STAFF REPORT

Proposal for Optional Alternative SiteDesignation and Management Framework 

December 2008 
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EXECUTIVE SUMMARY

The statutory goal of the FTZ program -- “to expedite and encourage foreign commerce” -- has 

led the FTZ Board to focus consistently on meeting the real-world needs of grantees and the 

business community. However, real-world needs related to the designation of FTZ space often 

involve timeframes that are incompatible with any process for full FTZ Board action. Therefore, 

the Board has authorized staff-level action for “minor [zone] boundary modifications” (MBMs). 

As the pace of business has accelerated, grantees have increasingly relied on MBM actions to 

respond to time-sensitive needs for new FTZ sites. However, simultaneous with the increased 

demand for MBMs has been a proliferation of FTZ sites largely driven by property owners’ 

interest in FTZ status for their properties (with grantees agreeing to propose numerous sites 

because they cannot foresee which sites will be used for FTZ activity). As a result, the FTZ 

Board and the U.S. Customs and Border Protection (CBP) offices with oversight responsibilities 

cannot accurately project the resources needed for future oversight of potential FTZ activity. 

The factors cited above -- as well as burdens on grantees and on the FTZ Board related to the 

current MBM practice -- have led the FTZ Staff to develop a variation on the current approach to 

site designation and management. Through a lengthy consultative and public-comment process, 

including meetings with grantees and discussions with CBP port personnel, the FTZ Staff has 

developed a proposal for an “alternative site framework” (ASF). The proposal gives equal 

weight to increasing flexibility for grantees and businesses and to addressing oversight concerns 

by focusing FTZ designation primarily on sites where FTZ activity actually occurs. 

In essence, the ASF proposal simply modifies existing practice by allowing MBMs that draw on 

unallotted acreage from a standard 2,000-acre activation limit for an individual FTZ. The Board 

already applies that limit to FTZs which have presented sites that, cumulatively, include more 

than 2,000 acres within their boundaries. The ASF proposal makes the MBM practice far more 

predictable and flexible by building into the “plan” adopted for a participating grantee the ability 

to designate one category of new sites through MBM action (as long as acreage from the 2,000-

acre activation limit is available to be allotted). However, the ASF proposal’s increased 

flexibility for grantees is tied to several limitations and guidelines that will increase FTZs’ focus 

on active sites. As with current practice, no proposal to add or modify a FTZ site will be 

approved unless the appropriate CBP Port Director has concurred on the proposal. 

The FTZ Staff proposes for the Board to make the ASF available only on an optional basis 

because, among the several hundred FTZs approved by the Board, there is a broad variation of 

approaches taken by the grantees. A certain number of grantees pursue the most traditional 

approach to site management, which is essentially focused on drawing users/operators 

(collectively “users”) to a very limited number of FTZ sites (as opposed to seeking to serve new 

needs at new locations). Both static and dynamic frameworks for site management can coexist 

provided that grantees have the proper information and tools to manage their zone projects 

effectively. Experience with administering the proposed ASF can help gauge the extent to which 

its elements could be appropriate to incorporate into future regulations. 
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The ASF proposal can be summarized as follows: 

The ASF involves a change in FTZ Board practice that will allow the grantee to propose sites 

(subject to the grantee’s standard 2,000-acre activation limit) within a defined service area. The 

2,000-acre limit would be specifically apportioned among approved sites -- for example, 

authority to activate 200 acres within a 900-acre industrial park site. Unapportioned acreage 

from the overall activation limit would remain in reserve for future sites. 

Under the ASF, a grantee would propose in an application to the FTZ Board: 

1) Its service area (typically a list of counties); and, 

2) “Magnet” site(s) -- a magnet site is a site intended to draw future users (as opposed to a 

“usage-driven site” that is designated to meet a specific user’s need). The grantee would indicate 

the boundaries of any magnet site and the amount of the 2,000-acre activation limit to be 

apportioned to the site. 

Grantees will have the increased flexibility to propose as a usage-driven site any site within the 

service area that accommodates a specific user’s need. Usage-driven sites could be designated 

by simple “minor boundary modification” (MBM) actions by the FTZ Staff. This contrasts with 

the limited MBM flexibility available under the FTZ Board’s current practice, which involves 

comparing each MBM -- both individually and cumulatively with prior MBMs -- to the locations 

and characteristics of the requesting grantee’s already approved zone sites. 

With the allowable exception of one magnet site, magnet and usage-driven sites designated 

under the ASF would be subject to “sunset” time limits that would automatically remove the 

FTZ designation if no FTZ activity had occurred within a specified period. To limit property 

speculation, the ASF would also have a general goal of six or fewer “magnet” sites per grantee. 

Proliferation of sites increases the cost to the government to oversee the FTZ program, and the 

FTZ Act proscribes the sale of FTZ-designated property for more than its fair market value 

would be without FTZ designation. The ASF is designed to reduce speculative sites while 

providing significantly improved access to the program for actual zone users. 

Because many zones currently have more than six magnet-style sites, the ASF provides for a 

“transitional phase” that would allow a grantee to designate any number of existing sites as 

magnet sites for an initial five-year period. At the end of the five years, the activity-based 

“sunset” tests described above generally would automatically remove FTZ designation from 

unused sites. The result would generally be a zone with six or fewer magnet sites, and the sunset 

mechanism would be neutral and equitable for all affected parties. 

Finally, for each zone that participates in the ASF, the FTZ staff would provide reports to the 

Board on a defined, periodic basis. 
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INTRODUCTION 

Based on a broad and extended consultative process, the FTZ Staff has developed a proposal for 

the FTZ Board to make available to grantees -- on an optional basis -- an Alternative SiteDesignation and Management Framework (Alternative Site Framework, or ASF). The key goals 

in developing the ASF were to give grantees significant additional flexibility and predictability 

in site designation while, for the benefit of the FTZ Board and CBP oversight and resource 

allocation, increasing the focus of the program on sites where FTZ activity actually occurs. 

After a year of consultations with grantees and CBP port personnel, the FTZ Staff published a 

detailed proposal for public comment in May 2008 and, based on the comments received in 

response, published a significantly revised proposal for public comment in September 2008. 

After receiving and considering comments on the revised proposal, the staff now proposes to the 

FTZ Board the formal adoption of the final version of the ASF as an option for grantees. 

NEED FOR PROPOSAL 

At the broadest level, an updated approach to site designation and management is needed to 

better meet the needs of U.S. facilities for which FTZ procedures can be a key contributing 

factor to competing successfully with companies and facilities overseas. Grantees also are 

burdened excessively by limitations associated with the FTZ Board’s current practice. Of equal 

importance, the FTZ Board and CBP face excessive oversight-related burdens (or uncertainties) 

and other issues stemming from the shortcomings that have become apparent in the Board’s 

current practice. 

As the number of zones, the level of international trade, and the pace of business decisionmaking have all increased, the number of MBM requests has increased as well.1

 For some active 

grantees, MBMs have become the primary mechanism to successfully meet newly emerging 

needs for FTZ space. However, the increased use of MBMs has highlighted several weaknesses 

in the structure of the FTZ Board’s regulations and practice. In particular, the documentation 

burden associated with each MBM effectively doubles due to the requirement for a grantee to 

“swap” acreage.2 Specifically, in addition to documenting the boundaries of the newly proposed 

FTZ site/parcel, the grantee must precisely indicate the source of the acreage to be swapped from 

one (or more) of the grantee’s existing sites. The document review burden for the FTZ Staff and 

CBP is commensurately higher as well. 

 

1 The growth in the use of the MBM procedure is reflected in data from the FTZ Board’s Annual Reports to 

Congress. For FY 1985 – the first year for which administrative actions were included in an Annual Report to 

Congress – the FTZ Staff approved 16 MBMs (versus 39 Board Orders issued during the year). For comparison, 

during FY 2008, the FTZ Staff approved 69 MBMs (versus 61 Board Orders issued during the year). 

2 The swapping of acreage from an approved FTZ site to a proposed FTZ site originated as a means of ensuring 

compliance with the language, “Any expansion of the area of an established zone shall be made and approved in the 

same manner as an original application,” from section 81f(b) of the FTZ Act. The swapping practice has also helped 

to ensure that a modification is “minor” relative to the standard in section 400.26 (a)(2)(ii) of the Board’s regulations 

that require the Executive Secretary to consider the extent to which a proposed modification would “[e]xpand the 

physical dimensions of the approved zone area as related to the scope of operations envisioned in the original plan.” 
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The documentation-related burdens and complexity associated with MBMs are further increased 

by two distinct practices: 1) temporary approval of a site via MBM, with the site later approved 

by the FTZ Board in a formal expansion, after which the amount of acreage originally swapped 

out of a donor site reverts to that site; and 2) permanent approval of a site via MBM in a context 

where the grantee believes that it subsequently needs to restore the amount of swapped acreage 

to the donor site and accomplishes that restoration through a subsequent expansion application to 

the FTZ Board. This type of disappearance and reappearance of designated acreage at sites 

poses significant record-keeping challenges for grantee and for the FTZ Board and CBP. 

However, although temporary or permanent swapping of acreage creates significant burden for 

FTZ grantees, the FTZ Staff, and CBP (both at the initial MBM request stage and later as the 

status of specific acreage is tracked), the swapping of acreage for MBMs is a key mechanism 

under the Board’s current practice for easily ensuring compliance with the statutory and 

regulatory requirements cited above (from section 81f(b) of the FTZ Act and section 

400.26(a)(2)(ii) of the Board’s regulations). 

Finally, grantees’ accomplishment of their economic development goals is placed at risk due to 

the lack of bright-line standards for determining whether a MBM request -- on its own or 

cumulative with other MBM requests by the same grantee -- will be consistent with the “plan” 

approved for the zone by the FTZ Board. In this context, a grantee faces real uncertainty on 

whether a commitment can be made to a potential FTZ user regarding the feasibility of rapid 

FTZ designation through a MBM. Further, grantees have expressed considerable frustration at 

the lack of predictability associated with the vague standards for approval (or denial) of MBM 

requests. Certain active grantees have found themselves hamstrung in attempting to respond 

quickly to new needs for FTZ designation and instead finding that the FTZ Staff has determined 

that the cumulative effect of a grantee’s MBMs to date require a reorganization application to the 

FTZ Board before additional MBMs can be considered. However, the broad range of types and 

structures of FTZs have made it problematic for the FTZ Staff to try to establish bright-line 

standards to apply across all zones. 

The issues delineated above that relate to the FTZ Board’s current MBM practice contribute to a 

broader need for a new approach to the designation and management of FTZ sites. Inflexibility 

and burden associated with the current practice not only hamstring grantees in their efforts to 

respond to time-sensitive needs but also contribute to the accumulation of too many unused FTZ 

sites. Difficulties or uncertainties associated with MBM requests can lead grantees to embrace 

proposing FTZ designation for larger numbers of speculative sites on the basis that the larger 

number of sites designated the more likely that an eventual interested user will happen to be 

located within one of them. At least as significantly, the requirement to swap acreage when a 

MBM is needed encourages grantees to retain unused sites (or portions of sites) as “fodder” for 

future MBMs -- an unofficial practice known as “land-banking.” 

A pattern has developed at many zones of an increasingly looser connection between FTZ 

designation at sites and actual FTZ activity at those sites. A key contributing factor appears to 

be property owners’ and developers’ interest in FTZ designation as a marketing tool. That 

interest has become widespread but, in many instances, does not appear to have led to larger 
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numbers of firms actually using FTZ procedures. Further, despite multiple new FTZ sites having 

been approved in recent years based on the grantees’ expressed need for the additional space to 

draw new FTZ users, the same grantees often have subsequently submitted MBM requests to 

move FTZ designation to additional locations where potential FTZ users have actually turned up. 

This overall pattern of increased speculative site designation failing to diminish grantees’ needs 

for MBM actions in order to meet the needs of actual zone users is indicative of a need for an 

updated model for site designation and management. Beyond the inefficiencies for grantees in 

meeting users’ needs and the direct problems posed for the FTZ Board and CBP by the 

accumulation of unused FTZ sites, a general perception problem can exist for the FTZ program 

if a gap continues to grow between approved FTZ space and actual zone activity within that 

space. 

DEVELOPMENT OF PROPOSAL 

The FTZ Staff’s effort to address the challenges posed by the FTZ Board’s current site 

designation and management practice began with a series of meetings with various different 

grantees to understand their real-world needs. The Staff explored with grantees their experiences 

-- and degrees of success -- with attempting to attract potential users to existing FTZ sites versus 

moving FTZ designation to a potential user’s existing non-FTZ location. Many grantees 

indicated that attempting to pre-designate FTZ sites and then attract users was a problematic 

model, in general, because many companies have existing locations and the costs or difficulties 

associated with moving would outweigh the benefits. 

In examining the pros and cons of the FTZ Board’s current site-designation and management 

practice, the FTZ Staff also became increasingly mindful of the challenges faced by the FTZ 

Board and CBP in administering and overseeing the program. In particular, an inherent concern 

regarding the number of speculative FTZ sites is that all such sites theoretically have potential 

for future multi-user activity (although experience has shown that relatively little of that 

potential activity is likely to occur). However, the resource implications of a proposed site for an 

agency like CBP, in particular, cannot be fully examined without an ability to identify the 

specific user(s) of a site -- something that is inherently impossible when a site is proposed on a 

speculative basis.3

 In this context, it became apparent that the oversight agencies’ interest in 

better targeting of FTZ designations to actual users was solidly in sync with many grantees’ 

interest in pursuing designation for specific identified users, provided such designation could be 

accomplished in a simple, rapid fashion. 

Subsequently, the FTZ Staff developed a specific proposal to make available -- as an option for 

grantees -- a more flexible and more focused approach to MBMs and to site designation. The 

proposal was published on May 8, 2008 (73 FR 26077-26078 -- see Appendix 4), with public 

comment invited through July 7, 2008. Based on the comments received from a number of 

 

3 CBP Port Directors have specifically indicated to the FTZ Staff their difficulties in assessing future oversightrelated resource demands for proposed sites which have no reliably identified users (often because the sites as yet 

have no tenants). 
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parties -- including the National Association of Foreign-Trade Zones (NAFTZ) -- the FTZ Staff 

made major modifications to the proposal. 

The FTZ Staff published a revised proposal on September 11, 2008 (73 FR 52817-52822 -- see 

Appendix 5), with public comment invited through October 31, 2008. The few comments 

received on the revised proposal are summarized in Appendix 6. As explained in the Discussion 

of Elements of Final Proposal section, the final proposal summarized below incorporates 

changes based on certain of the comments. 

SUMMARY OF FINAL PROPOSAL 

Below is a summary of the final staff proposal for the ASF, which takes into account the public 

comments received on both the initial proposal and the revised proposal. (The final proposal is 

presented in full at Appendix 1 and the elements of the final proposal are discussed at length in 

Appendix 2.) The only substantive changes relative to the revised proposal published in 

September 2008 are a three-year sunset period for usage-driven sites (rather than five years) and 

allowance for each grantee to have the option of proposing permanent FTZ designation for one 

magnet site. A grantee could opt to participate in the ASF by incorporating the framework’s 

elements into an application4

 for FTZ Board action to reorganize the FTZ and adopt a new ASFconsistent “plan” for the FTZ. 

The basic elements of the final ASF proposal would apply to each participating grantee as 

follows: 

1) A standard 2,000-acre activation limit -- mirroring existing practice for large FTZs -- to be 

allotted among designated sites and acreage left in “reserve.” 

2) Allowance for site-specific activation limits -- again mirroring existing practice -- that will 

enhance the flexibility in allotting the overall 2,000-acre limit. (For example, a grantee could 

request to be able to activate up to 100 acres within the boundaries of a FTZ-designated 700-acre 

port facility.) 

3) The “service area” (e.g., a list of counties) within which the grantee intends to be able to 

propose FTZ sites under the ASF. This general concept already exists in certain approved FTZ 

applications. Any proposed service area would need to meet the "adjacency" requirement of the 

FTZ Board’s regulations (60 miles/90 minutes driving time from CBP Port of Entry boundaries), 

state enabling legislation and the grantee organization’s charter. 

 

4 The FTZ Staff would provide specific guidelines to assist grantees in drafting such an application. 
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4) Designation through FTZ Board action of “magnet” sites intended to attract multiple FTZ 

users (as with traditional general-purpose FTZ sites). For each grantee, the initial goal would be 

a maximum of six magnet sites.5

5) Designation through either FTZ Board action or FTZ Staff administrative action (the existing 

MBM procedure) of “usage-driven” sites targeted to individual companies that are not located in 

a magnet site but which are ready to use FTZ procedures. 

