly entries covering the estimated removals of

merchandise for the weekly period and the associated entry summaries

would have to be filed exclusively through the Automated Broker

Interface. The expanded weekly procedure, which, as is presently the

case, would remain an entirely optional procedure, would thus be

conducted in a fully paperless environment. The expanded weekly

procedure would reduce the number of entries from zones as well as

automate and expedite the processing of such entries. The proposed

expansion of the weekly procedure would allow zone users to not have to

delay their operations pending the acceptance of an entry and Customs

examination of the subject merchandise. 2

DATES: Comments must be received on or before April 14, 1997.

ADDRESSES: Written comments (preferably in triplicate) may be addressed

to the Regulations Branch, Office of Regulations and Rulings, U.S.

Customs Service, 1301 Constitution Avenue, N.W., Washington, D.C.

20229. Comments may be inspected at the Regulations Branch, Office of

Regulations and Rulings, Franklin Court, 1099 14th Street, N.W., Suite

4000, Washington, D.C.

FOR FURTHER INFORMATION CONTACT:

Marsha Malbrough, Office of Field Operations, (202-927-0457).

SUPPLEMENTARY INFORMATION:

Background

The Foreign Trade Zones Act of 1934, as amended (19 U.S.C. 81a-u)

(the ``FTZA''), provides for the establishment and regulation of

foreign trade zones. Foreign trade zones are secured areas to which

foreign and domestic merchandise, except that prohibited by law, may be

brought for the purposes enumerated in the FTZA without being subject

to the Customs laws of the U.S. Foreign trade zones, by virtue of being

exempt from the Customs laws, are intended to attract and promote

international trade and commerce. Part 146, Customs Regulations (19 CFR

part 146), sets forth the documentation and recordkeeping requirements

governing the admission of merchandise into a zone, 3 its removal from

the zone, and, among other things, its manipulation, manufacture,

storage, destruction or exhibition, while in the zone.

[[Page 12130]]

The current weekly entry procedure for foreign trade zones,

contained in Sec. 146.63(c)(1), Customs Regulations (19 CFR

146.63(c)(1)), has been in effect since May 12, 1986, having first been

authorized in T.D. 86-16, 51 FR 5040. That weekly entry process has

been limited to merchandise which is manufactured or changed into its

final form just shortly (within 24 hours) before physical transfer from

the zone. This procedure was believed to be especially necessary for

assembly-line type manufacturing operations because in these

circumstances there would otherwise be little time for examination of

the merchandise and furnishing of entry documentation after the

merchandise was in its final form but before its physical removal from

the zone. Accordingly, under the weekly entry process, the assembly-

line operation would not have to be delayed pending acceptance of an

entry and Customs examination of the merchandise.

Title VI of the North American Free Trade Agreement Implementation

Act (Pub. L. 103-182, 107 Stat. 2057), popularly known as the Customs

Modernization Act, was enacted on December 8, 1993. Section 637 of the

Customs Modernization Act, which amended 19 U.S.C. 1484 concerning the

entry of merchandise generally, provides further statutory support for

the weekly 4 entry procedure, in concert with section 3 of the FTZA (19

U.S.C. 81c(a)), which deals specifically with the entry of merchandise

from zones.

Since its inception, there have been no major problems associated

with the use of weekly entry. Therefore, Customs is proposing to expand

the use of the procedure by adding a weekly entry procedure to cover

merchandise involved in activities other than manufacturing operations.

Also, under the proposed amendment, the weekly entry under both the

present procedure and the proposed expanded procedure would cover any

seven-day consecutive period (i.e., the weekly period would not be

limited to a calendar week).

It is expected that the expanded weekly entry procedure would be

available to zones (including subzones) having large quantities of

different types of merchandise. A pilot program, implemented in

September 1994, to test such an expanded weekly entry procedure at a

selected number of zones/subzones has since been evaluated as a

success.

