E9-22064. Revised Proposal for Changes to the Format of Annual Reports Submitted to the Foreign-Trade Zones Board

Summary: On May 15, 2009, the Foreign-Trade Zones (FTZ) Board published a notice seeking comments on proposed revisions to the format of annual reports that are submitted by grantees to the FTZ Board. Based on comments received, the FTZ Board has made further revisions to the proposed annual report format. The most significant revision is a proposed shift from reporting on a Federal fiscal year basis to reporting on a calendar-year basis. The Board is inviting public comment on the latest proposal. Comments and questions regarding the original proposal are summarized and addressed below by general topic. The revised format follows the discussion of the comments.

Summary of Comments Received

Comments on Terminology

(1) One comment requested that the term “inactive” be removed from the report format and replaced with the terms “never activated” or “deactivated”. The comment noted that this revision would harmonize the language in the report with that used by CBP. This change has been made.

(2) Comments were also received on specific terminology in the section of the report for oil refinery operators. As a result, questions regarding indirect exports, tank storage capacity and shipments to affiliated plants have been modified.

(3) One comment requested that clarification be added to the FTZ Board's Annual Report to Congress on the treatment of zone-to-zone transfers. That comment will be considered separately as the proposal below is specific to the information submitted to the Board by grantees.

(4) A comment was received suggesting that part 1, Question 2 be modified to remove the phrase “promotion and marketing” and better reflect the full integration that should exist between the zone and local economic development plans. While it is noted that the zone should be incorporated into the overall economic development plan of a region, as written the question should provide the latitude that a grantee needs to include all efforts that have been taken regarding the zone.

Comments on Employment Numbers

(1) One comment requested that employment numbers be collected for both approved and activated zone space. Currently, the annual report requests information on the number of full-time equivalent employees within activated FTZ sites. There are currently a significant number of approved zone sites where no FTZ related activity if occurring, as grantees have sought to include sites in their zone project where future zone activity may arise. Including employment numbers for companies located within those sites in a report on FTZ activity would increase the reporting burden on grantees while not providing an accurate reflection of the employment related to FTZ activity within a zone. For similar reasons, the movement of merchandise in approved zone sites that have no zone activity is not requested.

(2) One comment included suggested criteria for calculating the employment numbers. The suggested criteria would essentially have defined employees as those engaged in zone activity with foreign status merchandise within the active zone operation. In many instances, however, companies will comingle domestic and foreign status merchandise within the zone, with employees handling either status of merchandise, and the percent of foreign and domestic merchandise changing throughout the year. As a result, calculating the suggested employment criteria could be overly burdensome for many operations. In addition, although a portion of the activity may involve domestic status merchandise, the FTZ savings could be impacting the viability of the facility as a whole, and as such, the employment related to the domestic status merchandise is then tied to the use of the zone. On balance, the current policy of requesting employment numbers for the active portions of the zone provides a number that is useful to the FTZ Board while not overly burdensome to zone users.

(3) One comment also suggested that temporary and contract employees be reported on a full-time equivalent basis. This clarification on reporting employment numbers had been included in part 1, and has now also been added to Part 2.

Comments on Value-Added

(1) One comment suggested that the request for value-added activity in part 2 be broken down by each category of merchandise forwarded (exports, entries for consumption and zone-to-zone transfers). The revised annual report format, as proposed, requests the total value-added in the zone for manufacturing/processing operations. Requiring a further breakdown would create an additional burden on zone operators, while not providing a significant benefit in terms of data that would be useful for oversight purposes. This proposed format maintains the request for the total value-added for the zone activity.

(2) A question has also been added to part 2 for oil refinery operators requesting the total value-added for those zone operations. The questions on value-added also include a description of how the number should be calculated.