6) Concurrence from the CBP Port Director would continue to be required for any proposed 

designation of a site. 

7) Continuing recent FTZ Board practice, “sunset” time limits self-remove FTZ designation 

from sites not used for FTZ purposes before a site’s sunset date. Magnet sites would generally 

have five-year sunset periods while usage-driven sites would have three-year sunset periods. 

FTZ use at a site during a given period would simply push back the sunset date (by another five 

years for magnet sites or three years for usage-driven sites); we have termed this “resetting.” 

8) The FTZ Staff would carefully number and track both magnet and usage-driven sites based 

on a system that the Staff will develop in time for the ASF’s actual implementation. Information 

regarding each designated site and its status will be made available via the web, to the particular 

benefit of actual or potential users. 

9) Periodic reports from the FTZ Staff to the FTZ Board on the effects of the ASF on individual 

participating FTZs. The FTZ Staff would submit a first report to the Board after no more than 

five years of a grantee’s participation in the ASF or ten usage-driven site-designation MBM 

actions for the grantee (whichever comes first). The reporting would result from FTZ Staffinitiated reviews, and would not require any request or application from the grantee. 

Finally, in response to the initial proposal, grantees requested allowance for a transitional phase 

that could ease an existing zone’s transition to the new framework by enabling continued FTZ 

designation for any number of existing sites so that activity-based sunset tests could provide a 

neutral, equitable mechanism to automatically remove designation over time from unused sites: 

10) The optional transitional phase would allow a grantee to propose any number of pre-existing 

sites as magnet sites, with minimum five-year sunset periods. For sites used during the sunset 

period, the FTZ Staff would evaluate the nature of site-specific activity. At the end of the 

transitional phase, the FTZ Board would be able to take action on Staff recommendations to 

 

5 An ASF element like this general goal of six or fewer magnet sites (unless multi-user activity has actually been 

demonstrated at most or all of six pre-existing magnet sites) is intended to minimize FTZs competing simply based 

on the number of sites. Therefore, the intent in incorporating this element in the ASF parallels the FTZ Board’s 

intent in 1982 when the Board adopted the standard 2,000-acre activation limit as a means of minimizing the thenemerging problem of FTZs competing with each other based on the size of their zones (see the “Context: Law, 

Regulations, and FTZ Board Practice” section below). 
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apply either magnet or usage-driven designation to each such site depending on comments from 

the grantee and factors such as the number of distinct FTZ operations at the site. 

CONTEXT: LAW, REGULATIONS AND FTZ BOARD PRACTICE 

The FTZ Act establishes a relatively general framework within which the FTZ Board must 

operate the FTZ program. See 19 U.S.C. §§ 81a-81u. Courts have consistently recognized the 

broad discretion that Congress intended for the Board. In Armco Steel Corporation v. Stans, a 

seminal FTZ case before the Court of Appeals for the Second Circuit, the appeals court found 

that “Congress has delegated a wide latitude of judgment to the Foreign-Trade Zones Board to 

respond to and resolve the changing needs of domestic and foreign commerce through the trade 

zone concept. Because of the complexity and vagaries of our highly developed systems of trade, 

and the pressing needs for varying solutions to the problems that inevitably arise, it is imperative 

that the Board be permitted to experiment at the fringes of the tariff laws. As long as the Zones 

Board remains within the fringes and does not stray into areas clearly outside its delegated 

authority, a court should not interfere except for compelling reasons...” See Armco Steel Corp. 

v. Stans, 431 F.2d 779, 788 (2d Cir. 1970). 

The ASF proposal outlined in this paper is well within the “fringes” of the FTZ Act. The 

proposal essentially constitutes a variation on -- and a natural evolution of -- the FTZ Board’s 

existing practice for designating and modifying sites where FTZ activity may take place. The 

foundation both for the Board’s current practice and for the ASF proposal is a conceptual shift 

by the FTZ Board approximately 30 years ago. Until that time, the Board approved only small 

amounts of “zone” space which were then required to be dedicated only to FTZ use. As such, all 

approved zone space was subject to strict security requirements and treated as outside the 

customs territory. However, the Board came to recognize the need for far greater flexibility if 

FTZs were to prove useful to grantees and businesses.6

 As a result, in the mid-1970’s, the Board 

embraced a major conceptual shift by recognizing the distinction between “approval” of a site 

versus Customs “activation” of the site. As explained in the August 1983 examiners committee 

report for the expansion of FTZ 62 (in Brownsville, Texas): 

[T]he concept of "approval/activation" is becoming more well-known and accepted. This 

concept, applied by the Board during the past seven years, involves approving areas as 

zones that will not be used exclusively for zone activity. Portions of the "approved" area 

are "activated" with Customs approval, with FTZ Staff and possibly Board involvement 

in new manufacturing situations. Only the "activated" areas are considered to be outside 

Customs territory. Inherent in the concept is the point that Board approval is conditional 

and "full" status does not occur until after a final Customs operational review and 

activation. 

 

6 Until the mid-1970’s, a warehouse could not be used for non-zone activity once it had been designated as zone 

space. Only a burdensome and time-consuming process for action by the FTZ Board could allow the warehouse to 

revert to non-FTZ use, but such action would then prevent its future zone use until another burdensome and timeconsuming process was undertaken to achieve action by the FTZ Board to restore designation. 
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The consistency of the “approval/activation” distinction with the FTZ Act can be illustrated in a 

series of statutory contexts. For example, section 81c of the Act -- entitled “Exemption from 

customs laws of merchandise brought into foreign trade zone” -- provides considerable detail on 

the distinctions between the treatment of goods in FTZs versus goods within the customs 

territory. However, since the development of the approval/activation distinction in the 1970’s, 

the exemption from customs laws has only applied to goods within the activated portions of sites 

which had already been approved for FTZ use by the FTZ Board. As such, only those activated 

portions constitute “zones” within the meaning of section 81c. 

Similarly, section 81l of the FTZ Act (“Facilities to be provided and maintained”) includes the 

following requirement: “Each grantee shall provide and maintain in connection with the zone... 

(f) Adequate enclosures to segregate the zone from customs territory for protection of the 

revenue, together with suitable provisions for ingress and egress of persons, conveyances, 

vessels, and merchandise...” Numerous sites approved over the last three decades by the Board 

for FTZ designation -- such as “greenfield” sites on which no construction has yet taken place -- 

have not needed to meet the requirement of section 81l(f) in order to be designated as FTZ sites. 

 Once again, this is because a designated site does not function as a “zone” until it is activated. 

Instead, CBP requires that the effective standards expressed in section 81l(f) be met as a 

precondition for activation; therefore, at the time of activation, the area in question actually 

begins to function as a “zone” (i.e., is treated as if outside the customs territory). 

Other examples stem from section 81o of the FTZ Act, which contains provisions on “Persons 

allowed to reside in zone” (“No person shall be allowed to reside within the zone except Federal, 

State, or municipal officers or agents whose resident presence is deemed necessary...”) and 

“Retail trade within zone” (“No retail trade shall be conducted within the zone...”). Again, these 

provisions of the FTZ Act apply only to the activated portions of sites that have been designated 

by the FTZ Board. There has, in fact, been both retail and residential activity within portions of 

sites previously designated by the FTZ Board (and for which the designation had not yet been 

removed -- such removal would be a logical step once a FTZ-incompatible use was in place at a 

site). However, the retail or residential activity did not violate the FTZ Act because it did not 

take place within activated space (i.e., the portion of a designated site that actually functions as a 

“zone” within the meaning of the FTZ Act). 

Through a specific recommendation, the above-cited 1983 examiners committee report for the 

Brownsville FTZ expansion made explicit the idea that the size of a zone was the area that could 

actually be activated simultaneously (and, therefore, truly function as a zone). Given the scale of 

the proposed Brownsville expansion (19,000 acres along the Brownsville Ship Channel) and the 

increasing numbers of large FTZ sites being proposed by grantees, the examiners committee 

made -- and the FTZ Board adopted -- the following recommendation: 

Because zones tend to refer to the size of their approved area in promotional activity and 

because of concern by some Customs officials and FTZ that this might set an undesirable 

precedent, some type of limit should be imposed that relates to "activation". It appears 

that a restriction that would allow the flexibility that is desired, yet put a reasonable 
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ceiling on the amount of space that could be activated without further Board approval, 

would involve a limit of 2000 acres... The 2000 acres is an amount just short of what 

was recently approved for the Port of New York and New Jersey at its Newark-Elizabeth 

Marine Terminal, the busiest container port in the world. Since it is desirable under the 

approval/activation concept to have a general benchmark as to total area that could be 

activated without further FTZ Board involvement, the Newark/Elizabeth zone is 

proposed as such a benchmark for large seaport areas. 

The FTZ Board subsequently maintained the 2,000-acre activation limit as its general standard 

for large FTZ projects. In addition, the Board has also applied activation limits to define the 

maximum size of individual zone sites. This has been the case with certain airport sites -- for 

which grantees tend to simply draw boundaries around a large portion (or even all) of an airport 

facility -- or large industrial parks. Specific examples include the airport in Minneapolis, 

Minnesota (a 500-acre activation limit within a perimeter that defines 3,002 acres), several 

industrial parks in Laredo, Texas (for example, a 500-acre activation limit within a perimeter that 

defines 1,600 acres), and multiple industrial parks in San Antonio, Texas (each of which has a 

225-acre activation limit within varying larger site perimeters). It is also instructive that acreage 

swapped out of the above-cited Laredo industrial park site for MBM purposes reduced the site’s 

500-acre activation limit, rather than reducing the 1,600 acres within the defined perimeter. This 

reinforces the concept that -- when a site has an activation limit within a larger perimeter -- the 

“area” (within the meaning of section 81f(b) of the FTZ Act) of such a site is its activation limit 

rather than the amount of acreage defined by the site’s overall marked perimeter. 7

As indicated by the quoted sections of the Brownsville expansion examiners committee report 

above, the Board’s actions beginning in the mid-1970’s have embraced the concept that “full” 

FTZ status does not occur until “after a final Customs operational review and activation.” That 

position is consistent with the vision of the legislators who drafted the FTZ Act and imagined 

zones as specific spaces that would be physically segregated from customs territory and devoted 

to FTZ use. The result for all of the early FTZ grantees had been zones that were small in size 

and that proved very costly to their sponsors due to the complete inflexibility associated with 

FTZ status. 

In contrast, after the Board’s adoption of the “approval/activation” concept, an industrial park 

approved for FTZ use -- perhaps with a certain activation limit -- would remain entirely useable 

as ordinary commercial space and completely integrated with U.S. customs territory until such 

time as some part of the industrial park was activated by CBP. Importantly, such activation 

might never occur and, therefore, none of that industrial park would ever end up being treated as 

if outside the customs territory. In this context, it is a natural conclusion that -- taking into 

 

7 Once a zone is restricted to activating no more than 2,000 acres, its approved "area" within the meaning of section 

81f(b) of the FTZ Act has been established by the Board as 2,000 acres and cannot expand beyond that size until 

Board action increases the activation limit beyond 2,000 acres. However, the fact that a zone's area has been limited 

by a standard restriction to 2,000 acres has not precluded the Board from requiring an application for full Board 

action to significantly modify the zone's “plan” (see 15 CFR 400.26(a)(2)(i)). However, that regulatory requirement 

is indicative of the Board's interest in evaluating any major proposed evolution in a FTZ's structure rather than 

reflective of a statutory requirement for full Board action on such a proposal. 
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account the envisioned meaning of a zone at the time of the FTZ Act’s passage as an area outside 

the customs territory -- an industrial park (or any other space) which had been approved for FTZ 

designation but which had never been activated by CBP would never be a part of the “area” of 

the zone. 

For the ASF proposal, we have been able to build on the concepts described above, including the 

2,000-acre activation limit as the essential “area” of any zone to which it had been applied.8 The 

ASF proposal would build the 2,000-acre limit -- and the ability to use MBM actions to allot 

acreage within that limit for the sites in the “usage-driven” category -- into the “plan” to be 

adopted by the FTZ Board for a FTZ that opts to participate in the ASF. The ASF proposal also 

counter-balances the increased flexibility that would be available to participating grantees for 

certain MBMs by requiring the prior establishment through a full FTZ Board process -- 

including public notice and comment -- of the specific “service area” within which the grantee 

could propose future MBMs. 

It is worth noting that the ASF proposal does not inherently diminish the FTZ Board’s role in the 

designation and modification of sites for a given FTZ. Rather, for a participating grantee, the 

FTZ Board’s approval of a revised “plan” to reorganize based on the ASF would lead to 

retrospective notification9

 to the Board of all MBM actions approved by the FTZ Staff.10 The 

periodic, grantee-specific reports to the FTZ Board by the FTZ Staff will provide the Board with 

greater detail than is currently the case regarding MBM actions by the Staff. The Board would 

be free to open reviews or take other actions, as warranted, depending on the facts and 

circumstances reported. Further, given the magnitude of the FTZ Board’s conceptual shift to the 

“approval/activation” model, the Board’s practice in some sense has not yet evolved to fully 

reflect the implications of that shift.11 Based on the reasons described above for making 

available a more flexible and focused framework to designate and manage FTZ sites, the ASF 

proposal lays out an additional evolutionary step for the Board to maximize the benefits for the 

FTZ program based on the full implications of the “approval/activation” concept. 

 

8 The limit has not been applied to zones for which the sum of the acreage encompassed by the existing and 

proposed site perimeters is less than 2,000 acres. 

9 The retrospective nature of the Board’s involvement in MBM actions under the ASF proposal is roughly similar 

to the Board’s adoption of the sourcing change notification option (19 CFR 400.28(a)(3)) to give greater flexibility 

for manufacturing firms. The sourcing change notification provision was created and implemented in the final 

revised regulations (December 1991) based on comments submitted in response to the proposed regulations. Those 

comments had indicated a need for greater flexibility to meet time-sensitive needs, and the Board modified its 

practice accordingly. 

10 The intended benefit, of course, is the elimination of a grantee’s current, sporadic need – which varies depending 

on the number and nature of MBMs presented and their cumulative divergence from the FTZ’s approved “plan” – 

for the grantee to submit proposals to expand or reorganize its zone, with each such proposal aimed at gaining Board 

adoption of a new plan for the zone. 

 

11 The incomplete evolution of practice to reflect the implications of the “approval/activation” shift can be 

attributed, at least in part, to a prior absence of adequate need for further evolution. 
−12−

Finally, the ASF proposal was developed specifically to remain compatible with the FTZ Act 

and the FTZ Board’s existing regulations. Each of the elements of the proposal derives directly 

from FTZ Board practice or is a minor modification of existing practice consistent with the FTZ 

Act and the Board’s regulations. However, experience with actually administering the ASF can 

help gauge the extent to which its elements function as envisioned and could, therefore, be 

appropriate to consider for incorporation into future regulations. 

(A detailed discussion of the relevant statutory and regulatory provisions and of the Board’s 

related practice is provided in Appendix 3.) 

OTHER CONSIDERATIONS 

The effects of implementation of the ASF proposal are likely to extend far beyond positive 

impacts on burden for FTZ grantees or the FTZ Board and CBP. The largest impact is likely to 

come from an improved ability to make FTZ procedures readily accessible to U.S. facilities that 

compete with facilities abroad. Engaged grantees will be able to bring FTZ designation easily 

and quickly to companies for which incremental cost savings are increasingly important. This 

can be especially effective in combination with other initiatives by the FTZ Board to improve the 

program’s accessibility and usefulness, particularly for small and medium-sized manufacturers 

(SMMs). 

In 2004, the FTZ Board adopted the Temporary/Interim Manufacturing (T/IM) proposal as a 

mechanism for enabling SMMs, in particular, to better compete through the use of FTZ 

procedures. The Board modified T/IM in 2006 in an effort to make it a more effective tool for 

SMMs. However, a critical weak link has been the time and burden associated with bringing 

FTZ designation to a SMM’s facility. The ASF proposal can enable engaged grantees to break 

through that final barrier to access. The enhancement of T/IM through the adoption of the ASF 

proposal would be magnified if the FTZ Board recognizes the appropriateness of the FTZ Staff 

being able to simultaneously consider a usage-driven site-designation request and a T/IM 

application from a particular manufacturer. 