Under the proposed expanded procedure, weekly entries and entry

summaries would have to be filed electronically through the Automated

Broker Interface (ABI). Thus, the participant making entry would have

to do so using ABI, or employ an ABI-qualified Customs broker for this

purpose. Specifically, the port director would allow the person making

entry to file an electronic entry containing the data required on

Customs Form 3461 for the estimated removals of merchandise intended to

occur during the related weekly period. The electronic entry would be

filed prior to any transfers of merchandise from the zone, and an

electronic entry summary containing the data required on Customs Form

7501 would be filed within 10 working days after the first day of the

weekly period covered by the electronic entry. Payment of applicable

duties and taxes would likewise be scheduled for no later than 10

working days after the date of entry, using the Automated Clearinghouse

(ACH) as prescribed in Sec. 24.25, Customs Regulations (19 CFR 24.25).

The principal purpose of the proposed expanded weekly procedure, as

conducted in a fully paperless environment, is to reduce the number of

entries from zones and further expedite the processing of such entries,

with the added benefit that zone users would not have to delay their

operations pending the acceptance of an entry and Customs examination

of the subject merchandise.

Hence, while the expanded weekly entry procedure, like the current

weekly manufacturing entry procedure, is a voluntary program, an

integral component thereof, under the proposed amendment, would be the

use of electronic entry filing. Indeed, electronic entry processing

accords precisely with and fully effects the purpose of the program, as

described. At the same time, however, zone users not wishing to use the

expanded weekly entry may, of course, continue to operate in a zone,

and, to this end, if desired, may file paper entries covering

individual transfers of merchandise from the zone, inasmuch as

electronic entry filing is also a voluntary program (see 19 U.S.C.

1411(b); 19 CFR 143.31).

No retail trade or retail sales within the zone would be permitted

through this procedure. Retail trade is prohibited in a zone except as

provided in 19 U.S.C. 810(d) of the FTZA.

The person with the right to make entry, who has established an

importing history, and who is not delinquent or otherwise remiss in

transactions with Customs, would make application to the port director

at least 30 days before the expanded weekly entry procedure were to

become effective. Each person seeking permission to use the expanded

procedure under the proposed section 146.63(c)(2) would have to file an

individual application therefor. The application would describe the

merchandise to be handled or processed, the accounting and

transportation controls exercised over the merchandise, and the kind of

activity or operation it would undergo in the zone. The port director

would evaluate the application based on the quality of the accounting

and transportation controls exercised over the merchandise in the zone,

the enforcement risk presented, the type of merchandise imported,

Customs knowledge of the business conducted in the zone, and any local

criteria developed by the port director. The port director would have

to provide written notice of any special local criteria that would be

used in evaluating the application.

It is noted that filers eligible for weekly entry under

Sec. 146.63(c)(1) would not be required to apply or reapply for

participation in that program.

To be approved for expanded weekly entry, the merchandise to be

admitted to the zone, its handling or processing therein, and the

shipments of such merchandise from the zone, would have to be fairly

predictable, continuing and repetitive, and relatively fixed in variety

by the type of merchandise and the nature of the business conducted at

the site. In addition, the subject merchandise would have to have been

preclassified or otherwise have been determined to be risk-free; it

could not be restricted or sensitive or of a type which required

Customs examination before or at the time of its admission to, or

removal from, the zone. Quota-class merchandise would thus be excluded

from the program. Also, the records with respect to the merchandise and

its handling and/or processing in the zone, if not computerized, would

have to be maintained in an organized and readily retrievable manner,

and be capable of being accessed by Customs within a reasonable time

after due notice.

Additionally, in the case of a general-purpose zone with multiple

users, the zone operator would, in writing, have to certify to the port

director that he understands the requirements of the expanded weekly

entry program, and agree to supervise and monitor the movement of

merchandise thereunder. The operator would also have to expressly agree

to maintain inventory records that accurately accounted for all

transfers of merchandise from the zone related to the respective weekly

entry of each person using the procedure therein. The zone operator's

written acknowledgement of responsibilities in this regard would be

required to be on file with the applicable port director

[[Page 12131]]

before any application to use the weekly entry procedure could be

approved in relation to the zone.