Comments on Scope

(1) Two comments were received on the questions in part 2 that relate to the scope of authority approved by the FTZ Board. These questions are included in the annual report to ensure that zone operators with manufacturing/processing activity from the FTZ Board are aware of and assessing how the current activity relates to that approved by the Board. However, realizing that further clarification is needed generally on issues of the scope of authority, and that guidance and clarification on scope should occur more broadly, question 8 in part 2 for manufacturing/processing operators has been modified. The modifications should address the concerns raised while providing the FTZ Board with needed information to assist its monitoring of manufacturing and processing activity within zones. The questions in part 2 for oil refinery operators were taken from the current annual report guidelines for oil refinery subzones and were not changed in this revision.

Comments on the Reporting Period

(1) Two comments noted that although the current annual report format is based on the Federal fiscal year, use of the fiscal year is not required in the FTZ Act or Regulations. In addition, the comments noted that moving to a calendar year reporting cycle would be consistent with other government agency requirements and reports. One comment noted that synchronizing the reporting cycle with other required reports would ease the reporting burden on zone operators by standardizing the values and timeframes for the submission of reports to the Federal government. Based on the comments received, the revised proposal below includes a shift from the Federal fiscal year to the calendar year. Under this revised format, the reporting cycle for the annual report would be January 1 to December 31 and the report from the grantee to the FTZ Board would be due April 30.

Comments on the Public Nature of the Annual Report

(1) One comment included a request to have the data included in the annual report considered business proprietary. In the format proposed, the data for all warehouse and distribution operators within a zone project (in general-purpose sites and subzones) will be combined and reported as a single number in part 1. In addition, the names of the warehouse and distribution operators are not requested, so the data provided would not be linked to specific firms. In the case of manufacturing/processing operators, the data will be requested specific to each approved manufacturing/processing operation (whether in a general-purpose site or a subzone). Unlike the examples of CBP and Census that are cited in the comment and involve the mandatory reporting of data for all shipments into and out of the U.S., FTZ manufacturing and processing operations are approved through a public process when found to be in the public interest and the activity occurring within them must remain within the public interest. The FTZ Board has always made a practice of providing its report to Congress on the use of the program, which includes a summary of zone operations, as a public document. In addition, members of the trade community and grantee organizations depend on the information provided in the annual report for their own efforts to assess the impact of the program, and restricting such parties' access to the information would have a negative impact on those efforts. However, based on a recognition of concerns about the sensitivity of certain information, it will continue to be our practice to allow for the submission of rounded numbers in the movement of merchandise sections.

Comments on Potential Automation of the Annual Report Format

(1) A comment was also received on the interaction between the proposed annual report format and the potential for future electronic submission of the report. The FTZ staff is currently in the initial phases of developing a Web-based submission system for the annual report. As that system is further developed and implemented, information and training will be made available to the public. The implementation of an electronic system will incorporate any changes that are ultimately made to the annual report format.

The revised proposed annual report format is as follows:

Part 1: Zone Project Summary for January 1-December 31

1. Was foreign-status merchandise stored within the zone under zone procedures during the year?

If the answer is no, complete questions 2-3 below:

2. Describe the promotion and marketing efforts that are being undertaken to provide local companies with information on using the zone.

3. Has the zone ever been used for the admission and storage of zone status merchandise? If yes, indicate when.

If the answer is yes, complete questions 4-12 of part 1 below for all warehouse and distribution operations within the general-purpose zone and any subzones. In addition, complete a separate part 2 (Manufacturing/Processing GPZ and Subzone Operations) for each general-purpose or subzone operation involved in manufacturing/processing.

4. Provide a summary of the warehouse and distribution activity that occurred within the zone project. Specifically discuss any developments or trends in shipments or activity and any value added activity that occurred within active zone space.

5. Discuss how the zone project contributes to the local economy and local economic development efforts, including the FTZ impact on local employment, port activity, industrial development, international trade and investment. If applicable, describe in what ways the zone has been used locally by the logistics industry and other companies to address supply chain issues.

6. The general-purpose zone served___ zone users during the calendar year.

The number employed by zone users within activated general-purpose zone areas was___persons.

Employment figures should include both direct and contract persons. For part time workers, please report a full time equivalent (e.g., 60 contract employees working for 6 months would equal a full time equivalent of 30 workers).