CONCLUSION 

The specific ASF proposal is the result of an extensive, year-long consultative process. That 

process was followed by formal publication for public comment of an initial proposal and, after 

incorporation of many changes based on comments received, solicitation of public comment on a 

revised proposal. The final proposal delineated and explained above takes into account a small 

number of comments submitted on the revised proposal. The ASF concept overall, as well as its 

details, is strongly supported by a range of FTZ grantees and the National Association of 

Foreign-Trade Zones. The regular periodic reports to the FTZ Board regarding participating 

FTZs will enable the Board to continue to evaluate the impact of the ASF proposal if 

implemented. Based on the factors described in this report, the FTZ Staff recommends the 

implementation of the ASF proposal as an option for FTZ grantees. 
−13−

It is important to recognize the ASF’s potential to transform many active grantees’ operation of 

their FTZs. The flexibility and speed with which participating grantees will be able to respond 

to emerging needs can have a significant positive impact on U.S. facilities’ ability to compete 

internationally. That positive impact can easily extend to small and medium-sized U.S. 

manufacturers -- particularly in combination with the simultaneous availability of the FTZ 

Board’s T/IM procedure. Importantly, the ASF concept also can play a key role in moving the 

FTZ program towards a longer-term refocusing on sites at which FTZ activity actually takes 

place. As such, the proposal has many benefits both for the private sector -- with resulting 

public benefits derived from private U.S. facilities’ enhanced international competitiveness and 

employment -- and for the government agencies whose missions encompass oversight of FTZs. 
−1−

Appendix 1 

Final Proposal 

The fundamental trade-off addressed in this proposal is greater flexibility and increased 

predictability for approval of FTZ sites through simple and rapid “minor boundary modification” 

actions in exchange for a grantee maximizing the linkage between designation of FTZ space and 

actual use of that space for FTZ activity (after “activation” by CBP). The major benefit would 

likely be for existing FTZ grantees, which would have the option of applying to reorganize their 

FTZ by incorporating in an application for FTZ Board action elements from the following 

framework: 

1. An initial limit of up to 2,000 acres would be authorized for FTZ activation within a 

specific geographic area. The proposal is focused on linking FTZ designation more closely to 

FTZ activity, and the 2,000-acre limit reflects the Board’s existing practice of limiting any FTZ 

grantee to activation of 2,000 acres unless further approval is obtained from the FTZ Board. 

Acreage within the 2,000-acre limit which had not been allotted to specific designated sites 

would be considered “reserve” acreage available for activation at future sites within the general 

geographic area approved for the zone to serve (see “service area” below). 

2. Enhanced flexibility by allowing site-specific activation limits that may represent only a 

portion of the acreage encompassed by the sites’ boundaries (as has been the FTZ Board’s 

practice with certain applications to date). For example, the boundaries of a site might 

encompass a 700-acre port facility but the grantee could request that a 100-acre activation limit 

apply to the site. The precise 100 (or fewer acres) that would be used within the site’s 

boundaries would be pinpointed at the time of CBP activation(s) of the specific area(s) within 

the site. 

3. The "service area" within which the grantee intends to be able to propose generalpurpose FTZ sites (e.g., specific counties, with documented support from new counties if the 

service area reflected a broader focus than the FTZ’s current area served) using its standard 

2,000-acre activation limit. The term “service area” applies a name to a concept which already 

exists in certain approved FTZ applications in which a grantee organization has named the 

localities it intends to serve. It should be noted that any service area must meet the "adjacency" 

requirement of the FTZ Board’s regulations (60 miles/90 minutes driving time from CBP Port of 

Entry boundaries). A grantee’s proposed service area would need to be consistent with enabling 

legislation and the grantee organization’s charter. The FTZ Board’s evaluation of a proposed 

service area could potentially involve examination of issues related to the “convenience of 

commerce” (19 U.S.C. 81b(b)) in regions served by more than one FTZ grantee. Also, 

designation of a service area for one grantee would not preclude other grantees from proposing

to the FTZ Board a service area (or a site) that includes some or all of the same geographic area; 

the Board would evaluate the specific facts and circumstances on a case-by-case basis (including 

relative to the previously cited “convenience of commerce” standard). 
−2−

4. Designation of a limited number of “magnet” sites selected by the grantee -- often as a 

result of local public processes -- for ability and readiness to attract multiple FTZ uses. An 

individual magnet site would generally be proposed with an allotment of no more than 200 acres 

for activation, although a larger proposed activation limit for a magnet site could be justified 

based on factors such as the nature of the site (e.g., a major harbor facility) or a specific type of 

projected FTZ activity that would tend to require an unusually large number of acres in 

simultaneous “activated” status at the specific site. A magnet site could only be designated 

through an application for FTZ Board action. 

5. Possible designation of “usage-driven” sites to serve companies which are not located in 

a magnet site but which are ready to pursue conducting activity under FTZ procedures. In the 

general interest of maximizing the linkage between FTZ site designation and FTZ activity at the 

site, a usage-driven site would be limited -- in the context of a larger industrial park or business 

district where other companies interested in FTZ procedures might be able to locate in the future 

-- to the area(s) required for the company(ies) specifically identified as ready to pursue 

conducting FTZ activity at the site. 

6. Unlike magnet sites, usage-driven sites could be designated through the current minor 

boundary modification (MBM) mechanism -- a rapid administrative action by the Board’s staff -- 

in addition to through FTZ Board action. (It should be noted that usage-driven MBM actions 

could conceivably be used to designate additional acreage where needed at magnet site 

locations.) A simplification of the MBM process would result from elimination of the need to 

“swap” like amounts of acreage from existing sites because the total allotted acreage for 

activation of existing and proposed sites would remain within the standard 2,000-acre limit. 

Requests for MBM actions would continue to require concurrence from the appropriate CBP 

port director. 

7. No specific limit on the number of usage-driven sites (although subject to the zone’s 

overall 2,000-acre activation limit). However, it should be noted that such usage-driven sites are 

by definition focused on only the specific physical area(s) required for company(ies) conducting 

FTZ activity or ready to pursue conducting FTZ activity. Therefore, with regard to numbers of 

usage-driven sites, the definition of such sites and the standard sunset limits (and resetting) 

described below inherently function to limit usage-driven sites on an ongoing basis to the 

number of specific areas required for activity by (or on behalf of) FTZ users. 

8. Regarding numbers of magnet sites, the framework would reflect a general goal -- after 

any transition period, as outlined below -- of focusing each FTZ on six or fewer simultaneously 

existing magnet sites. Special circumstances of regional (multi-county) FTZs could be taken 

into account based on factors which could justify a larger number of magnet sites (e.g., 

population size, level of trade-related activity). Also, a grantee seeking over a longer term to 

justify to the FTZ Board proposed authority for a larger number of magnet sites could provide 

evidence of multi-user FTZ activity -- as reflected in the grantee’s annual reports to the FTZ 

Board -- at a significant percentage of the grantee’s already designated magnet sites. (It should 

be noted that a grantee with an approved magnet site where only a single user activates over time 

will be able to consider requesting usage-driven designation for the active portion of that magnet 
−3−

site, thereby helping to retain focus and enabling the grantee to consider whether a different site 

would be more appropriate for magnet designation while remaining consistent with the goal 

outlined above for total number of magnet sites.) 

9. Magnet sites and usage-driven sites would be subject to “sunset” time limits which would 

self-remove FTZ designation from a site not used for FTZ purposes before the site’s sunset date. 

For magnet sites, the default sunset period would be five years with sunset based on whether a 

site had been activated by CBP. However, each grantee would have the option of proposing 

permanent FTZ designation for one magnet site and the FTZ Board could take a range of factors 

into account in determining the appropriate sunset period for a given site (e.g., nature of the site, 

public ownership of the site). For a usage-driven site, the sunset limit would require within three 

years of approval admission into the site of foreign non-duty paid material for a bona fide

customs purpose. Experience in administering the framework could also reveal a need to adjust 

practice for usage-driven sites to implement intermediate benchmarks (such as progress towards 

activation) rather than a single deadline date at the end of a three-year period. 

10. Magnet sites and usage-driven sites would also be subject to ongoing “resetting” whereby 

activation at a site during the site’s initial sunset period would serve to push back the sunset date 

by another five years for magnet sites and by another three years for usage-driven sites (at which 

point the sunset test would again apply). Finally, if all of a grantee’s sites were due to sunset 

based on lack of activation, the grantee would need to apply to the FTZ Board at least 12 months 

in advance of the ultimate sunset termination to request designation of at least one site for the 

period beyond the sunset of the previously approved sites. 

11. An optional five-year transitional phase would be available for grantees of zones with 

more than six existing magnet-style sites. For the optional transitional phase, an individual 

grantee could apply to reorganize its zone and request continued FTZ designation for existing 

sites that the grantee determines warrant further opportunity to demonstrate a need for FTZ 

status. For the transition period, there would be no specific goal in terms of numbers of existing 

sites which could be proposed for magnet designation. However, sites proposed for a zone’s 

transitional phase would need to comply with the framework’s limit of a 2,000-acre activation 

limit within the zone’s service area (see further discussion below). 

12. For the transitional phase for a particular zone, the grantee would have the option of 

requesting usage-driven designation for any site where a single entity is conducting (or ready to 

conduct) FTZ activity. For sites that the grantee believes are better suited to a magnet (multiuser) role, the grantee could request magnet designation. Any usage-driven sites would have the 

standard three-year sunset period for such sites. The FTZ Board would establish sunset limits 

for individual magnet sites based on the facts of the case (particularly as they pertain to each 

site). For the transition phase, the default sunset limit for magnet sites would be five years but 

the FTZ Board would be able to establish longer sunset limits for specific sites if warranted by 

the facts and circumstances present. 

13. The five-year transition period for a specific grantee would begin with approval of the 

grantee’s reorganization application by the FTZ Board. During the final year of the transition 
−4−

period, the FTZ Board staff would initiate a review of all of the zone’s sites for which the sunset 

limits align with the end of the transition period. The staff review would examine whether each 

of those sites had been activated during the transition period and, for activated sites, the specific 

FTZ activity which had taken place (including the operator(s)/user(s) for each site). The staff 

review of a zone’s transition period would result in a report noting any sites subject to the review 

which had remained unactivated during the period (for which FTZ designation would selfremove at the end of the period). The staff report would also make preliminary 

recommendations regarding magnet or usage-driven designation going forward for sites 

activated during the period. The FTZ Board staff would provide its preliminary 

recommendations to the zone’s grantee and allow a period of 30 days for the grantee to provide 

any response to the staff’s recommendations. After the end of the 30-day period, the staff would 

create a final report taking into account any response from the grantee regarding the preliminary 

recommendations. The FTZ Board would be able to take action, as appropriate, on the FTZ 

Staff’s final recommendations, and the grantee would be notified of any ultimate action. 

14. The transitional phase for any zone would be limited by the 2,000-acre activation limit 

inherent in the proposed framework. In this context, if existing sites which a grantee wishes to 

propose for a transitional phase cumulatively exceed 2,000 acres in their current configuration, 

the grantee would need to determine the specific activation limit to propose allotting to each 

such existing site. (For example, if an existing site is the 340-acre Acme Industrial Park, the 

grantee could propose an activation limit of 100 acres within the 340-acre Acme Industrial Park.) 

A grantee might opt for a simple mechanism to apportion a certain total amount of its activation 

limit among sites it is proposing for the transitional phase (after making allowance for the 

amount of acreage the grantee determines it needs to keep in reserve for possible future minor 

boundary modifications; a grantee retaining a minimum of 200 acres in reserve is advisable). 

It is important to note that the elements of the proposal support each other in furthering the goals 

of flexibility and focus for FTZ site designation (with important resulting resource- and 

efficiency-related benefits for the government). As such, a framework incorporating these types 

of elements would include the package of elements as an available alternative to the Board’s 

current practice. As is currently the case, minor boundary modification actions would be 

approved by the Board’s staff while modifications to a zone’s “plan” (e.g., increase in authorized 

activation limit, modifications to service area) would be matters for the FTZ Board’s 

consideration. FTZ grantees opting to manage their zones under the Board’s current framework 

would be unaffected by this proposal. 

Finally, in order to help the FTZ Board evaluate the effectiveness and appropriateness of the 

alternative framework after actual experience with FTZ grantees, the FTZ staff would report to 

the Board on a periodic basis regarding the actual usage of the alternative framework. The 

staff’s reporting regarding implementation of the framework at individual participating FTZs 

would result from staff-initiated reviews and would not require any request or application from 

the grantee.
−1−

Appendix 2 

Discussion of Elements of Final Proposal

The main principle underlying the ASF proposal can be summarized as follows: Link FTZ 

designation of sites as closely as possible to actual use of the sites. By enabling rapid, minimally 

burdensome actions to achieve designation when warranted, the need to designate sites 

speculatively is dramatically reduced. Active grantees can then devote far fewer resources to 

burdens like swapping acreage or reorganizing their zone to regularly update the “plan” 

approved by the Board. Instead, such grantees could focus on actively marketing their zones and 

making the competitiveness-enhancing benefits of the FTZ program available to as many U.S. 

firms as possible. In addition, multiple elements of the proposal should serve to maximize 

participating grantees’ focus on sites where FTZ activity actually occurs. 

The elements of the ASF proposal complement each other in advancing the principles outlined 

above and accomplishing a series of program objectives. In addition, key elements of the ASF 

have been derived from existing FTZ Board practice. Together, the elements permit a grantee to 

present for adoption by the FTZ Board a new “plan” for the grantee’s zone under the ASF. 

One commenter indicated that the FTZ Board should not require a formal reorganization 

application to designate magnet sites for a grantee if the sites are existing general-purpose FTZ 

sites designated through Board Order(s). The underlying premise of this comment -- 

minimization of burden on any grantee seeking to shift its zone to the ASF -- is very important. 

The same point was addressed in a slightly different fashion in the September 11, 2008 notice 

(which contained the revised proposal). In the section summarizing the comments received on 

the May 8, 2008 proposal and providing responses to each of the comments, the FTZ Staff 

indicated that it would aim to minimize the burden on a grantee applying to reorganize its zone 

under the ASF (particularly regarding the type of economic data which had been part of a 

justification which had previously been submitted to the Board). The same basic logic would 

hold true regarding justification requirements for existing sites -- particularly in instances where 

a grantee’s number of existing sites is relatively compatible with the goals expressed in the ASF. 

Details of each element of the ASF -- including reasons for the proposed framing of certain 

elements -- are discussed below. 

The standard 2,000-acre limit for the initial size of a zone ties directly to the FTZ Board’s 

practice of limiting each grantee to simultaneous activation of no more than 2,000 acres 

(regardless of the number of acres within the boundaries of the grantee’s approved sites). Given 

the proposal’s focus on more closely linking FTZ designation and activity, the existing 2,000-

acre activation limit was a logical starting point and anchors the proposal in longstanding 

practice. As noted above, acreage from the 2,000-acre limit which had not been allotted to 

specific designated sites would effectively be “reserve” acreage available for allotment to future 

parcels or sites within the grantee’s service area. Participating grantees would need to manage 

their zone projects to ensure that adequate reserve acreage was maintained to meet unforeseen 
−2−

needs. If a grantee’s active zone space within its FTZ were to begin to approach 2,000 acres, the 

grantee could apply to the FTZ Board for an increase in its activation-acreage limit. 

Allowing site-specific activation limits is essential to enhancing the usefulness of a zone’s 2,000-

acre allotment and enabling that standard limit to function effectively for almost any grantee. 

Further, the application of site-specific activation limits -- within site boundaries that encompass 

a larger facility -- has already been adopted by the FTZ Board in a number of instances. An 

example of a site-specific activation limit would be a 100-acre activation limit within a 700-acre 

port facility. The precise 100 (or fewer) acres to be used within the facility would be pinpointed 

at the time of CBP activation (and could also change over time within the designated overall site 

boundaries as old companies deactivate and new companies activate). 

The service area for a grantee is a broad framing element that applies a specific term to a concept 

which already exists in certain approved FTZ applications (i.e., that a grantee organization has 

listed the localities it intends to serve). The most straightforward approach to a service area for 

many grantees would be to name the counties in which they intend to be able to propose FTZ 

sites. It is important to recognize that in regions served by more than one FTZ grantee, the FTZ 

Board’s evaluation of a proposed service area could potentially involve examination of issues 

related to the “convenience of commerce” (19 U.S.C. 81b(b)).1

 Specifically, after the first 

(entitlement) FTZ in a port of entry, additional FTZs generally could only be approved if they 

were able to demonstrate that the first grantee would not meet the convenience of commerce. 