The port director, following his evaluation of the application,

would notify the applicant, in writing, of his decision. If the

application was denied, the port director would specify the reason for

the denial in his reply, and would inform the applicant that such

denial may be appealed to the port director for reconsideration. A

request for reconsideration may, if denied, be appealed to the

Assistant Commissioner, Office of Field Operations, Customs

Headquarters. Such appeals must be made within 30 days of the date of

the adverse decision being appealed. The port director's decision or

the Assistant Commissioner's decision, as applicable, would be issued,

in writing, within 30 days of the receipt of the appeal. The Assistant

Commissioner's decision would constitute the final Customs

determination concerning the application.

If the application were approved, the port director could stay

participation in the weekly entry program for a specified reasonable

period, should examination of the merchandise or its documentation be

needed for any reason.

In addition, the port director could later propose to revoke the

approval, if there were a subsequent failure to fulfill the criteria

under which the initial approval had been obtained, or if it thereafter

became routinely necessary to examine the merchandise or its

documentation before or upon admission to, or removal from, the zone,

should the merchandise have become restricted or sensitive or otherwise

of a type which likewise routinely required Customs examination. A

challenge to a proposed revocation of participation in the weekly entry

program could be filed with the port director. An adverse decision by

the port director could be appealed to the Assistant Commis-sioner,

Field Operations, Customs Headquarters. The Assistant Commissioner's

decision in this connection would constitute the final Customs

determination concerning the challenge.

It is also proposed to add a new paragraph (d) to Sec. 146.68 to

provide for weekly reporting of transfers from a foreign trade zone to

a class 9 warehouse (duty-free store), provided the zone grantee or

operator is also the class 9 warehouse proprietor. The procedure is

similar to the warehouse transfer procedure set out in Sec. 144.34 of

the Customs Regulations (19 CFR 144.34).

Comments

Before adopting this proposal, consideration will be given to any

written comments that are timely submitted to Customs. Comments

submitted will be available for public inspection in accordance with

the Freedom of Information Act (5 U.S.C. 552), Sec. 1.4, Treasury

Department Regulations (31 CFR 1.4), and Sec. 103.11(b), Customs

Regulations (19 CFR 103.11(b)), during regular business days between

the hours of 9:00 a.m. and 4:30 p.m. at the Regulations Branch,

Franklin Court, 1099 14th Street, N.W., Suite 4000, Washington, D.C.

Regulatory Flexibility Act and Executive Order 12866

As explained in the preamble, the proposed rule is intended to

expand electronic entry filing on a weekly basis in foreign trade

zones, and thus reduce the number of entry filings from zones as well

as automate and expedite the processing of such entries. As such,

pursuant to the provisions of the Regulatory Flexibility Act (5 U.S.C.

601 et seq.), it is hereby certified that the proposed amendments set

forth in this document, if adopted, will not have a significant

economic impact on a substantial number of small entities. Accordingly,

they are not subject to the regulatory analysis or other requirements

of 5 U.S.C. 603 and 604. Nor do the proposed amendments result in a

``significant regulatory action'' under E.O. 12866.

Paperwork Reduction Act

The collection of information contained in this notice of proposed

rulemaking has been submitted to the Office of Management and Budget

for review in accordance with the Paperwork Reduction Act of 1995 (44

U.S.C. 3507).

An agency may not conduct or sponsor, and a person is not required

to respond to a collection of information unless the collection of

information displays a valid control number.

The collection of information in this document is in

Sec. 146.63(c). This information is needed and will be used to enforce

Customs entry procedures as required by law and to ensure the

protection of the revenue. The likely respondents and/or recordkeepers

are businesses.

Estimated annual reporting and/or recordkeeping burden: 300 hours.

Estimated average annual burden per respondent/recordkeeper: 30

minutes.

Estimated number of respondents and/or recordkeepers: 600.

Estimated annual frequency of responses: 1.

Comments on the collection of information should be sent to the

Office of Management and Budget, Attention: Desk Officer of the

Department of the Treasury, Office of Information and Regulatory

Affairs, Washington, D.C. 20503. A copy should also be sent to the

Regulations Branch, Office of Regulations and Rulings, U.S. Customs

Service, 1301 Constitution Avenue, N.W., Washington, D.C. 20229.

