FTZs and the FDA Dan Griswold, NAFTZ President Rebecca Williams, NAFTZ Board Member, Rockefeller Group Sean T. Murray, Esq., General Counsel, Miller & Company P.C. March 2, 2016
Foreign-Trade Zones • Foreign-Trade Zones (FTZs) created by Foreign-Trade Zones Act of 1934 – 19 U.S.C. § 81 a-u – Purpose “to expedite and encourage foreign commerce” • FTZs handle a significant volume of U.S. international trade – Approximately 12% of all imports move through FTZs – Calendar Year 2014 data: • 257 active FTZs plus 311 individual production operations • Shipments into FTZs totaled $799 billion (including $288.3 billion foreign and $509.7 billion domestic status merchandise) – Warehouse/distribution operations received over $235 billion in merchandise – FTZ production operations received over $564 billion in merchandise • Over $99 billion in exports from FTZs • 2,700 firms employing 420,000 persons used FTZs
FTZs and the National Export Initiative • March 11, 2010, President Obama signed Executive Order creating National Export Initiative (NEI) to enhance and coordinate federal efforts to facilitate job creation through export promotion • Feb. 17, 2012, White House announced “ A Simplified Process for Foreign-Trade Zones ”: – New FTZ regulations will “ help encourage manufacturing and investment in the US…” – “These simplifications will contribute to the National Export Initiative goal to double exports by the end of 2014 and the Administration’s goal of attracting and retaining manufacturing activity and manufacturing jobs in the United States .”
What is a Foreign-Trade Zone (FTZ)? • Secure areas in or “adjacent to” Customs Port of Entry • Located in the geographic United States, but considered outside the U.S. Customs Territory • Permitted FTZ activities: – assembly, exhibition, cleaning, manipulation, manufacturing, mixing with other merchandise, processing, relabeling, repackaging, repair, salvage, sampling, storing, testing, display, destruction, scrap/waste
FTZ Agency Oversight • Foreign-Trade Zones Board (FTZB) – reviews and approves applications to create FTZs – Secretary of Commerce • International Trade Administration – FTZ Board Executive Secretary and Staff – Secretary of Treasury • ITDS Chair • U.S. Customs and Border Protection – reviews individual FTZ processes and controls; authorizes activity – Port Directors are FTZ Board Representatives at Ports
FTZ Agency Oversight • Participating Government Agencies – Regulation depends on Statutes • FDA Compliance Policy Guide Section 110.200 – Products of foreign origin located in Foreign-Trade Zones or in bonded warehouses are in the United States, are in interstate commerce and are therefore subject to the laws administered by FDA. Products entered for transportation and exportation (in bond for transportation through the United States by a bonded carrier without appraisement or the payment of duties) are also subject to the laws administered by FDA. – Those products of foreign origin not offered for import but located within the legal boundaries of the U.S. are to be regulated under the domestic provisions of statutes. – Those products (whether in Foreign-Trade Zones, bonded warehouses, etc.) which have been offered for entry and those already imported but still in import status are regulated under the provisions of section 801 of the FD&C Act or 360(a) of the RCHS Act.
FTZs: Reduce Costs/Facilitate Trade • Manufacturing and Distribution Operations – Duty Deferral – Duty Elimination on Exports – Duty Elimination on Destruction – Duty Reduction (Inverted Duty Savings on goods manufactured in FTZs)
Unique FTZs Operations • Inventory Control and Recordkeeping – FTZ companies can choose to manage their inventory for purposes of reporting to CBP using either a specific identity (lot) methodology or a unique identifier number (UIN) (record identity) methodology • Many FTZ companies ship commercially interchangeable merchandise that is managed by a UIN methodology and reported on a FIFO basis, not on the actual country of manufacture of the physical merchandise in the particular shipment • Track using inventory control and recordkeeping system (ICRS)
Unique FTZs Operations – Weekly Entry • 19 U.S.C. § 1484(i) authorizes FTZ operators/ users to file weekly estimated Customs entries for a business week’s shipments into the U.S. Customs territory instead of one Customs entry per shipment – FTZs establish a 7-day zone shipping week and obtain CBP approval to file an estimated CBP Form 3461 – The CBP Form 3461 for Weekly Entry is just an estimate used for purposes of securing a CBP release to enter merchandise over the upcoming 7-day zone week; it is not related to actual shipments or merchandise from the FTZ – CBP Form 7501 Entry Summary filed at the end of the week to report actual shipments into the Customs territory • NAFTZ believes that the vast majority of activated FTZ operators and users utilize Weekly Entry procedures
FDA Weekly Entry Procedure • 1996 FDA Weekly Entry Filing Procedure – Extremely important to industry • Supports supply chain efficiencies – Can be revised to benefit FDA and industry • PREDICT allows: – Automated review of WEF applications – Automated review of WEF approvals • Reduce entry-by-entry burden on FDA and industry • For low-risk merchandise – Promotes domestic location of business – allows increased FDA domestic regulation • FTZs impose additional recordkeeping, monitoring, and compliance burdens PLF/PP/142466
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