Although additional zones may have met that test when first established with regard to their 

specific proposed zone sites, issues of convenience of commerce could need to be addressed 

anew when such grantees seek to define their service areas. Also, although the need for a 

grantee to document support from counties within its proposed service area is most critical when 

counties were not previously served by the zone, the standard practice should be to require 

evidence of support from all counties within a proposed service area. The age and/or limited 

scope of many existing FTZ sites means that a county’s past support for one or more sites may 

not be indicative of its support for a proposed broader “service area” within the county. 

One commenter maintained that inclusion of a geographic area within the designated service 

area of one grantee should not preclude another grantee from including the same geographic area 

within its service area. The final version of the proposal (see Appendix 1) incorporates 

clarification based on this comment. Another commenter indicated that, to establish a service 

area, a grantee should be required to obtain letters of agreement from neighboring grantees in 

addition to endorsements from local/regional governmental bodies. Such a requirement is not 

included in the final proposal because of the need to be able to evaluate each situation on a caseby-case basis. However, the views of neighboring grantees would be very important in the 

process of the FTZ Board considering many proposed service areas. 

It is worth noting that applying a specific service area for a zone is an important complement to 

the standard 2,000-acre activation limit in defining the zone. Both the standard 2,000-acre limit 

and the grantee’s proposed service area would be presented in the grantee’s application to the 

 

1 Such an examination would take into account any relevant grantees in the same port of entry regardless of 

whether such grantees were adopting the ASF. 
−3−

FTZ Board to reorganize the grantee’s zone. As such, the 2,000-acre limit and the service area 

would both be integral to a specific “plan” approved for a zone by the Board and, consequently, 

could only be altered by FTZ Board action (rather than by administrative action). 

Magnet sites are akin to the traditional vision of a foreign-trade zone site: one of a limited 

number of facilities selected by the grantee -- often as a result of local public processes -- for 

ability and readiness to attract multiple FTZ users. In order to provide some overall structure to 

grantees’ attempts to frame their zones under the ASF, a general guideline would apply an 

activation limit of 200 or fewer acres for a single magnet site. However, a larger activation limit 

for a magnet site could be justified based on factors such as the nature of the site (e.g., a major 

harbor facility) or a specific type of projected FTZ activity that would tend to require an 

unusually large number of acres in simultaneous “activated” status at the specific site. A magnet 

site could only be designated through an application for FTZ Board action. 

The number of magnet sites would be limited in a general sense. This is attributable, in part, to 

the focus of the ASF on flexibility and speed for grantees to obtain FTZ designation for new 

users at unanticipated locations (for which usage-driven sites are the best solution). The ASF 

recognizes the legitimacy of grantees maintaining a certain number of magnet-style sites but, at 

the same time, recognizes that grantees will need to be selective in proposing magnet sites in 

order to help maintain the focus of the ASF on linking sites with actual activity (which is a key 

goal for the FTZ Board and CBP). As such, the ASF proposal delineates a general goal -- after 

any Transition Period, as discussed below -- of focusing each FTZ on six or fewer 

simultaneously existing magnet sites. 

Although the ASF proposal establishes a general initial goal for maximum number of magnet 

sites, the proposal also specifically makes allowance for taking into account special 

circumstances such as regional (multi-county) FTZs. For such FTZs, a range of factors could be 

presented to the FTZ Board as possible justification for a larger number of magnet sites (e.g., 

population size or the level of trade-related activity). Also, a grantee seeking over a longer term 

to justify to the FTZ Board proposed authority for a larger number of magnet sites could provide 

evidence of multi-user FTZ activity -- as reflected in the grantee’s annual reports to the FTZ 

Board -- at a significant percentage of the grantee’s already designated magnet sites. (It should 

be noted that a grantee with an approved magnet site at which only a single operator/user 

activates over time would be able to consider requesting usage-driven designation for the active 

portion of that magnet site. This would both help to retain focus and enable the grantee to 

consider whether a different site would be more appropriate for magnet designation while 

remaining consistent with the general goal for number of magnet sites per grantee.) 

The concept of usage-driven sites reflects the reality faced by many FTZ grantees. Despite 

grantees’ best efforts to anticipate trade-related needs and, effectively, pre-position FTZ 

designation for future users, grantees repeatedly are faced with requests for designation of new 

FTZ space driven by individual companies’ needs or interest. Such requests often come despite 

large numbers of unused or underutilized sites within those same FTZs. The reality is that 

companies tend to find it far more cost effective to obtain FTZ designation for a facility they 

already occupy than to move to an already designated FTZ site. Further, such companies often 
−4−

exist within industrial park or business district environments that contain additional space with 

potential for future FTZ use. However, at the time that a request is made to the grantee for FTZ 

designation, it is generally a single company driving the request. 

Under the FTZ Board’s existing framework, FTZ-designation requests explicitly driven by single 

companies have tended to be viewed as inappropriate for “general-purpose” (GP) (i.e., multiuser) FTZ status. As such, grantees have at times resorted to an approach of building a larger GP 

proposal -- encompassing more of the industrial park or business district in which the requesting 

company is located -- in order to be able to pursue timely and straightforward FTZ designation 

for the single user through MBM action. However, grantees’ proposing larger amounts of FTZ 

space solely to meet this type of GP standard for MBM requests is not necessarily beneficial for 

the grantees or for the government. On the other hand, there is little logic associated with the 

time and burden required for a grantee and user to pursue subzone designation for a portion of an 

industrial park or business district -- because the request is driven by a single current user’s need 

and is therefore not general-purpose -- although the industrial park or business district 

encompasses additional space potentially suitable for other future FTZ users. The ASF aims to 

broaden the FTZ Board’s practice incrementally in order to enable targeted designation of 

specific portions of industrial parks or business districts as usage-driven sites. The alternatives -- 

designation of extra space where no companies are currently interested in FTZ procedures or 

requiring the interested company to pursue subzone designation -- both involve significant 

negative impacts that can be alleviated through a well considered update of current practice 

under specific circumstances. 

In the post-9/11 environment, it is critical for government agencies with oversight responsibility 

(such as CBP) to be able to anticipate future resource demands associated with a particular 

proposed FTZ site. As such, it is inefficient and problematic to request CBP concurrence on the 

designation of a FTZ site when the likely users of the site are unknown (and therefore the 

oversight burden associated with future activation(s) is unknowable). From the perspective of 

assessing future resource allocation, it is far more appropriate to adopt a targeted approach that 

involves requesting FTZ designation for only the portion of an industrial park or business district 

where the current interested company is located. 

Beyond the benefits of significantly increased targeting of FTZ site designation to known 

proposed users, the other key benefit to the concept of usage-driven sites is the responsiveness 

and reduction of burden for small and medium-sized businesses (particularly manufacturers). In 

an increasingly challenging economic environment, FTZ procedures can represent a critical 

additional increment of cost savings for U.S. facilities struggling to compete with facilities 

abroad. The ASF proposal can enable grantees to devote more time marketing their zones, 

educating potential users, and then quickly and simply bringing FTZ designation to the facilities 

of companies that are ready to pursue the use of FTZ procedures. 

Finally, given the range of considerations involved in the development of the concept of a usagedriven site, it naturally follows that a usage-driven site is designated for the specific 

operator(s)/user(s) and use delineated at the time of the site-designation request. If the 

operator(s)/user(s) present at the site were to change, the usage-driven designation of the site 
−5−

would no longer be recognized. Importantly, a new usage-driven designation request could be 

submitted -- with minimal burden on the applicant -- if new operator(s)/user(s) at what had been 

a usage-driven site were interested in conducting FTZ activity. 

Concurrence from the CBP Port Director would continue to be required for any action to 

establish or modify the boundaries of FTZ sites. The ASF does not modify this requirement in 

any way relative to the FTZ Board’s longstanding practice. This basic requirement derives 

directly from the FTZ Board’s regulations and reflects the essential role of CBP oversight 

(including the necessary determination of whether CBP has or will have resources available to 

oversee any ultimate activity at a site). 

“Sunset” time limits would self-remove FTZ designation from a site not used for FTZ purposes 

before the site’s sunset date. For magnet sites, activation by CBP would be required before the 

end of the sunset period, with a five-year default period. However, the FTZ Board could 

consider site-specific requests for longer sunset periods taking into account a range of factors 

(e.g., nature of the site, public ownership of the site). Grantees would also have the option of 

proposing permanent status (i.e., without a sunset limit) for one specific magnet site at the time 

of their application to reorganize their zone. Allowance for optional permanent status for one 

magnet site per grantee is a change from the revised proposal based on a comment received. The 

commenter further indicated that, for permanent magnet designation, a preference should be 

given to publicly owned sites. As a general policy matter, such a preference would be consistent 

with both the public interest mandate and the history of the FTZ program. However, 

determinations will need to be made on a case-by-case basis taking into account the specific 

facts present. The same commenter also proposed that a grantee be able to transfer the 

permanent status from one magnet site to another by MBM request to the FTZ Staff. This 

suggestion has not been adopted for the final proposal due primarily to concerns about the actual 

practical effect (including the possibility of repeated requests to shift permanent status among a 

grantee’s magnet sites) and the related potential for abuse. 

The sunset test for a usage-driven site would be based on admission of foreign non-duty paid or 

zone-restricted merchandise for a bona fide customs purpose within three years. The three-year 

sunset period for usage-driven sites is a change from the revised proposal based on comments 

received. One commenter also proposed that the sunset test for usage-driven sites should be 

applied based on admission into the site of foreign-status merchandise (as defined in 19 CFR 

146.41 and 146.42) or zone-restricted merchandise (as defined in 19 CFR 146.44) for a bona fide

purpose. Relative to the previously proposed standard, inclusion of zone-restricted merchandise 

is an addition which has been adopted for the final proposal. However, the commenter proposes 

that admission be held to a standard of “for a bona fide purpose” rather than the revised 

proposal’s standard of “for a bona fide customs purpose” (emphasis added). The word 

“customs” has been retained for the final proposal because, although there can be non-customs 

related benefits at the state or local level – such as inventory or real property taxes – that a 

user/operator may consider as bona fide justifications for continuation of FTZ status, such 

benefits could raise public interest or legal concerns for the FTZ Board in the absence of bona 

fide customs reasons for the continued designation of a usage-driven site. Finally, if a grantee 

had no permanent FTZ site and all of the grantee’s sites were due to sunset based on lack of 
−6−

activation/activity (per the description above), the grantee would need to apply to the FTZ Board 

no less than 12 months in advance of the ultimate sunset termination to request FTZ designation 

for at least one site beyond the final sunset date. 

Another key concept is the “resetting” of the sunset limit for an individual magnet or usagedriven site. If activation/activity (as appropriate) occurs during a site’s sunset period, the effect 

is to “reset” the sunset date by an additional five years for magnet sites and three years for usagedriven sites (at which point the sunset test would again apply to those sites). For example, if a 

sunset period for a magnet site ends on September 15, 2015, activation of the site during that 

sunset period resets the sunset date to September 15, 2020 (at which time the sunset test would 

be based on activation of the site during the period from September 16, 2015 to September 15, 

2020). Activation during the five years through September 15, 2020 would reset the sunset date 

again to September 15, 2025, and so on. 

The optional transitional phase that would be available on a one-time basis for each grantee may 

be critical to enabling a broad cross-section of grantees to participate in the ASF. Formal 

comments and informal input to the FTZ Staff indicate that grantees with significant numbers of 

existing sites may not be in a position to simply propose removal of FTZ designation from 

currently unused sites in order to better align their zones with the goals of the ASF. The 

transitional phase could provide -- based on sites’ actual use during the years after FTZ Board 

approval of a grantee’s ASF-consistent reorganization -- a neutral mechanism that would autoselect for retention the sites for which viability had been demonstrated through actual use. As 

such, for the transitional phase, there would be no specific goal in terms of numbers of existing 

sites which could be proposed for magnet designation. However, sites proposed for a zone’s 

transitional phase would need to comply with the framework’s allotment of a grantee’s 2,000-

acre activation limit among the FTZ’s sites and reserve acreage (see further discussion below). 

For the transitional phase for a particular zone, the grantee would have several options for 

existing sites. A grantee could request removal of designation from sites that the grantee has 

determined are no longer appropriate for inclusion as part of the FTZ. For any existing site 

where a single entity is conducting (or ready to conduct) FTZ activity, the grantee could request 

usage-driven designation. Finally, for existing sites that the grantee believes are suited to a 

magnet (multi-user) role, the grantee could request magnet designation. 

Sunset periods for the transitional phase would apply the following methodology: Any usagedriven sites would be subject to the standard three-year sunset period for such sites. For 

individual magnet sites, the FTZ Board would establish the sunset based on the specific facts and 

circumstances presented. The standard sunset limit for magnet sites would be five years. 

However, the FTZ Board would be able to make an exception and establish a longer sunset limit 

for a specific magnet site -- including the option described above of permanent FTZ status for 

one site -- if warranted by evidence presented by the applicant. 

The transitional phase for a particular zone would be a five-year period (designed to track the 

length of the sunset limits that will apply to most magnet sites) near the end of which the FTZ 

Staff would evaluate a zone’s specific sites and activity as a supplement to the automatic sunset 
−7−

tests associated with most magnet sites. The goal of the Staff’s evaluation would be to enable an 

optimal targeting of FTZ designation by assessing whether certain sites with activity during the 

transitional phase appeared to be better suited to usage-driven designation -- based on activity by 

a single user or operator -- rather than magnet designation. 

Based on the FTZ Staff’s evaluation, the Staff would provide its preliminary recommendations 

to the zone’s grantee regarding magnet or usage-driven designation going forward for sites 

activated during the transitional phase. The grantee would then have 30 days to provide any 

response to the staff’s recommendations. After the end of the 30-day period, the staff would 

create a final report taking into account any response from the grantee regarding the preliminary 

recommendations. The FTZ Board would be able to take action, as appropriate, on the FTZ 

Staff’s final recommendations, and the grantee would be notified of any ultimate action. 

As noted above, the transitional phase for any zone would apply the 2,000-acre activation limit 

inherent to the proposed framework. In this context, if existing sites which a grantee wishes to 

propose for a transitional phase cumulatively exceed 2,000 acres in their current configuration, 

the grantee would need to determine the site-specific activation limits to propose for each such 

existing site. (For example, if an existing site is a 340-acre industrial park, the grantee could 

propose an activation limit of 100 acres for that site.) A grantee might opt for a simple 

mechanism to apportion the 2,000-acre activation limit among sites it is proposing for the 

transitional phase (after making allowance for the amount of acreage the grantee determines it 

needs to keep in reserve for possible future minor boundary modifications; a grantee retaining a 

minimum of 200 acres in reserve is generally advisable). 

Numbering and tracking of both magnet and usage-driven sites will be subject to specific 

requirements that the FTZ Staff will develop before the first FTZ Board action on an application 

to reorganize a zone under the ASF. An important commitment related to the implementation of 

the ASF is public availability via the web of information regarding each designated site and its 

status. (This meshes with one comment submitted in response to the revised proposal.) 

Finally, the FTZ Staff will provide periodic reports to the FTZ Board -- on a grantee-specific 

basis -- for the zones that participate in the ASF. This reporting will perform an important 

function given that some FTZ grantees which participate in the ASF may then largely rely on 

administrative MBMs to modify their FTZ sites. As such, periodic Staff-generated reports 

would help the FTZ Board evaluate the effectiveness and appropriateness of the alternative 

framework after actual experience with grantees. For the first round of reports for each grantee, 

the FTZ Staff would create a report after no more than five years of a grantee’s participation in 

the ASF or ten usage-driven site-designation MBM actions for the grantee (whichever comes 

first). The frequency could vary for subsequent rounds of reports depending on the Board’s 

experience with the first round (including subsequently varying by zone, if appropriate). All 

such reporting would result from FTZ Staff-initiated reviews, and would not require any request 

or application from the grantee. 
−1−

Appendix 3 

Background on the FTZ Act, the FTZ Board’s 

Regulations, and the Board’s Existing Practice

Statutory Provisions: 

The FTZ Board’s practice on designation and management of FTZ sites has taken place in the 

context of the FTZ Act’s provisions that relate to application for, and approval of, zone sites and 

facilities within those sites: 

§ 81f. Application for establishment and expansion of zone 

(a) Application for establishment; requirements 

 

Each application shall state in detail – 

(1) The location and qualifications of the area in which it is proposed to establish a zone, 

showing (A) the land and water or land or water area or land area alone if the application 

is for its establishment in or adjacent to an interior port; (B) the means of segregation 

from customs territory; (C) the fitness of the area for a zone; and (D) the possibilities of 

expansion of the zone area; 

(2) The facilities and appurtenances which it is proposed to provide and the preliminary 

plans and estimate of the cost thereof, and the existing facilities and appurtenances which 

it is proposed to utilize; 

(3) The time within which the applicant proposes to commence and complete the 

construction of the zone and facilities and appurtenances; 

(4) The methods proposed to finance the undertaking; 

(5) Such other information as the Board may require. 