Comments should be submitted within the same time frame as comments on

the substance of the proposal.

Comments are invited on: (a) Whether the collection of information

is necessary for the proper performance of the functions of the agency,

including whether the information shall have practical utility; (b) the

accuracy of the agency's estimate of the burden of the collection of

the information; (c) ways to enhance the quality, utility, and clarity

of the information to be collected; (d) ways to minimize the burden of

the collection of information on respondents, including through the use

of automated collection techniques or other forms of information

technology; and (e) estimates of capital or startup costs and costs of

operations, maintenance, and purchase of services to provide

information.

List of Subjects in Part 146

Customs duties and inspection, Exports, Foreign trade zones,

Imports, Reporting and recordkeeping requirements.

Proposed Amendment

It is proposed to amend part 146, Customs Regulations (19 CFR part

146), as set forth below.

PART 146--FOREIGN TRADE ZONES

1. The authority citation for part 146 would continue to read as

follows:

Authority: 19 U.S.C. 66, 81a-u, 1202 (General Note 20,

Harmonized Tariff Schedule of the United States), 1623, 1624.

2. It is proposed to amend Sec. 146.63 by revising paragraph (c) to

read as set forth below:

Sec. 146.63 Entry for consumption.

* * * * *

(c) Estimated activity--(1) Weekly manufacturing. When merchandise

is manufactured or its physical condition as entered (exclusive of

packing) is otherwise changed in a zone within 24 hours before physical

transfer from the zone for consumption, the port director may allow the

person making entry to file an entry on Customs Form 3461 for the

estimated removals of merchandise during any consecutive 7-day period

[[Page 12132]]

(such period is thus not limited to being a calendar week). The Customs

Form 3461 must be accompanied by a pro forma invoice or schedule

showing the number of units of each type of merchandise to be removed

during the weekly period and their zone and dutiable values.

Merchandise 13 covered by an entry made under the provisions of this

paragraph will be considered to be entered and may be removed only when

the port director has accepted the entry on Customs Form 3461. If the

actual removals will exceed the estimate for the week, the person

making entry shall file an additional Customs Form 3461 to cover the

additional units before their removal from the zone. Notwithstanding

that a weekly entry may be allowed, all merchandise will be dutiable as

provided in Sec. 146.65 of this subpart, with the time of entry being

determined as provided in Sec. 141.68 of this chapter. When estimated

removals exceed actual removals, that excess merchandise will not be

considered to have been entered or constructively transferred from the

zone. After acceptance of the weekly entry, and any additional entries

required to be filed hereunder, individual transfers of merchandise

covered by the entry may be made from the zone.

(2) Weekly expanded. Regarding merchandise not qualifying for

weekly entry under paragraph (c)(1) of this section, the port director

may, upon application, allow the person making entry of such

merchandise to file an electronic entry containing the data required on

Customs Form 3461 for the estimated removals of merchandise intended to

occur during the related weekly period. Such weekly period may cover

any consecutive 7-day period and is not limited to being a calendar

week. The electronic data submitted must show the number of units of

each type of merchandise to be removed during the weekly period and

their dutiable values (see Sec. 143.36 of this chapter). Merchandise

covered by an electronic entry made under the provisions of this

paragraph will be considered to be entered and may be removed from the

zone only when the port director has accepted the entry. If the actual

removals will exceed the estimate for the week, the person making entry

shall file an additional electronic entry to cover the additional units

before their removal from the zone. An electronic entry summary

containing the data required on Customs Form 7501 must be filed within

10 working days after the first day of the weekly period covered by the

electronic entry. Both the weekly entry and the related entry summary

must be filed electronically through the Automated Broker Interface,

with payment of applicable duties and taxes being scheduled, through

the Automated Clearinghouse, for no later than 10 working days after

the date of entry (see subpart D, part 143, and Sec. 24.25 of this

chapter). Under this weekly entry procedure, all merchandise will be

dutiable as provided in Sec. 146.65 of this subpart, with the time of

entry being determined as provided in Sec. 141.68 of this chapter. When

estimated removals exceed actual removals, such excess merchandise will

not be considered to have been entered or constructively transferred

from the zone.