7. Activity Summary

Provide a list of general-purpose zone sites and indicate the number of acres that are activated at each site. Also indicate if the site is subject to a time or sunset limit.

Provide a list of approved subzones and indicate the activation status of each subzone. If the subzone is active, provide the employment (includes direct and contract, reported on a full time equivalent basis)) for the subzone. If the subzone has never been active, indicate if it has lapsed.

8. Movement of Merchandise

This section should include the movement of merchandise for all general-purpose and subzone operations that did not require FTZ Board manufacturing/processing authority. (There is a separate section below where manufacturing/processing operations that occurred within the general-purpose zone or any subzone will be reported individually.)

Zone reports should reflect only activity within activated portions of zones/subzones. Foreign and domestic merchandise handled within activated FTZ areas should be reported.

Merchandise in the Zone at Beginning and End of Calendar Year

	Beginning value	End value
Domestic Status	$	$
Foreign Status
Total	$	$
Merchandise Received	Value
Domestic Status	$
Foreign Status
From Other U.S. FTZ's:
Domestic Status
Foreign Status
Total	$
Merchandise Forwarded	Value
To The U.S. Market	$
To Foreign Countries (Exports)
To Other U.S. FTZ's
Total	$
Merchandise Destroyed	$

Explanation of Discrepancies:

a. Does Beginning Inventory + Total Merchandise Received − Total Merchandise Forwarded − Merchandise Destroyed = Ending Inventory? If not, explain.

b. Is the level of Merchandise Received this year significantly different from the previous year? If yes, explain.

c. Is the Ending Inventory from the previous year equal to the Beginning Inventory for this year?

9. Main Categories of Foreign Status Merchandise Received (Top Five)

Category	Value	Main countries of origin
_________________________	$__________	_________________________
_________________________	__________	_________________________
_________________________	__________	_________________________
_________________________	__________	_________________________
_________________________	__________	_________________________
Total	$__________

10. Foreign Status Merchandise Received:

Nonprivileged Foreign $.

Privileged Foreign $_____.

11. Customs duties collected on merchandise entered from the zone during the calendar year amounted to $_____.

12. (Optional) Attachment field: You may attach any photographs of the zone or any information you feel may be useful.

Part 2: Manufacturing/Processing GPZ and Subzone Operators for January 1-December 31

A separate part 2, questions 2-18 should be included for each manufacturing/processing operation that occurred within the general-purpose zone or any subzone. This reporting of manufacturing/processing applies to any activity requiring FTZ Board approval under the Board's regulations (15 CFR part 400). (Note that any oil refinery operations should use the oil refinery-specific part 2 that follows this section.)

Zone reports should reflect only activity within activated portions of zones/subzones. Foreign and domestic merchandise handled within activated FTZ areas should be reported.

1. The grantee shall provide a list of each FTZ Board approved manufacturing/processing operation within the general-purpose zone or subzones, and indicate whether or not activity was conducted under zone procedures at each operation during the calendar year. Note that separate information for questions 2-18 below is required for each active manufacturing/processing operation.

2. Site/Subzone Number.

3. Company Name.

4. Activated Acres.

5. Briefly describe the activity at the subzone/GPZ operation that is occurring under zone procedures. Have there been any changes to the activity or facilities within the past year?

6. Employment within the FTZ operation (includes direct and contract, reported on a full time equivalent basis).

7. Provide the current year's level of production _____ and the level of production approved by the FTZ Board _____.

8. Is the current activity consistent with the plan that was presented to and approved by the FTZ Board? Explain how the activity is consistent.

9. Provide an estimate for the value-added activity that takes place under zone procedures (labor, profit, overhead, etc.). One way to estimate value-added is: Value of Sales from Plant minus Value of merchandise Received at Plant. Value-added should not be included in the Movement of Merchandise figures below.

10. Explain the extent to which FTZ status has helped your facility compete with plants abroad (this includes competition with other company facilities located abroad to expand or maintain product lines in the U.S.).