(b) Amendment of application; expansion of zone 

The Board may upon its own initiative or upon request permit the amendment of the 

application. Any expansion of the area of an established zone shall be made and approved 

in the same manner as an original application. 

§ 81g. Granting of application 

If the Board finds that the proposed plans and location are suitable for the 

accomplishment of the purpose of a foreign trade zone under this chapter, and that the 

facilities and appurtenances which it is proposed to provide are sufficient it shall make 

the grant. 
−2−

Regulatory Provisions: 

Regarding the designation and modification of FTZ sites, the FTZ Board’s regulations have 

consistently delineated detailed requirements for applications to the Board. Section 400.6031 of 

the pre-1991 regulations and section 400.24 of the Board’s 1991 regulations (which remain in 

effect) are the key sections in this regard. However, beyond those application-related sections -- 

which provide far more specificity than section 81f(a) of the FTZ Act but merely delineate the 

detailed requirements for each application exhibit to be presented for Board review -- certain 

provisions tell key stories about the evolving concepts embraced by the Board at the time (in the 

context of an unchanged statute). 

In the Board’s regulations from 1935 through 1971, section 400.607 had consisted of the 

following language -- drawn verbatim from section 81f(b) of the FTZ Act: 

Applications for expansion of an established zone shall be made and approved in the 

same manner as an original application. 

In December 1971, the Board amended section 400.607 to add the following language: 

In cases of requests for minor modifications in zone boundaries which are not designed to 

expand zone operations and will not result in such an expansion, the Executive Secretary 

is authorized to determine the requirements for the exhibits to such applications. Among 

the exhibits there shall be a report from the District Director of Customs and of the 

District Engineer. If the latter two officials recommend that the requested modification 

be approved, the Executive Secretary shall have the authority to approve the application. 

The December 1971 amendments to the regulations also added a new subsection (j) to Section 

400.1301 (“Executive Secretary of the Board”), which consequently included the following 

language: 

As principal operating official of the Board, the Executive Secretary shall: 

... 

(j) Approve in appropriate cases, with the prior recommendations of the District Director 

of Customs and the District Engineer, requests for minor modifications to zone 

boundaries which will not result in an expansion of zone operations. 

In 1991, the FTZ Board adopted fully revised regulations. The successor section to Section 

400.607 is Section 400.26 of the Board’s 1991 regulations, which recognized the distinction 

between major and minor changes. Based on the Board’s evolving practice, Section 400.26 also 

 

1 The pre-1991 regulations employed a different numbering system from the current regulations. It should also be 

noted that the substance of certain pre-1991 sections reflects the involvement in the Board’s processes of the Army 

Corps of Engineers as representatives of the Secretary of the Army (who was a FTZ Board member until removed by 

an amendment of the FTZ Act in 1996). 
−3−

established a bare-bones test for determining whether a request to modify a zone’s boundaries is 

major or minor: 

 

a) In general. (1) A grantee may apply to the Board for authority to expand or otherwise 

modify its zone project. 

 2) The Executive Secretary, in consultation with the Port Director, will determine 

whether the proposed modification involves a major change in the zone plan and is thus 

subject to paragraph (b) of this section, or is minor and subject to paragraph (c) of this 

section. In making this determination the Executive Secretary will consider the extent to 

which the proposed modification would: 

 i) Substantially modify the plan originally approved by the Board; or 

 ii) Expand the physical dimensions of the approved zone area as related to the scope 

of operations envisioned in the original plan. 

 b) Major modification to zone project. An application for a major modification to an 

approved zone project shall be submitted in accordance with the format in §400.24, 

except that: 

 1) Reference may be made to current information in an application from the same 

applicant on file with the Board; and 

 2) The content of Exhibit Four shall relate specifically to the proposed change. 

 c) Minor modification to zone project. Other applications or requests under this 

subpart, including those for minor revisions of zone boundaries, grant of authority 

transfers, or time extensions, shall be submitted in letter form with information and 

documentation necessary for analysis, as determined by the Executive Secretary, who 

shall determine whether the proposed change is a minor one subject to this paragraph (c) 

instead of paragraph (b) of this section (see, §400.27(f)). 

Section 400.27(f) of the 1991 regulations largely mirrored the content of prior Section 

400.1301(j) in delineating: 

Procedure-Application for minor modification of zone project. (1) The Executive 

Secretary, with the concurrence of the Port Director, will make a determination in cases 

under §400.26(c) involving minor changes to zone projects that do not require a Board 

order, such as boundary modifications, including certain relocations, and will notify the 

applicant in writing of the decision within 30 days of the determination that the 

application or request can be processed under §400.26(c). 

 2) The Port Director shall provide the decision as to concurrence within 20 days after 

being notified of the request or application. 

Evolution of the FTZ Board’s Practice on FTZ Sites: 

The FTZ Act established a framework which is sufficiently general to enable the FTZ Board to 

evolve its perspective over time pertaining to some of the core issues related to the 

characteristics of a FTZ. As the need arose, the Board consciously explored the flexibility of the 

statutory framework in order to find the most effective allowable mechanisms for its 

administration of the FTZ program. During the 1970’s, with the growth of international trade 
−4−

and of local communities’ interest in FTZs as economic development tools, the FTZ Board 

implemented several key changes in practice that culminated in perhaps the single largest 

conceptual shift since the passage of the FTZ Act. 

Through the 1960’s, the Board had -- relative to the requirements of sections 81f and 81g of the 

FTZ Act -- implemented a narrow interpretive approach to the designation of zone sites and the 

approval of buildings. For any proposed zone site, the Board required the specification in 

advance of the precise area of the site -- which could then only be used for zone activity -- and a 

detailed description of any buildings or facilities that would be constructed. Board Order 

number 2 (January 30, 1936), granting authority for FTZ # 1 in New York City, included the 

following language as the first of the “express conditions and limitations” to which the grant was 

subject: 

The Grantee shall make no deviation from the maps, plans, specifications, drawings, and 

blue prints, accompanying the said application and marked Exhibits Numbers l to 13, 

inclusive, before or after completion of the structures or work involved, unless 

modification of such maps, plans, specifications, drawings, and blue prints, has 

previously been submitted to and has received the approval of the Board. 

The Board’s practice over the ensuing forty-five years remained static, with Board Order number 

93 (March 23, 1973), granting authority for FTZ # 15 in Kansas City, Missouri, containing 

substantively identical language2

 in the first of the grant’s “express conditions and limitations.” 

However, during the course of 1973, the Board chose to modify its practice. The State of 

Michigan had applied to establish a new FTZ on a 17-acre site within the Sault Ste. Marie (Soo) 

Industrial Park. The site was described in the examiner’s report as “currently under 

development” and the report noted that: 

The space to be allocated to the Zone in the Soo Industrial Park was the subject of 

considerable discussion as the application was being developed. Although the applicant 

states that 17 acres may be more than is needed at the outset, specified land needs of 

prospective clients cannot be determined until the grant is authorized and serious 

negotiations can begin. It is advanced that a zone of significant size will provide 

maximum flexibility in attracting the widest range of diversified firms. 

In Board Order 94 (June 11, 1973), the FTZ Board granted authority for the proposed Sault Ste. 

Marie zone but -- for the first time -- did not include in its order the restrictive condition that the 

“Grantee shall make no deviation from the maps, plans, specifications, drawings, and blue 

prints...” In fact, that restrictive condition never reappeared in subsequent Board Orders. 

 

2 The exact language from the first restriction in Board Order 93 is, “The Grantee shall make no deviation from the 

maps, plans, specifications, drawings, and blue prints, accompanying the said application and marked Exhibits Nos. I 

to XIII inclusive, before or after completion of the structures or work involved, unless such deviation has previously 

been submitted to and has received the approval of the Board.” 
−5−

Instead, after one other approval of a new FTZ without the old restrictive language in the Board 

Order3

, the Board adopted an explicitly new approach. 

For the May 1974 proposal to establish a FTZ in San Jose, California -- comprised of one 15-

acre section and one 16-acre section “about a quarter mile apart within a 500-acre industrial 

park” -- the examiners committee made the following recommendation to the Board: 

Since the proposed facility would be an industrial park the committee suggests that the 

Board’s action on the application extend to an endorsement of the general construction 

plans for plants within the zone which would make it unnecessary for each individual 

plant to be approved by the Board separately, so long as the operation is consistent with 

the instant application. 

Consequently, in approving the San Jose zone as FTZ 18, the resolution accompanying Board 

Order number 103 (November 27, 1974) contained the following new language4: 

Since the proposal involves an industrial park type zone that envisages the construction 

of the buildings by other than the grantee, this approval includes authority to the grantee 

to permit the erection of such buildings, pursuant to Section 400.815 of the Board’s 

regulations5, as are necessary to carry out the proposal, providing that prior to its granting 

such permission it shall have the concurrences of the local District Director of Customs, 

the District Army Engineer, when appropriate, and the Board’s Executive Secretary. 

The inclusion of Board approval for future buildings as part of the approval for a proposed site 

was a complete break from prior practice. As such, the Board beginning in 1974 had changed its 

interpretation of the FTZ Act’s requirement that “[e]ach application shall state in detail... [t]he 

facilities and appurtenances which it is proposed to provide and the preliminary plans and 

estimate of the cost thereof...” and “[t]he time within which the applicant proposes to commence 

and complete the construction of the zone and facilities and appurtenances.” 19 U.S.C. 81f(a). 

 

3 The Board Order in question is number 97 (May 17, 1974) approving FTZ 17 in Kansas City, Kansas and 

expanding the related zone in Kansas City, Missouri. 

4 Except for approvals of applications where proposed zone sites involved only specific pre-existing enclosed 

space, all subsequent Board Orders through 1991 that related to new FTZ sites included either this reference to “an 

industrial park type zone” or a reference to “open land” or “open space” that similarly was available for construction 

of buildings by other than the grantee, and for which Board approval was included in the granted authority. (In 

1991, the Board’s revised regulations incorporated a new section which rendered the 1974 through 1991 resolution 

language unnecessary – Section 400.28(a)(6): A grant of authority approved under this subpart includes authority 

for the grantee to permit the erection of buildings necessary to carry out the approved zone project subject to 

concurrence of the Port Director.) 

5 Section 400.815 stated: “The grantee may, with the approval of the Board, and under reasonable and uniform 

regulations for like conditions and circumstances to be prescribed by it, permit other persons, firms, corporations or 

associations to erect such buildings and other structures within the zone as will meet their particular requirement...” 

Section 400.815 was replaced in the Board’s 1991 regulations by section 400.28(a)(6), which stated: “A grant of 

authority approved under this subpart includes authority for the grantee to permit the erection of buildings necessary 

to carry out the approved zone project subject to concurrence of the Port Director.” 
−6−

The Board had shifted from an interpretation of section 81f(a) that any building for which details 

had not been provided in the application would require further approval by the Board prior to 

construction to an interpretation that an application should provide the details of current or future 

buildings to the extent practicable (but with authorization for future, as-yet-unplanned buildings 

within the boundaries of a site included in the Board’s approval of a plan involving that site). 

During the ensuing years, the FTZ Board also opted to alter its practice regarding the scale and 

scope of acceptable FTZ sites. The key change accepted by the Board in this regard was a 

recognition of the legitimacy of “standby” space (as opposed to the prior standard of approving 

space which would be dedicated exclusively to FTZ use). The September 1980 examiners 

committee report for the establishment of a FTZ covering 2,000 acres in Brownsville, Texas 

(FTZ # 62 approved by Board Order number 166 -- 10/20/1980) included the following 

explanation: 

It is to be noted that insofar as the standby space is concerned the FTZ Board has 

accepted in recent years the proposition that when zones are part of large development 

projects, abundant standby space is justified for marketing purposes. The fact that 

approval by the Board is contingent upon further operational approval by Customs 

officials and a reporting system on new manufacturing is considered adequate protection 

against improper activity. This attitude of the Board is consistent with current policy in 

facilitating projects relating to economic development. 

Also of note, in January 1982, the Port Authority of New York and New Jersey, grantee of FTZ 

# 49, applied to expand its FTZ to encompass the entire 2,200 acre Port Newark/Elizabeth Port 

Authority Marine Terminal (subsequently approved by Board Order number 211, 5/26/1983). 

The March 1983 examiners committee report discusses the proposal as follows: 

What is novel about this proposal is not its size, but that it involves designation of an 

entire complex as an approved zone area, though it is anticipated that only portions of the 

area would ever be activated. This flexibility, argues the Port Authority's director "is the 

only practical means available to satisfy interest on a timely basis and give the Port 

Authority the marketing flexibility that is critical to achieve its goals to expedite and 

encourage foreign commerce, increase economic growth, and develop new employment". 

This was in response to a written request from the chief examiner that the Port Authority 

consider reducing the space requested by about 50 percent to exclude areas not expected 

to be activated. The position of the Port Authority is not that it "needs" all of the space 

for zone activity, but that it needs the flexibility to be effective in using the zone to its 

full economic potential. It is strongly supported by the cities in which the complex is 

located, backed by county and state officials. Unemployment is high in both Newark and 

Elizabeth and the port complex is seen as an economic resource that can help create new 

trade-related employment opportunities with a more aggressive use of free zone status. 
−7−

The Newark report added: 

The Board has already supported the concept of approving large standby areas to help 

grantees market their zones more effectively. This practice reduces red tape and the need 

for incessant requests for expansions and boundary changes. There is no loss of control, 

for Customs must approve activations and the Board reviews manufacturing cases as they 

arise. 

Then, in August 1982, the Brownsville, Texas grantee applied to expand its FTZ to include an 

additional 19,000 acres within the 42,000 Brownsville Navigation District. The August 1983 

examiners committee report on the application explained the Board’s rapidly evolving practice in 

the context of what, in retrospect, represents perhaps the most important conceptual shift in the 

program’s history: 

[T]he concept of "approval/activation" is becoming more well-known and accepted. This 

concept, applied by the Board during the past seven years, involves approving areas as 

zones that will not be used exclusively for zone activity. Portions of the "approved" area 

are "activated" with Customs approval, with FTZ Staff and possibly Board involvement 

in new manufacturing situations. Only the "activated" areas are considered to be outside 

Customs territory. Inherent in the concept is the point that Board approval is conditional 

and "full" status does not occur until after a final Customs operational review and 

activation. 

For that Brownsville expansion, which proposed adding 19,000 acres to Brownsville’s existing 

2,000 acre FTZ, the August 1983 examiners committee also recommended (and the FTZ Board 

adopted in Board Order number 226, October 7, 1983) what would become the Board’s standard 

2,000-acre activation limit for any general-purpose zone: 

Because zones tend to refer to the size of their approved area in promotional activity and 

because of concern by some Customs officials and FTZ that this might set an undesirable 

precedent, some type of limit should be imposed that relates to "activation". It appears 

that a restriction that would allow the flexibility that is desired, yet put a reasonable 

ceiling on the amount of space that could be activated without further Board approval, 

would involve a limit of 2000 acres. 

The 2000 acres is an amount just short of what was recently approved for the Port of New 

York and New Jersey at its Newark-Elizabeth Marine Terminal, the busiest container 

port in the world. Since it is desirable under the approval/activation concept to have a 

general benchmark as to total area that could be activated without further FTZ Board 

involvement, the Newark/Elizabeth zone is proposed as such a benchmark for large 

seaport areas. The [Brownsville grantee] has indicated that this limitation would not 

prevent [the grantee] from accomplishing its objectives. Under the circumstances, the 

2000-acre activation limit is recommended. 
−8−

The series of above-cited decisions (as well as those on similar cases of the time6) taken by the 

FTZ Board reflect a major reassessment of what the FTZ Board could and should authorize 

under the FTZ Act and the Board’s regulations. The single most significant change was entirely 

conceptual, namely from viewing the Board’s action as designating space as an area outside the 

customs territory to viewing the action as designating space which would potentially be treated 

as outside the customs territory (but only if approved for activation by the Customs Service). 