(i) Application required; criteria. Each person seeking permission

to make a weekly zone entry under paragraph (c)(2) of this section must

file an individual application therefor. The person must have an

established importing history 15 and must not be delinquent or

otherwise remiss in transactions with Customs. The written application

shall be filed with the port director at least 30 days before the

applicant wishes to use the weekly expanded entry procedure. The

application must state that weekly entries and entry summaries will be

filed with Customs electronically using the Automated Broker Interface;

describe the merchandise to be handled or processed citing the

Harmonized Tariff Schedule of the United States classification (and

providing to Customs changes thereto), describe the accounting and

transportation controls exercised over the merchandise, and describe

the kind of operation such merchandise will undergo in the zone. The

port director will evaluate the application based on the quality of the

accounting and transportation controls exercised over the merchandise,

the enforcement risk presented, the type of merchandise imported, and

Customs knowledge of the business conducted in the zone. The port

director shall also consider in his evaluation of the application the

following additional criteria:

(A) The merchandise to be admitted to the zone, its handling or

processing therein, and the shipments of such merchandise from the zone

must be predictable, repetitive, and stable over the long term, and

relatively fixed in variety by the type of merchandise and the nature

of the business conducted at the site;

(B) The subject merchandise must have been preclassified or

otherwise have been determined to be risk-free; such merchandise may

not be restricted or sensitive or of a type which requires Customs

examination before or at the time of its admission to, or removal from,

the zone;

(C) Records with respect to the merchandise and its handling and/or

processing in the zone, if not computerized, must be maintained in an

organized and readily retrievable manner, and be capable of being

produced within a reasonable time after due notice; and

(D) Any other local criteria that the port director considers

essential to the application process. (The port director must provide a

written announcement of such criteria by a notice posted at the

customhouse, or by any other written methods considered appropriate.)

(ii) Application decision. The port director shall notify the

applicant, in writing, of Customs decision on the application. If the

application is denied, the port director shall specify the reason for

the denial in his reply, together with what corrective action may be

taken, and shall inform the applicant that such denial may be appealed

in the manner prescribed in paragraph (c)(2)(v) of this section. The

party may not reapply for participation in the weekly entry program

until the reason for the denial is resolved. If the application is

approved, the party may later apply to amend its application to add

merchandise not previously covered therein, for inclusion in its weekly

entry program. If a requested amendment is denied, the procedures set

forth in this paragraph shall apply.

(iii) Stay. If the application to participate in the weekly entry

program is approved, the party's use of weekly entry for particular

merchandise may thereafter be stayed, for a specified reasonable

period, should the port director determine, for any reason, to examine

the merchandise or its associated documentation prior to entry, for

purposes of verification. A stay of the weekly entry procedure in this

regard shall take effect on the date of the port director's letter

notifying the party thereof and shall remain in effect for the period

specified in that letter, or such earlier date as the port director

notifies the party in writing that the reason for the stay has been

satisfied. After the stay is lifted, the entry of such merchandise

under the weekly entry program may resume.

(iv) Proposed revocation of approval. The port director may propose

to revoke the approval given under this section, if there is a failure

to sustain the criteria in paragraph (c)(2)(i) of this section, or if

it thereafter becomes routinely necessary to examine the merchandise or

documentation before or upon

[[Page 12133]]

admission to, or removal from, the zone, because the merchandise has

become restricted or sensitive or otherwise of a type which likewise

requires examination. The port director shall notify the appropriate

party, in writing, specifying in detail the reason for the proposed

revocation, and shall inform the party of its right to challenge the

proposed revocation action as prescribed in paragraph (c)(2)(v) of this

section.

