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: Customs Service, Department of the Treasury.

ACTION: Proposed rule; withdrawal.

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SUMMARY: This document withdraws the proposed amendments to the Customs

Regulations that would have expanded the weekly entry procedure for

foreign trade zones to include merchandise involved in activities other

than exclusively assembly-line type production operations. Customs has

determined that the proposed expanded weekly entry procedure would

significantly reduce the collection of the merchandise processing fee

(MPF) that Customs needs to offset its administrative costs incurred in

processing imported merchandise that is formally entered or released.

DATE: The withdrawal is effective on March 17, 1999.

FOR FURTHER INFORMATION CONTACT: Linda Walfish, Office of Field

Operations, (202-927-0042).

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 exempted

from the Customs laws of the United States for the purposes enumerated

in the FTZA. Foreign trade zones, by virtue of their potential to allow

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

legitimate international trade and commerce.

Part 146, Customs Regulations (19 CFR part 146), sets forth the

documentation and recordkeeping requirements governing, among other

things, the admission of merchandise into a zone, its manipulation,

manufacture, storage, destruction or exhibition while in the zone, and

its entry and removal from the zone.

To this latter end, Customs has in place a weekly entry procedure

for foreign trade zones, as prescribed in Sec. 146.63(c)(1), Customs

Regulations (19 CFR 146.63(c)(1)). Under the procedure, instead of

requiring a separate entry for each removal of merchandise from a zone,

as would otherwise be the case, Customs accepts one entry from a zone

user covering all its anticipated removals fro an entire weekly period.

The use of this procedure, however, has been limited exclusively to

merchandise that is manufactured or changed into its final form just

shortly (within 24 hours) before physical transfer from the zone.

The weekly entry procedure is 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. Thus, 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.

On March 14, 1997, Customs published in the Federal Register (62 FR

12129) a notice of proposed rulemaking that would have expanded the use

of weekly entry by adding a weekly entry procedure to cover merchandise

involved in activities other than manufacturing operations. It was

expected that the expanded weekly entry procedure would be available to

zones (including subzones) having large quantities of different types

of merchandise.

The principal purpose of the proposed expanded weekly entry

procedure, which would have required electronic entry filing, was to

reduce the number of paper entries from zones and further facilitate

the processing of zone entries, with resulting reductions in paperwork

and associated industry costs.

In order to test the expanded weekly entry procedure, a pilot

program had been authorized in September 1994 for a selected number of

zones/subzones.

Effect on Merchandise Processing Fee

Based upon further evaluation of the pilot program, and comments

made by zone operators and others on the proposed rule, it is clear

that the expanded procedure would significantly impact Customs

collection of the merchandise processing fee (MPF). This poses a

serious funding concern for the Government.

Under 19 U.S.C. 58c(a)(9)(A) and (B)(i), the MPF is the fee that

Customs assesses on importers in order to offset its administrative

costs (salaries and expenses) incurred in connection with the

processing of imported merchandise that is formally entered or

released. The fees collected are deposited in the

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general fund of the Treasury in a separate account known as the

``Customs User Fee Account'' (19 U.S.C. 58c(f)).

Specifically, except as otherwise provided, merchandise that is

formally entered is subject to an ad valorem MPF of .21 percent (19 CFR

24.23(b)(1)(i)(A)); however, on any one such entry of merchandise, the

fee may not exceed $485, subject to certain provisions not here

relevant (19 CFR 24.23(b)(1)(i)(B)).

As a result, in those cases where a company must now make a

separate entry for each of its removals of merchandise from a zone, and

its total payment of the MPF for all entries so made during a week

greatly exceeds $485, the company would be able to lower this payment

substantially if it could instead make one entry covering all its

removals from the zone for the week, with the MPF thereby capped at

$485.

Clearly, Customs collection of the MPF would be significantly

reduced under an expanded weekly entry program. Indeed, some parties

expressing interest in the proposed rule even asserted that they would

apply for foreign trade zone status just to gain the benefit of the

reduced MPF through the use of a weekly entry.

Moreover, other industries, such as bonded warehouse associations,

stated that similar entry procedures should as well be available to

them, which also raised a fairness concern.

Withdrawal of Proposal

In view of the foregoing, and following further consideration of

the matter, Customs has determined to withdraw the notice of proposed

rulemaking that was published in the Federal Register (62 FR 12129) on

March 14, 1997. Customs, however, will continue to cooperate with the

trade in seeking mutually satisfactory ways in which to further

facilitate entry processing or imported merchandise, so as to reduce

associated paperwork and costs to industry, while at the same time

reasonably preserving the integrity of the MPF which is necessary to

offset merchandise processing costs incurred by the Government in this

regard.

Raymond W. Kelly,

Commissioner of Customs.

Approved: February 9, 1999.

John P. Simpson,

Deputy Assistant Secretary of the Treasury.

[FR Doc. 99-6467 Filed 3-16-99; 8:45 am]

BILLING CODE 4820-02-M