Context of Regulations on Administrative Minor Modifications: 

By the early 1970’s, the Board had also recognized a need -- unmet by the Board’s then-current 

practice and procedures -- to be able to quickly bring FTZ designation to new buildings or 

parcels when circumstances warranted. As a result, in December 1971, the Board adopted an 

amended regulation that allowed simplified and faster action by the Board staff to authorize 

minor modifications of zone boundaries. The authority to enable the staff -- at the staff level 

rather than by the Board -- to approve certain modifications of zone boundaries did not derive 

directly from any specific language found in the FTZ Act, but rather from the FTZ Board’s 

overall statutory authority and broad discretion in carrying out the purposes of the FTZ Act. The 

initial standard expressed in the regulations for allowable minor modifications was that they 

“will not result in an expansion of zone operations,” and the 1991 regulations provided a 

standard that was only slightly less vague. However, the key point is not the specific standard 

established but rather the conceptual shift that changes could be made by administrative action as 

long as the result remained consistent with the “plan” approved by the Board for the zone in 

question. 

During the decades following the regulatory change that first instituted the concept of a minor 

boundary modification, the FTZ Board’s practice regarding modifications to zones continued to 

evolve and become further defined. Increasing numbers of FTZs were approved7

 and levels of 

international trade grew dramatically, both of which contributed to greater FTZ use and greater 

demand for changes to existing FTZs (including to meet time-sensitive needs). 

The FTZ Staff’s current practice on administrative minor boundary modifications (MBMs) 

reflects a conservative approach to the statutory and regulatory requirements (including sections 

400.26 and 400.27(f) of the Board’s regulations). The FTZ Staff essentially approves MBM 

requests only if there is no increase in the total combined acreage of a FTZ’s approved sites (or, 

on occasion, if an increase would only be small and truly temporary in nature). A grantee 

seeking a permanent action to add a new parcel or site is required to remove an equivalent 

amount of similar space elsewhere in its general purpose zone (“swap” acreage). 

 

6 The March 1983 examiners committee report for the expansion of the Newark, New Jersey zone cited a series of 

then-recent cases in which the Board had adopted the practice of allowing large zone areas: “A number of zones 

have been approved in recent years covering large areas, including Brownsville, Texas (2000 acres), Huntsville, 

Alabama (1300 acres), Galveston (884 acres) and San Antonio (556 acres).” 

7 A total of 13 FTZs were approved between the passage of the FTZ Act in 1934 and the end of 1971. From 1971 

through 1991, the FTZ Board approved 170 additional FTZs. 
−9−

The FTZ Staff also evaluates the effect of each proposed MBM relative to the zone’s most recent 

“plan” established through FTZ Board action. This evaluation is both individual and cumulative 

with prior MBMs since the last Board action establishing the zone’s plan. The cumulative 

impact of multiple MBM actions for a zone at times leads the FTZ Staff to inform the zone’s 

grantee that new proposed MBM actions will not be possible until the grantee has reorganized its 

zone and obtained FTZ Board approval for a new zone plan (thereby effectively resetting the 

gauge against which a grantee’s proposed MBMs are measured to determine whether they 

“[s]ubstantially modify the plan originally approved by the Board” -- 15 CFR 400.26(a)(2)(ii)). 

In this context, even with swapping of acreage from an existing FTZ site, issues arise such as 

when a proposed MBM site is located far from an existing site of the same zone. The FTZ Staff 

would then be concerned about whether the proposed MBM substantially modifies the plan 

approved by the Board. Such concerns often lead either to denial of the MBM or approval only 

on a temporary basis until the grantee makes full application to FTZ Board to establish a new 

plan for the zone. 
Appendix 4 

First Published Proposal 

(5/8/08; 73 FR 26077-26078) 
Federal Register / Vol. 73, No. 90 / Thursday, May 8, 2008 / Notices 26077 

information collection should be sent 

within 30 days of publication of this 

notice to David Rostker, OMB Desk 

Officer, FAX number (202) 395–7285, or 

David_Rostker@omb.eop.gov. 

Dated: May 5, 2008. 

Gwellnar Banks, 

Management Analyst, Office of the Chief 

Information Officer. 

[FR Doc. E8–10226 Filed 5–7–08; 8:45 am] 

BILLING CODE 3510–22–P 

DEPARTMENT OF COMMERCE 

Foreign–Trade Zones Board 

Proposal for Available Alternative Site–

Designation and Management 

Framework 

SUMMARY: The Foreign–Trade Zones 

(FTZ) Board is inviting public comment 

on a staff proposal to make available an 

alternative framework for participating 

grantees to designate and manage their 

general–purpose FTZ sites. A key result 

of this proposal, which stems from a 

series of regional and state–level 

discussions with FTZ grantees that 

began in April 2007, would be greater 

flexibility and predictability for a 

participating grantee to use 

administrative ‘‘minor boundary 

modifications’’ (MBMs) to modify FTZ 

sites. The greater flexibility would be 

made possible by participating grantees’

increased focus on the FTZ sites needed 

for current or near–term zone activity, 

with a resulting improvement in the 

efficiency of FTZ oversight by 

government agencies. The availability of 

this alternative framework would affect 

only participating FTZ grantees and 

would occur within the existing 

statutory and regulatory context 

(including the role of the local CBP port 

director relative to any application for 

Board action or MBM request). 

Background: 

Under the FTZ Act of 1934 (19 U.S.C. 

81a–81u), the FTZ Board may authorize 

FTZ sites sponsored by local ‘‘grantee’’

organizations at locations within or 

adjacent to U.S. Customs and Border 

Protection (CBP) ports of entry. Under 

the FTZ Act and the FTZ Board’s 

regulations (15 CFR Part 400), FTZ 

designation for a particular parcel or site 

may result either from an application for 

action by the FTZ Board or from a 

request for an administrative MBM 

action by the FTZ Board staff. The 

regulatory time frame for such FTZ 

Board actions is ten months versus a 

thirty-day time frame for administrative 

MBM actions, and there are significantly 

greater documentation requirements 

associated with applications for Board 

action than for requests for 

administrative action. 

The FTZ Act gives the FTZ Board 

broad authority and discretion. In this 

context, the Board’s 1991 regulations 

delineate criteria for evaluation of 

applications for Board action and 

requests for administrative action to 

authorize FTZ designation for new 

parcels or sites. The applicable 

regulatory criteria are general in nature 

and the Board’s existing approach 

(practice) for MBMs and FTZ 

designation for new parcels or sites pre–

dates both the enormous growth in 

international trade of recent decades 

and the significant evolution in trade–

related security and oversight 

responsibilities within government 

since 2001. 

Within the FTZ program itself, 

increased demand for rapid action 

regarding new FTZ parcels or sites is 

tied to an accelerated pace of decision–

making among the types of businesses 

that constitute the ultimate users of the 

program. The program’s ability to react 

to business needs in a timely manner is 

inextricably linked to the program’s 

success in helping to retain or enhance 

U.S.-based activity. In this context, an 

alternative approach to MBMs and site 

management for grantees in need of 

greater flexibility and responsiveness 

can be important in fulfilling the FTZ 

program’s purpose ‘‘to expedite and 

encourage foreign commerce.’’

Proposal: The fundamental trade–off 

addressed in this proposal is greater 

flexibility and increased predictability 

for approval of FTZ sites through simple 

and rapid MBM actions in exchange for 

a grantee maximizing the linkage 

between designation of FTZ space and 

actual use of that space for FTZ activity 

(after ‘‘activation’’ by CBP). Maximizing 

this linkage can further other important 

program–related goals, including more 

efficient use of both FTZ Board and CBP 

resources. 

Although the proposed alternative 

framework could be available to new or 

existing grantees, the major benefit 

would likely be for existing grantees 

who seek to enhance their ability to 

respond to evolving FTZ–related needs 

in their communities. Under this 

proposal, existing or potential grantees 

would have the option of applying to 

establish or reorganize their FTZ by 

incorporating in an application for FTZ 

Board action elements from the 

following framework: 

1. The ‘‘service area’’ within which 

the grantee intends to be able to 

propose FTZ sites (e.g., specific 

counties, with documented support 

from new counties if the service 

area reflected a broader focus than 

the FTZ’s current area served). The 

term ‘‘service area’’ applies a name 

to a concept which already exists in 

certain approved FTZ applications 

in which a grantee organization has 

named the localities it intends to 

serve. It should be noted that any 

service area would need to be 

consistent with the ‘‘adjacency’’

requirement of the FTZ Board’s 

regulations (60 miles/90 minutes 

driving time from CBP Port of Entry 

boundaries). 

2. An initial limit of up to 2,000 acres 

of designated FTZ space within the 

service area. Given the proposal’s 

focus on linking FTZ designation 

more closely to FTZ activity, the 

2,000–acre limit reflects the FTZ 

Board’s existing practice of limiting 

any FTZ grantee to activation of 

2,000 acres (regardless of the overall 

size of the grantee’s zone) unless 

further approval is obtained from 

the FTZ Board. Acreage within the 

2,000–acre limit which had not 

been applied to specific designated 

sites would effectively be ‘‘reserve’’

acreage available for future FTZ 

designation for parcels or sites 

within the grantee’s approved 

service area. 

3. Enhancement of the usefulness of 

the 2,000 available acres by 

emphasizing ‘‘floating’’ acreage 

within an individual site’s 

boundaries (as has been the FTZ 

Board’s practice with certain 

applications to date). For example, 

100 acres of ‘‘floating’’ FTZ 

designation within the boundaries 

of a 700–acre port complex would 

mean that it would be possible to 

activate with CBP up to 100 acres 

of total space anywhere within that 

700–acre complex. 

4. Mandatory designation of a primary 

‘‘anchor’’ FTZ site able to attract 

multiple FTZ users. No ‘‘sunset’’

time limit (see below) would apply 

to the anchor site. The anchor site 

would generally be no more than 

500 acres (which could be 

‘‘floating’’ acres within larger site 

boundaries see above). A grantee’s 

anchor site would be designated 

through the full application process 

for FTZ Board action. 

5. Possible designation of a limited 

number of ‘‘magnet’’ sites selected 

by the grantee often through local 

public processes for ability and 

readiness to attract multiple FTZ 

users. An individual magnet site 

would generally be limited to 200 

‘‘floating’’ acres. A magnet site 

could only be designated through 

an application for FTZ Board 

mstockstill on PROD1PC66 with NOTICES

26078 Federal Register / Vol. 73, No. 90 / Thursday, May 8, 2008 / Notices 

action. 

6. Possible designation of ‘‘user–

driven’’ sites to serve companies 

not located in an anchor or magnet 

site but which are ready to pursue 

conducting activity under FTZ 

procedures. In the general interest 

of maximizing the linkage between 

FTZ site designation and FTZ 

activity at the site, a user–driven 

site would be limited in the context 

of a larger industrial park or 

business district where other 

companies interested in FTZ 

procedures might be able to locate 

in the future to the area(s) required 

for the company(ies) ready to 

pursue conducting activity under 

FTZ procedures. 

7. Unlike anchor and magnet sites, 

user–driven sites could be 

designated through the current 

minor boundary modification 

(MBM) mechanism a rapid 

administrative action by the Board’s 

staff in addition to through FTZ 

Board action. A simplification of 

the MBM process would result from 

elimination of the need to ‘‘swap’’

like amounts of acreage from 

existing sites as long as the total 

acreage for existing and proposed 

sites remained within the standard 

2,000–acre limit. 

8. In addition to the one anchor site, 

general initial limits of five magnet 

sites and ten user–driven sites 

which could exist simultaneously 

for a single FTZ. Increases of the 

limits applicable to a specific 

grantee could be justified over a 

longer term based on FTZ activity at 

a significant percentage of the 

grantee’s designated sites. A 

grantee’s request for a permanent 

increase in its number of authorized 

sites would be a matter for 

consideration by the FTZ Board. 

Also, the special circumstances of 

regional (multi–county) FTZs could 

be taken into account by an 

alternative general initial limit for 

such zones of two magnet sites per 

county. (Other limits in the 

proposal would be unaffected by 

such an alternative initial limit on 

numbers of magnet sites for regional 

FTZs.) 

9. Consistent with current practice for 

many expansion applications, 

magnet sites and user–driven sites 

would be subject to ‘‘sunset’’ time 

limits which would self–remove 

FTZ designation from a site if there 

had been no FTZ activity before the 

site’s sunset date (generally five 

years from the date of the site’s 

approval). Magnet sites and user–

driven sites would also be subject to 

ongoing ‘‘recycling’’ whereby FTZ 

activity at a site during the site’s 

initial sunset period would serve to 

push back the sunset date by 

another five years (when the sunset 

test based on FTZ activity would 

again apply). 

It is important to note that the 

elements of the proposal support each 

other in furthering the goals of 

flexibility and focus for FTZ site 

designation (with important resulting 

resource- and efficiency–related benefits 

for the government). As such, a 

framework incorporating these types of 

elements would incorporate the package 

of elements as an available alternative to 

the Board’s current practice. FTZ 

grantees opting to manage their zones 

under the Board’s current framework 

would be unaffected by this proposal. 

As is currently the case, MBM actions 

would be approved by the Board’s staff 

while modifications to a zone’s ‘‘plan’’

(e.g., increase in authorized FTZ 

acreage, modification to service area) 

would be matters for the FTZ Board’s 

consideration. 

In addition, in order to help the FTZ 

Board evaluate the effectiveness and 

appropriateness of the alternative 

framework after actual experience with 

FTZ grantees, the FTZ staff would 

report to the Board on a periodic basis 

regarding the actual usage of the 

alternative framework. The staff’s 

reporting regarding implementation of 

the framework at individual 

participating FTZs would result from 

staff–initiated reviews and would not 

require any request or application from 

the grantee. 

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 (202) 482–0002. 

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 July 7, 2008. Any 

questions about this request for 

comments may be directed to the FTZ 

Board staff at (202) 482–2862. 

Dated: May 2, 2008. 

Andrew McGilvray, 

Executive Secretary. 

[FR Doc. E8–10274 Filed 5–7–08; 8:45 am] 

BILLING CODE 3510–DS–S 

DEPARTMENT OF COMMERCE 

International Trade Administration 

[A–580–807] 

Polyethylene Terepthalate Film, Sheet, 

and Strip from the Republic of Korea: 

Amended Final Results of 

Antidumping Duty Changed 

Circumstances Review and 

Reinstatement of the Antidumping 

Duty Order 

AGENCY: Import Administration, 

International Trade Administration, 

Department of Commerce. 

EFFECTIVE DATE: May 8, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Michael J. Heaney or Robert James, AD/ 

CVD Operations, Office 7, Import 

Administration, International Trade 

Administration, U.S. Department of 

Commerce, 14th Street and Constitution 

Avenue, NW, Washington, DC 20230; 

telephone: (202) 482–4475 and (202) 

482–0649, respectively. 

SUMMARY: On April 3, 2008, the 

Department of Commerce (the 

Department) published in the Federal 

Register the final results of the 

antidumping duty changed 

circumstances review and reinstatement 

of the antidumping order on 

polyethylene terephthalate film, sheet, 

and strip from Korea. The review 

covered a single firm, Kolon Industries, 

Inc. (Kolon) and the period July 1, 2005 

to June 30, 2006. See Polyethylene 

Terephthalate Film, Sheet, and Strip 

from the Republic of Korea; Final 

Results of Antidumping Duty Changed 

Circumstances Review and 

Reinstatement of the Antidumping Duty 

Order, 73 FR 18259 (April 3, 2008) 

(Final Results). We are amending the 

Final Results to correct a ministerial 

error in the calculation of the cash 

deposit rate for Kolon pursuant to 19 

CFR 351.224(e). 