(v) Appeal of denial or challenge to proposed revocation. An appeal

of a denial of an application under this section, or challenge to the

proposed revocation of an approval to use the weekly entry procedure

under this section, may be made to the port director issuing the denial

or proposed revocation and must be filed within 30 days of the date of

the denial or proposed revocation. A denial of an appeal or challenge

made to the port director may itself be appealed to the Assistant

Commissioner, Office of Field Operations, Customs Headquarters, and

must be filed within 30 days of the denial date of the initial appeal

or challenge. The 30-day period for filing an appeal or challenge with

the port director or with the Assistant Commissioner, Field Operations,

as applicable, may be extended for good cause, upon written request by

the party for such extension filed with the port director or, in the

case of appeals or challenges directed to the Assistant Commissioner,

Field Operations, with the Assistant Commissioner or other Customs

officer designated by him, within the 30-day period. The port

director's decision or the Assistant Commissioner's decision, as

applicable, shall be issued, in writing, within 30 working days of the

receipt of the appeal or challenge, unless extended with due

notification to the party. The Assistant Commissioner's decision shall

constitute the final Customs determination concerning the application

or challenge.

(vi) General-purpose zones--(A) Operator responsibilities. In the

case of a general-purpose zone with 18a multiple users, not only is

paragraph (c)(2)(ii) of this section applicable, but also the zone

operator must, in writing, certify to the port director that he

understands the requirements of the 19 weekly entry program under

paragraph (c)(2) of this section, and agree to supervise and monitor

the movement of merchandise thereunder (see Sec. 146.4 of this part).

The operator must also expressly agree to maintain inventory records

that accurately account for all transfers of merchandise from the zone

related to the respective weekly entry of each person using the

procedure therein as provided for in Secs. 146.4 and 146.21 of this

part. The zone operator's written acknowledgement of responsibilities

in this regard must be on file with the applicable port director before

any application to use the weekly expanded entry procedure may be

approved in relation to the zone (see paragraph (c)(2)(i) of this

section).

(B) Bond coverage; operator; person making entry. The operator's

responsibilities under the weekly entry procedure are covered under the

Foreign Trade Zone Operator's Bond (see Sec. 113.73 of this chapter).

The responsibilities of the person making entry are covered under such

party's basic importation and entry bond (see Sec. 113.62 of this

chapter).

* * * * *

3. It is proposed to amend Sec. 146.68 by adding a new paragraph

(d) to read as follows:

Sec. 146.68 Transfer for transportation or exportation; estimated

production.

* * * * *

(d) Weekly entry for class 9 warehouse (duty-free store).

(1) Requirements for transfer. Merchandise that 20 qualifies for

entry into a class 9 warehouse (duty-free store) pursuant to

Sec. 19.36(e) of this chapter, and subject also to Sec. 146.64 of this

subpart, may be transferred from a zone for that purpose under a weekly

entry procedure, provided:

(i) The zone operator or grantee is the same party, or shares

common ownership with, the class 9 warehouse proprietor (hereinafter

called ``the party''); and

(ii) The party utilizes a Customs approved centralized inventory

control system that shows the location of all the zone and warehoused

merchandise at all times, including merchandise in transit.

(2) Procedure. The following weekly entry procedure is to be

utilized for qualifying merchandise:

(i) The party shall file electronically a weekly entry permit to

enter the merchandise with the port director on Customs Form 7501 for

the estimated removal during any consecutive 7-day period, along with a

pro forma invoice or schedule pursuant to Sec. 146.63(c)(1) of this

subpart.

(ii) Upon acceptance of the permit by the port director, the party

may effect transfers of the merchandise from the zone to the warehouse

during the 7-day period.

(iii) Both an amended warehouse entry and warehouse withdrawal for

immediate exportation, covering the 21 merchandise actually removed

from the zone to the warehouse during the period covered by the permit,

will be filed by the close of the second business day following the end

of the period.

Approved: February 7, 1997.

George J. Weise,

Commissioner of Customs, Deputy Assistant

John P. Simpson,

Secretary of the Treasury.

[FR Doc. 97-6522 Filed 3-13-97; 8:45 am]

BILLING CODE 4820-02-P