11. Provide the percent of total production that is directly or indirectly exported ___%. The indirect exports to be reported are shipments that are entered for consumption prior to subsequent re-exportation or shipments to a customer or related facility that are later exported (whenever known). You may rely on estimates for indirect exports but it is important that each operator do its best to account for all export activity that is supported by their FTZ operation.

12. If the manufacturing activity is subject to restriction, list the restriction(s) and describe the method of compliance.

13. Movement of Merchandise

Merchandise in the Zone at Beginning and End of Calendar Year

	Beginning value	End value
Domestic Status	$	$
Foreign Status
Total	$	$
Merchandise Received	Value
Domestic Status	$
Foreign Status
From Other U.S. FTZ's:
Domestic Status
Foreign Status
Total	$
Merchandise Forwarded	Value
To The U.S. Market	$
To Foreign Countries (Exports)
To Other U.S. FTZ's
Total	$
Merchandise Destroyed	$

Explanation of Discrepancies:

a. Does Beginning Inventory + Total Merchandise Received − Total Merchandise Forwarded − Merchandise Destroyed = Ending Inventory? If not, explain.

b. Is the level of Merchandise Received this year significantly different from the previous year? If yes, explain.

c. Is the Ending Inventory from the previous year equal to the Beginning Inventory for this year?

14. Main Categories of Foreign Status Merchandise Received (Top Five)

Category	Value	Main countries of origin
_________________________	$__________	_________________________
_________________________	__________	_________________________
_________________________	__________	_________________________
_________________________	__________	_________________________
_________________________	__________	_________________________
Total	$__________

15. Main Categories of Merchandise Forwarded (Top Five)

Category	Value
$_________	_________
_________	_________
_________	_________
_________	_________
_________	_________
Total	$_________

16. Foreign Status Merchandise Received:

Nonprivileged Foreign $ .

Privileged Foreign $.

17. Customs duties collected on merchandise entered into U.S. Customs territory from the operation during the calendar year amounted to $ _____.

18. (Optional) Attachment field: You may attach any photographs of the operation or any information you feel may be useful.

Part 2 for Oil Refinery Operators for January 1-December 31

Zone reports should reflect only activity within activated portions of zones/subzones. Foreign and domestic merchandise handled within activated FTZ areas should be reported.

1. The grantee shall provide a list of each FTZ Board approved oil refinery operation within the general-purpose zone or subzones, and indicate whether or not activity was conducted under zone procedures at the subzone or GPZ site during the calendar year. Note that separate information for questions 2-36 below is required for each active oil refinery operator.

2. Site/Subzone Number.

3. Company Name.

4. Activated Acres.

5. Activation Date.

6. Total number of tanks/storage capacity in barrels.

7. Employment—direct and indirect (including contract employees), reported on a full time equivalent basis.

8. List primary non-crude receipts on an average daily basis.

9. What percent of the primary non-crude receipts are sourced from abroad?

10. List primary non-NPF attributed products (fuels, lubricants, etc.).

11. The primary non-NPF attributed products account for ___% of total output.

12. Provide a description of types of customers for non-NPF products shipped from the refinery. In describing customers, do not provide customer names or specific customer information. We are seeking general information about general types or categories of customers by industry and/or by use.

13. Identify exports by product and volume.

14. List primary products produced from NPF attributed feedstocks.

15. NPF attributed products account for ___ % of total output.

16. Provide a description of types of customers for petrochemical products.

17. Indicate approximate percentage of total shipments from the refinery that are to affiliated plants.

18. Provide the percent of total production that is directly or indirectly exported ___ %. The indirect exports to be reported are shipments that are entered for consumption prior to subsequent re-exportation or shipments to a customer or related facility that are later exported (whenever known). You may rely on estimates for indirect exports but it is important that each operator do its best to account for all export activity that is supported by their FTZ operation.