SUPPLEMENTARY INFORMATION: On April 

7, 2008, the Department received from 

Kolon a timely allegation of a 

ministerial error pursuant to 19 CFR 

351.224(c)(1). Kolon alleges an error in 

formatting product–specific control 

numbers. Kolon asserts the Department 

assigned a revised field of only 6 

characters in length for the variable 

CONNUM2H in the home market 

comparison program while assigning a 

field length of 10 characters for the 

variable CONNUM2H in the margin 

program. Kolon argues that the effect of 

this error is to truncate some of the 

CONNUM2H values used for matching 

purposes in the final results. Petitioners 

did not comment on the alleged 

ministerial error. 

mstockstill on PROD1PC66 with NOTICES

Appendix 5 

Second Published Proposal 

(9/11/08; 73 FR 52817-52822) 
Federal Register / Vol. 73, No. 177 / Thursday, September 11, 2008 / Notices 52817 

free). Components and materials 

sourced from abroad (representing 50–

65% of the value of the finished 

product) include: Synthetic filament 

tow, artificial filament tow, polyester 

fibers, polypropylene fibers and rayon 

fibers (HTSUS duty rate ranges from 4.3 

to 7.5%). 

FTZ procedures would exempt 

Cellusuede from customs duty 

payments on the foreign components 

used in export production. The 

company anticipates that 10–20 percent 

of the plant’s shipments will be 

exported. On its domestic sales, 

Cellusuede could choose the duty-free 

rate during customs entry procedures 

that applies to finished flock for the 

foreign inputs noted above. The request 

indicates that the savings from FTZ 

procedures would help improve the 

plant’s international competitiveness. 

In accordance with the Board’s 

regulations, Elizabeth Whiteman of the 

FTZ staff is designated examiner to 

investigate the application and report to 

the Board. 

Public comment is invited from 

interested parties. Submissions (original 

and 3 copies) shall be addressed to the 

Board’s Executive Secretary at the 

address below. The closing period for 

their receipt is November 10, 2008. 

Rebuttal comments in response to 

material submitted during the foregoing 

period may be submitted during the 

subsequent 15-day period to November 

25, 2008. 

A copy of the application and 

accompanying exhibits will be available 

for public inspection at each of the 

following locations: 

U.S. Department of Commerce Export 

Assistance Center, 605 Fulton Ave., 

Suite E103, Rockford, IL 61103. 

Office of the Executive Secretary, 

Foreign-Trade Zones Board, U.S. 

Department of Commerce, Room 

2111, 1401 Constitution Ave., NW., 

Washington, DC 20230. 

FOR FURTHER INFORMATION CONTACT: 

Elizabeth Whiteman at 

Elizabeth_Whiteman@ita.doc.gov or 

(202) 482–0473. 

Dated: September 3, 2008. 

Andrew McGilvray, 

Executive Secretary. 

[FR Doc. E8–21231 Filed 9–10–08; 8:45 am] 

BILLING CODE 3510–DS–P 

DEPARTMENT OF COMMERCE 

Foreign-Trade Zones Board 

Revised Proposal for Available 

Alternative Site-Designation and 

-Management Framework 

SUMMARY: Based on comments received 

in response to the May 8, 2008, notice 

(73 FR 26077–26078), the Foreign-Trade 

Zones (FTZ) Board staff is making a 

number of revisions to its proposal to 

make available an alternative framework 

(for grantees that choose to participate) 

to designate and manage their generalpurpose FTZ sites. Comments on the 

May proposal were overwhelmingly 

supportive overall with regard to 

making such a framework available to 

grantees on an optional basis. However, 

comments also raised a number of 

important questions and concerns. 

In response, we have made some 

significant revisions to the proposal. 

Key revisions are allowance for a special 

transitional phase for each grantee 

applying to transfer to the alternative 

framework, elimination of a general 

initial limit on the number of ‘‘usagedriven’’ (formerly ‘‘user-driven’’) sites, 

elimination of the concept of an 

‘‘anchor’’ site, and flexibility on the 

duration of the sunset limits for 

‘‘magnet’’ sites—with five years 

established as a minimum rather than a 

fixed standard—so that the FTZ Board 

may take specific circumstances into 

account. 

Comments and questions are 

summarized and addressed below by 

general topic. The revised proposal is 

delineated after the discussion of the 

comments/questions. 

Comments Received 

Comments on Overall Framework and 

Application Process 

(1) One commenter suggested that, 

recognizing that a number of FTZ 

grantees currently have more FTZ sites 

and/or acreage than envisioned under 

the standard numbers associated with 

the proposed alternative sitedesignation and -management 

framework (‘‘alternative framework’’), 

the FTZ Board could require 

participating grantees to submit a plan 

in advance of an application to 

restructure the grantee’s zone project 

outlining the process and standards to 

be used in assessing which of the 

grantee’s existing sites to propose for 

continued FTZ status. 

(2) One commenter stated that a 

grantee seeking to use the alternative 

framework would be changing its zone 

plan, which could only be 

accomplished through application to 

and approval by the FTZ Board. 

However, designating existing sites as 

Anchor or magnet sites should be at the 

grantees’ discretion. Further, requiring 

grantees to recompile economic data to 

resubstantiate the designation of already 

approved sites would tend to be timeconsuming while yielding little benefit. 

(3) More than one commenter 

suggested a transitional period that 

would allow grantees whose numbers of 

existing sites exceed the envisioned 

standard limitations the opportunity to 

exceed those standard limitations if they 

believe it is desirable to do so for an 

initial period, with a sunset provision 

for all affected sites helping to ‘‘weed 

out’’ unused or unneeded zone sites at 

the end of the initial period. 

(4) One commenter indicated that the 

FTZ Board should provide an appeals 

process for any existing property owners 

that may be ‘‘detrimentally impacted’’

by a grantee’s decisionmaking process 

regarding whether to retain FTZ 

designation at currently designated 

sites. The framework should also 

address issues of concurrence needed 

from property owners that may not 

necessarily agree to have zone status 

removed. 

(5) One commenter stated that it is 

important that the process be managed 

as a flexible framework rather than as a 

set of rigid requirements. The final 

framework should set general standards 

but specific grants of authority should 

be based on grantee requests and the 

FTZ Board’s assessment of applications. 

It would be incumbent on grantees to 

demonstrate the need to diverge from 

the established general standards. 

(6) One commenter stated that, for 

states where local inventory taxes can 

be a possible issue for approval of new 

sites, the FTZ Board should require 

evidence of taxing authority 

concurrence as part of the designation 

process. However, for existing FTZ sites 

being considered as part of the 

reframing of a zone project under the 

new framework, no new taxing 

authority approvals should be required. 

Also, if under the new framework FTZ 

designation is removed from a site 

either at the grantee’s discretion or via 

a sunset mechanism, a taxing authority 

approval previously in place for the site 

should ‘‘remain in place’’ in the event 

of a future request for redesignation of 

the site as magnet or user-driven. 

(7) One commenter suggested that the 

FTZ Board allow a grantee to benefit 

from some of the proposal’s benefits 

(‘‘floating acreage,’’ simplified process 

for minor boundary modifications) 

within a 2,000-acre limitation but based 

on the grantee’s own zone-site 

management plan, which the FTZ Board 


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could determine was an acceptable 

alternative to the model delineated in 

the alternative site management 

proposal. 

Response on Overall Framework and 

Application Process 

Reframing the ‘‘plan’’ for a general 

purpose zone project under the 

alternative framework would inherently 

involve application to the FTZ Board 

(including the procedural requirement 

for technical comments from CBP 

pursuant to 15 CFR 400.27(d)(1)) so that 

the Board could evaluate and possibly 

approve the proposal for a new plan for 

the zone. For existing FTZs with 

disparities between their levels of 

designated sites and acreage relative to 

their sites and acreage where FTZ 

activity is being conducted, we agree 

with the comments suggesting 

allowance for a transitional phase 

between a grantee’s existing structure 

and a future structure consistent with 

the goals of the alternative framework. 

As a result, the revised proposal 

outlined below specifically incorporates 

a mechanism for an optional, one-time 

transitional phase for a participating 

grantee. 

We also agree with comments 

indicating that applying rigid standards 

would be counterproductive. The 

proposal has been revised to eliminate 

any numeric limit or goal for usagedriven (formerly user-driven) sites. The 

revised proposal also reflects that a 

request for designation for a usagedriven site would be explicitly linked to 

the specific entity(ies) which will be 

conducting FTZ activity at the site (or 

for which such activity will be 

conducted). As such, the designation of 

a usage-driven site—and continuation of 

that designation—would be directly tied 

to the specific entity(ies) associated 

with the request. Further, the revised 

proposal emphasizes a general goal of 

no more than six magnet sites per zone 

while recognizing the special 

circumstances that may exist with 

regard to certain zones (such as regional, 

multi-county projects). The revised 

proposal explicitly allows for a range of 

situations while also emphasizing the 

type of justification that would be 

needed for a larger number of magnet 

sites. 

Regarding grantee decisionmaking 

standards and appeals of such 

decisions, we agree that any grantee 

making a decision about whether to 

retain existing sites should apply 

uniform neutral standards in making 

that determination. A standard element 

of processing any application for Board 

action is a Federal Register notice with 

a public comment period. The notice 

and comment process provides 

appropriate procedural safeguards 

regarding any application for Board 

action. Also, as noted above, any 

grantee’s use of the proposed alternative 

framework would be the result of an 

application to the FTZ Board to 

‘‘reorganize’’ the zone. The FTZ Staff 

would aim to minimize the burden on 

the applicant (particularly regarding the 

type of economic data which had been 

part of a justification which had 

previously been submitted to the 

Board). 

Finally, regarding documentation for 

concurrence of local taxing entities in 

states with inventory taxes, the Board 

would be able to evaluate on a case-bycase basis pre-existing documentation 

for sites newly proposed for designation 

whose previous FTZ designation had 

lapsed. 

Comments on ‘‘Service Area’’ Concept 

(8) One commenter, while agreeing 

with the concept of a ‘‘service area’’

(geographic area within which the 

grantee intends to be able to propose 

FTZ sites), noted that more than one 

grantee might present the same 

geographic location as part of their 

service areas and states that a grantee 

must satisfy the ‘‘convenience of 

commerce’’ (19 U.S.C. 81b(b)) for any 

portion of its service area that overlaps 

another grantee’s service area. The same 

commenter raised a number of questions 

regarding service areas: Will there be a 

process to continue overlaps in service 

areas? Will the Board determine the 

service area for each grantee and, if so, 

would there be an appeals process? 

Would the establishment of service 

areas require the transfer of existing 

sites from one grantee to another? Must 

a grantee’s subzones be within the 

boundaries of the service area associated 

with that grantee? 

(9) One commenter stated that, in 

implementing the concept of a zone’s 

service area, there is no need to change 

existing FTZ ‘‘projects’’ from one port of 

entry affiliation to another where ports 

of entry overlap and each has its own 

FTZ grantee. 

Response on ‘‘Service Area’’ Concept 

The complexity of the FTZ Board’s 

evaluation of a grantee’s proposed 

service area may vary depending on the 

proposal and the region to which the 

proposal relates. Some regions have 

multiple existing grantees serving a 

single Customs and Border Protection 

(CBP) port of entry (POE) and the 

limitations of the areas those grantees 

seek to serve may not have been defined 

to date. (It should be noted that some 

regions with multiple grantees serving a 

POE may have the basic framework in 

place to define service areas through the 

plans previously presented to the FTZ 

Board, some of which may have tended 

to focus on a single county within a 

broader region served by the POE.) In 

instances where there is disagreement 

over proposed service area(s) serving a 

POE, the FTZ Board would need to 

evaluate the history of the zone(s) at 

issue (particularly as such history 

relates to the ‘‘convenience of 

commerce’’ clause of section 81b(b) of 

the FTZ Act). The FTZ Board will be 

able to evaluate such issues on a caseby-case basis. 

It is also important to recognize that 

the primary purpose of defining a 

service area is to put in place a zone 

‘‘plan’’ that would clearly be compatible 

with subsequent requests for minor 

boundary modifications (MBMs) within 

the service area. As such, if a POE area 

is already served by multiple grantees 

with some overlap of communities 

served, defining a service area for 

grantee ‘‘A’’ would not inherently have 

an impact on an existing site of grantee 

‘‘B’’ that happens to fall within the 

newly defined service area of grantee 

‘‘A.’’ Also, approval of a service area for 

one grantee does not necessarily 

preclude another grantee in the POE 

from proposing a new FTZ site in the 

first grantee’s approved service area 

based on evidence that the first grantee 

‘‘will not adequately serve the 

convenience of commerce’’ (19 U.S.C. 

81b(b)). In fact, the service areas could 

conceivably overlap although the FTZ 

Board would need to examine the 

public interest implications of such a 

situation, including burden on the 

resources of government agencies 

involved in administration and 

oversight related to the FTZ program. 

A key additional point is that a 

service area could only be defined 

through an application for FTZ Board 

action. Action by the FTZ Board would 

establish the service area, and the Board 

would retain its existing discretion to 

determine whether to approve an 

application in its entirety and whether 

restrictions or limitations might be 

required. In this context, presentation of 

a proposed service area in an 

application does not guarantee approval 

of the exact service area by the Board 

(particularly if controversy has arisen 

regarding the proposed service area 

during the processing of the 

application). In instances where any 

party may wish to object to the service 

area proposed by a grantee in an 

application to the Board, the standard 

Federal Register notice and public 

comment procedures for applications to 

the Board will ensure that all 


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perspectives can be presented for 

consideration. 

Finally, the proposal at issue here 

relates to a grantee’s management of its 

general-purpose FTZ. As such, subzones 

are not a subject of any element of the 

proposal (service area, standard overall 

acreage limit, etc.) and, in any case, 

already are subject to regulations 

addressing issues of geography and 

sponsorship (see 15 CFR 400.22(d)(2)). 

Comments on 2,000 Acre Limit and 

‘‘Floating’’ Acreage 

(10) More than one commenter 

indicated that the proposed initial limit 

of 2,000 acres of designated FTZ space 

for a participating grantee appears 

reasonable in light of the concept of 

‘‘floating acreage’’ also described in the 

proposal, but that the proposal would 

likely fail without the flexibility 

associated with the floating acreage. The 

same commenters state that the 

proposed general initial limitations of 

500 floating acres at an anchor site and 

200 floating acres at a magnet site seem 

reasonable as long as the grantee is able 

to request an increase in the amount of 

floating acreage designated at a given 

site based on actual FTZ activity at the 

site. 

(11) Two commenters indicated that 

the proposed 2,000-acre limit per zone 

could cause confusion for some 

property owners of sites within a zone 

that currently exceeds 2,000 designated 

acres. Clarification should be provided 

regarding the availability of user-driven 

designation so that existing land owners 

(public and private) can understand 

how removal of designation now does 

not preclude them from getting FTZ 

designation on a usage-driven basis in 

the future. 

(12) One commenter was concerned 

that the proposed 2,000-acre limitation 

would be too restrictive for a grantee 

whose existing site approaches 2,000 

acres in size. 

(13) One commenter asked whether 

acreage for subzones was included in 

the proposed 2,000-acre limit. 

Responses on 2,000 Acre Limit and 

‘‘Floating’’ Acreage 

The 2,000-acre limit reflects the FTZ 

Board’s existing practice of limiting any 

FTZ grantee to activation of 2,000 acres 

(regardless of the overall size of the 

grantee’s zone) unless further approval 

is obtained from the FTZ Board. It is 

important to emphasize that the concept 

of ‘‘floating’’ acreage significantly 

enhances the usefulness of the 2,000 

acres. Given that major portions of large 

sites tend to remain unactivated, actual 

facilities encompassing significantly 

more than 2,000 acres could be served 

effectively by 2,000 floating acres. (For 

example, 500 floating acres within a 

4,000 acre airport complex would 

enable activation of up to 500 acres 

anywhere within the complex.) 

Comments on ‘‘Anchor’’ Site Concept 

(14) One commenter maintains that, 

where an existing site is to be proposed 

as an ‘‘Anchor’’ site, the grantee should 

be able to accomplish ‘‘Anchor’’

designation through a letter to the FTZ 

Board staff rather than a full application 

to the FTZ Board. 

Response on ‘‘Anchor’’ Site Concept 

Based on factors described elsewhere 

in this notice, the revised proposal no 

longer includes the concept of an 

anchor site. Flexibility introduced into 

the revised concept for a magnet site 

enables magnet designation to cover a 

broader range of needs. At the same 

time, the proposal is simplified by 

having two categories of sites rather 

than three. 