19. Current rated crude distillation capacity (BPD).

20. Volume of total crude oil receipts on an average daily basis (BPD).

21. Volume of foreign crude oil receipts on an average daily basis (BPD).

22. Estimated percentage of foreign crude receipts under 25 degrees API.

23. Provide the number and date of the most recent Board Order.

24. What capacity (BPD or BPD equivalent) was approved by the Board in the above order?

Grants of authority are approved for a given level of activity. In the case of oil refineries, the levels of activity are stated in terms of current rated crude distillation capacity. A plant may increase its capacity, but the level of approved zone activity for the plant remains at the level approved under the refinery's current Board Order. Significant increases in activity above Board-approved levels require an expanded authorization.

25. Is the refinery operating within the approved scope of authority? Explain.

26. Indicate how zone savings assist the company in its international competitiveness efforts (e.g., reduce operating costs, improve margins, help make exports more competitive, maintain or increase refinery capacity through processing unit upgrades or additions at U.S. refinery versus foreign refinery in a global industry).

In describing how FTZ status has affected the refinery, please give examples and anecdotal information that you feel relevant. We recognize that FTZ status may be only a contributing factor.

27. Current estimate of annual zone duty savings.

28. Provide an estimate for the value-added activity that takes place under zone procedures (labor, profit, overhead, etc.). One way to estimate value-added is: Value of Sales from Plant minus Value of merchandise Received at Plant. Value-added should not be included in the Movement of Merchandise figures below.

29. Describe public-type benefits (both direct and indirect) to the local and national economy. Please give specific examples. As it applies to your plant, you may describe with any or all of the following:

a. Affected domestic production employment and refinery capacity.

b. Helped to offset environmental compliance costs.

c. Helped to preserve U.S. refining capacity.

d. Contributed to increased investment in U.S. refining.

In describing industry impact, information may be presented to the FTZ Board on a company-wide or industry-wide basis (rather than from individual refineries). In this manner the accumulated impact of all of a company's facilities or the use of zone procedures in the industry as a whole may be discussed rather than on an individual basis.

30. If the operation is subject to restriction, please describe method of compliance.

31. Movement of Merchandise

Merchandise in the Zone at Beginning and End of Calendar Year

	Beginning value	End value
Domestic Status	$	$
Foreign Status
Total	$	$
Merchandise Received:	Value
Domestic Status	$	$
Foreign Status
From Other U.S. FTZ's:
Domestic Status
Foreign Status
Total	$	$
Merchandise Forwarded:	Value
To The U.S. Market	$
To Foreign Countries (Exports)
To Other U.S. FTZ's
Total	$	$
Merchandise Destroyed	$

Explanation of Discrepancies:

a. Does Beginning Inventory + Total Merchandise Received − Total Merchandise Forwarded − Merchandise Destroyed = Ending Inventory? If not, explain.

b. Is the level of Merchandise Received this year significantly different from the previous year? If yes, explain.

c. Is the Ending Inventory from the previous year equal to the Beginning Inventory for this year?

32. Main Categories of Foreign Status Merchandise Received (Top Five)

Category	Value	Main countries of origin
_________________________	$ __________	_________________________
_________________________	__________	_________________________
_________________________	__________	_________________________
_________________________	__________	_________________________
_________________________	__________	_________________________
Total	$__________

33. Main Categories of Merchandise Forwarded (Top Five)

Category	Value
_________	$ _________
_________	_________
_________	_________
_________	_________
_________	_________
Total	$_________

34. Foreign Status Merchandise Received:

Nonprivileged Foreign $.

Privileged Foreign $.

35. Customs duties collected on merchandise entered into U.S. Customs territory from the operation during the year amounted to $__________.

36. (Optional) Attachment field: You may attach any photographs of the operation or any information you feel may be useful.

Public comment on this proposal is invited from interested parties. We ask that parties fax a copy of their comments, addressed to the Board's Executive Secretary, to [phone] or e-mail comments to [e-mail]. We also ask that parties submit the original of their comments to the Board's Executive Secretary at the following address: U.S. Department of Commerce, Room 2111, 1401 Constitution Ave., NW., Washington, DC 20230. The closing period for the receipt of public comments is October 16, 2009. Any questions about this proposal should be directed to Elizabeth Whiteman at [e-mail] or [phone].

Dated: September 3, 2009.

Andrew McGilvray,

Executive Secretary.