Comments on ‘‘Magnet’’ Site Concept 

(15) More than one commenter 

maintained that, where an existing site 

is to be proposed as a magnet site, the 

grantee should be able to accomplish 

magnet designation through a letter to 

the FTZ Board staff rather than a full 

application to the FTZ Board. 

Response on ‘‘Magnet’’ Site Concept 

The designation of magnet sites is 

intended to be part of the reframing of 

a zone’s plan through application to the 

FTZ Board. As such, magnet designation 

cannot be accomplished through 

administrative action by the FTZ Board 

staff. However, there is real merit to 

commenters’ point that burden should 

be minimized for a grantee seeking to 

propose existing sites as magnet sites. 

Minimizing burden in that manner will 

be a goal for any guidelines to be issued 

by the Board staff for applications to 

reorganize zones using the alternative 

framework. Further, as noted above, 

such guidelines would aim to minimize 

any need to present new economic data 

for existing sites. 

Comments on ‘‘User-Driven’’ Site 

Concept 

(16) One commenter recommended 

changing the nomenclature of ‘‘userdriven’’ sites to ‘‘usage-driven’’ sites to 

reflect that designation of certain sites 

may be driven by the needs of an 

‘‘operator’’ (15 CFR 400.2(s)) rather than 

a ‘‘user’’ (15 CFR 400.2(v)). 

(17) One commenter recommended 

changing the nomenclature of ‘‘userdriven’’ sites to ‘‘operator/user-driven’’

to reflect the possible use of such sites 

by third-party operators. 

Response on ‘‘User-Driven’’ Site 

Concept 

The term ‘‘user-driven’’

unintentionally gave the impression of 

limiting such sites to situations driven 

by the needs of a zone ‘‘user’’ (as 

defined in 15 CFR 400.2(v)). In this 

revised proposal, we have adopted the 

recommended nomenclature ‘‘usagedriven’’ (which will be used throughout 

the remainder of this notice). Usagedriven sites would be designated for the 

physical area(s) required for 

company(ies) conducting FTZ activity 

or ready to pursue conducting FTZ 

activity. 

Comments on Numbers of Sites 

(18) Several commenters questioned 

the need to have general limits on the 

numbers of magnet and user-driven 

sites. 

(19) One commenter stated that a 

grantee should have the flexibility to 

determine appropriate numbers of 

magnet and user-driven sites for its zone 

project without limits on the numbers of 

such sites as long as the grantee’s zone 

project remained within the overall 

2,000 acre limit. 

(20) One commenter indicates that for 

regional FTZ projects that span more 

than one county, of which multiple 

examples exist in the FTZ program, 

each county should be able to have an 

‘‘Anchor’’ site. 

(21) Two commenters indicated that 

the concept should be amended to allow 

for designation of one anchor site per 

city or county participating in the zone 

project. 

(22) One commenter indicated that 

limitations on numbers of sites and on 

acreage for a type of site may be 

appropriate for many zones but 

inappropriate for some regionally 

focused zones. Also, the number of 

counties participating in a zone may be 

a good point of reference in many 

instances. However, counties can vary 

significantly in size, population and 

business activity, so counties may not 

be an appropriate point of reference in 

all cases. 

(23) One commenter indicated that it 

sees no reasonable or fair limits to the 

number of FTZ sites, whether magnet or 

user-driven. 

Response on Numbers of Sites 

In addition to elimination of the 

concept of an ‘‘anchor’’ site, the 

proposal has been revised in several 

significant ways regarding numbers of 

sites. First, there is no longer a 

suggested initial limit on the number of 


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proposed usage-driven sites per FTZ. 

For magnet sites, the revised proposal 

describes a general goal of no more than 

six magnet sites per zone over the long 

term. However, the revised proposal 

also makes clear that the goal is not a 

fixed standard. There is explicit 

recognition that flexibility may be 

needed for zone projects with structures 

that could potentially justify larger 

numbers of magnet sites. Further, the 

newly proposed option for a transitional 

phase for any participating grantee 

incorporates initial flexibility on 

numbers of sites. 

At the same time, it is important to 

recognize that the alternative framework 

delineated in the proposal is, 

fundamentally, about significantly 

enhanced flexibility in marketing and 

managing a zone project. The increased 

flexibility for the grantee is explicitly 

linked to other elements, including a 

need for greater focus that makes such 

flexibility possible. The proposal also 

reflects the reality expressed by many 

grantees of the great difficulty in 

prospectively placing FTZ designation 

where it may be needed in the future. 

The proposal looks to enable a grantee 

to move beyond repeated (often 

unsuccessful) attempts at prospective 

FTZ designation by recognizing that the 

primary mechanism for a participating 

grantee to serve new needs would be 

usage-driven minor boundary 

modifications (MBMs) within the 

service area, with a lesser role for longterm efforts to attract FTZ use to specific 

pre-designated magnet sites. 

Concentrating FTZ designation where it 

is actually used will also yield 

important benefits for the government in 

terms of oversight burden and other 

resource-related considerations. 

One factor to bear in mind regarding 

the revised proposal’s goal of no more 

than six magnet sites per grantee is that 

sites which begin their FTZ designation 

as magnet may ultimately prove 

appropriate to be shifted to usage-driven 

designation. For example, an industrial 

park newly designated as a magnet site 

may, after a number of years, be fully 

occupied but only have one active FTZ 

user and no other occupants that 

envision a short- to medium-term need 

for FTZ services. At the same time, the 

grantee may determine that it is 

desirable to propose a new industrial 

park as a magnet site. In that context, 

one option for a grantee to consider is 

redesignating the active FTZ portion of 

the older industrial park as a usagedriven site while seeking magnet 

designation for the new industrial park. 

Consideration of this type of option 

would be particularly appropriate if the 

grantee already had six magnet sites, 

and the FTZ Board could examine the 

number of distinct activated operations 

within each existing magnet site when 

evaluating a request for additional 

magnet sites beyond the goal of no more 

than six. This reflects that a grantee’s 

participation in the alternative 

framework will make rapid MBM action 

available for any unanticipated FTZrelated need within the service area 

(including, when warranted, to bring 

usage-driven FTZ designation to any 

parcel that may have previously had 

zone designation). 

Comments on Sunset Limits 

(24) One commenter stated that it is 

reasonable for magnet and user-driven 

sites to be subject to ‘‘sunset’’ limits 

whereby FTZ designation ‘‘selfremoves’’ at the end of a five-year sunset 

period if no FTZ activity has occurred 

but added that differing standards 

should apply to magnet versus userdriven sites. Specifically, the 

commenter indicates that magnet sites 

should be subject to a sunset/removal 

standard based on ‘‘activation’’ (19 CFR 

146.1(b)) whereas user-driven sites 

should be subject to a stricter sunset/ 

removal standard based on the 

admission of foreign non-duty paid 

material into the zone site for a bona 

fide customs purpose. 

(25) One commenter expressed 

concerns that sunset limits may be 

counterproductive by inhibiting 

investment in FTZ sites by property 

owners, adding that the time frames 

needed for zoning, infrastructure, 

construction, as well as activation of a 

finished facility by CBP, can make a 

five-year sunset period unrealistically 

short. 

Response on Sunset Limits 

Based on comments received, this 

revised proposal envisions a five-year 

period as the minimum sunset limit for 

magnet sites and allows flexibility in the 

FTZ Board’s evaluation of evidence so 

that a longer sunset period for a specific 

magnet site could be approved where 

appropriate based on the circumstances. 

For usage-driven sites, the proposed 

five-year sunset limit is unaltered since 

the first proposal and reflects the nature 

of usage-driven sites. The ability to 

designate a usage-driven site within a 

grantee’s service area via simple and 

rapid MBM action should also enable 

the grantee to address needs for new 

FTZ designation in situations where 

activation for a specific operator or user 

could not be accomplished during a 

site’s initial sunset period. 

With regard to the standard to be 

applied in the application of sunset 

limits, this revised proposal adopts 

standards suggested in comments. 

Specifically, FTZ designation will selfremove from a magnet site unless the 

site is activated by CBP prior to the 

specific site’s sunset deadline. For a 

usage-driven site, FTZ designation will 

self-remove unless there has been prior 

to the sunset deadline the admission 

into the site of foreign non-duty paid 

material for a bona fide customs 

purpose. These standards also apply to 

the periodic reapplication of the sunset 

test for a site under the ‘‘recycling’’

concept. 

Comment on Site Numbering 

(26) One commenter stressed that the 

FTZ Board should coordinate with 

various other Federal agencies to ensure 

compatibility of any site numbering in 

automated systems and across agencies. 

The same commenter indicated that the 

Board should issue guidance on the 

potential need for grantees to amend 

zone schedules (15 CFR 400.42(b)) and 

agreements with third parties if the 

Board renumbers zone sites. 

Response on Site Numbering 

The commenter is correct in 

highlighting the importance of the FTZ 

Board coordinating any site numbering 

or re-numbering with key government 

agencies. For any such numbering/renumbering, the FTZ Board staff can also 

issue guidance where needed for 

affected grantees and third parties. 

Comment on Tracking of Sites 

(27) One commenter indicated that 

increased complexity of site tracking 

associated with a grantee’s participation 

in the optional framework means that 

the Board should require such a grantee 

to post to the FTZ Board’s Web site 

regularly updated site and activation 

plans. 

Response on Tracking of Sites 

The tracking of sites, including 

designation and sunset, will be critical 

to the successful functioning of the 

alternative framework. For any 

implementation of the alternative 

framework, the FTZ Board staff would 

coordinate availability and use of an 

effective, publicly available tracking 

mechanism. 

Comment on Procedures for Minor 

Boundary Modifications 

(28) One commenter suggests 

enhancing the process for minor 

boundary modifications (MBMs) within 

the site management framework by 

allowing a grantee to request from the 

Customs and Border Protection port 

director a ‘‘Zone time approval’’ that 

would give the Grantee blanket CBP 


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concurrence for any user-driven sites 

the grantee might propose based on 

certain conditions. 

Response on Procedures for Minor 

Boundary Modifications 

The process for local CBP evaluation 

and possible concurrence for proposed 

MBMs often involves an examination of 

the specific activity and entities 

involved. Variation in activities, users, 

etc., can have a significant impact on 

the ultimate burden imposed on CBP 

resources. In this context, the current 

request-by-request consideration by CBP 

will be maintained for MBMs under the 

revised proposal. 

Revised Proposal 

The fundamental trade-off addressed 

in this proposal continues to be greater 

flexibility and increased predictability 

for approval of FTZ sites through simple 

and rapid minor boundary modification 

actions in exchange for a grantee 

maximizing the linkage between 

designation of FTZ space and actual use 

of that space for FTZ activity (after 

‘‘activation’’ by CBP). The major benefit 

would likely be for existing FTZ 

grantees, which would have the option 

of applying to reorganize their FTZ by 

incorporating in an application for FTZ 

Board action elements from the 

following framework: 

1. The ‘‘service area’’ within which 

the grantee intends to be able to propose 

general-purpose FTZ sites (e.g., specific 

counties, with documented support 

from new counties if the service area 

reflected a broader focus than the FTZ’s 

current area served). The term ‘‘service 

area’’ applies a name to a concept which 

already exists in certain approved FTZ 

applications in which a grantee 

organization has named the localities it 

intends to serve. It should be noted that 

any service area would need to be 

consistent with the ‘‘adjacency’’

requirement of the FTZ Board’s 

regulations (60 miles/90 minutes 

driving time from CBP Port of Entry 

boundaries). A grantee’s proposed 

service area would need to be consistent 

with enabling legislation and the 

grantee organization’s charter. The FTZ 

Board’s evaluation of a proposed service 

area could potentially involve 

examination of issues related to the 

‘‘convenience of commerce’’ (19 U.S.C. 

81b(b)) in regions served by more than 

one FTZ grantee. 

2. An initial limit of up to 2,000 acres 

of designated FTZ space within the 

service area. Given the proposal’s focus 

on linking FTZ designation more closely 

to FTZ activity, the 2,000-acre limit 

reflects the FTZ Board’s existing 

practice of limiting any FTZ grantee to 

activation of 2,000 acres (regardless of 

the overall size of the grantee’s zone) 

unless further approval is obtained from 

the FTZ Board. Acreage within the 

2,000-acre limit which had not been 

applied to specific designated sites 

would effectively be ‘‘reserve’’ acreage 

available for future FTZ designation for 

parcels or sites within the grantee’s 

approved service area. 

3. Enhancement of the usefulness of 

the 2,000 available acres by 

emphasizing ‘‘floating’’ acreage within 

an individual site’s boundaries (as has 

been the FTZ Board’s practice with 

certain applications to date). For 

example, 100 acres of ‘‘floating’’ FTZ 

designation within the boundaries of a 

700-acre port complex would mean that 

it would be possible to activate with 

CBP up to 100 acres of total space 

anywhere within that 700-acre complex. 

4. Designation of a limited number of 

‘‘magnet’’ sites selected by the grantee—

often as a result of local public 

processes—for ability and readiness to 

attract multiple FTZ uses. An individual 

magnet site would generally be 

proposed with no more than 200 

‘‘floating’’ acres, although a larger 

number of proposed acres for a magnet 

site could be justified based on factors 

such as the nature of the site (e.g., a 

major harbor facility) or a specific type 

of projected FTZ activity that would 

tend to require an unusually large 

number of acres in simultaneous 

‘‘activated’’ status at the specific site. A 

magnet site could only be designated 

through an application for FTZ Board 

action. 

5. Possible designation of ‘‘usagedriven’’ sites to serve companies which 

are not located in a magnet site but 

which are ready to pursue conducting 

activity under FTZ procedures. In the 

general interest of maximizing the 

linkage between FTZ site designation 

and FTZ activity at the site, a usagedriven site would be limited—in the 

context of a larger industrial park or 

business district where other companies 

interested in FTZ procedures might be 

able to locate in the future—to the 

area(s) required for the company(ies) 

specifically identified as ready to 

pursue conducting FTZ activity at the 

site. 

6. Unlike magnet sites, usage-driven 

sites could be designated through the 

current minor boundary modification 

(MBM) mechanism—a rapid 

administrative action by the Board’s 

staff—in addition to through FTZ Board 

action. (It should be noted that usagedriven MBM actions could conceivably 

be used to designate additional acreage 

where needed at magnet site locations.) 

A simplification of the MBM process 

would result from elimination of the 

need to ‘‘swap’’ like amounts of acreage 

from existing sites as long as the total 

acreage for existing and proposed sites 

remained within the standard 2,000-acre 

limit. Requests for MBM actions would 

continue to require concurrence from 

the appropriate CBP port director. 

7. No specific limit on the number of 

usage-driven sites. However, it should 

be noted that such usage-driven sites are 

by definition focused on only the 

specific physical area(s) required for 

company(ies) conducting FTZ activity 

or ready to pursue conducting FTZ 

activity. Therefore, with regard to 

numbers of usage-driven sites, the 

definition of such sites and the standard 

sunset limits (and recycling) described 

below inherently function to limit 

usage-driven sites on an ongoing basis 

to the number of specific areas required 

for activity by (or on behalf of) FTZ 

users. 

8. Regarding numbers of magnet sites, 

the framework would reflect a general 

goal—after any transition period, as 

outlined below—of focusing each FTZ 

on six or fewer simultaneously existing 

magnet sites. Special circumstances of 

regional (multi-county) FTZs could be 

taken into account based on factors 

which could justify a larger number of 

magnet sites (e.g., population size, level 

of trade-related activity). Also, a grantee 

seeking over a longer term to justify to 

the FTZ Board proposed authority for a 

larger number of magnet sites could 

provide evidence of multi-user FTZ 

activity—as reflected in the grantee’s 

annual reports to the FTZ Board—at a 

significant percentage of the grantee’s 

already designated magnet sites. (It 

should be noted that a grantee with an 

approved magnet site where only a 

single user activates over time will be 

able to consider requesting usage-driven 

designation for the active portion of that 

magnet site, thereby helping to retain 

focus and enabling the grantee to 

consider whether a different site would 

be more appropriate for magnet 

designation while remaining consistent 

with the goal outlined above for total 

number of magnet sites.) 

9. Magnet sites and usage-driven sites 

would be subject to ‘‘sunset’’ time limits 

which would self-remove FTZ 

designation from a site not used for FTZ 

purposes before the site’s sunset date. 

For magnet sites, the default sunset 

period would be five years with sunset 

based on whether a site had been 

activated by CBP. However, the FTZ 

Board could take a range of factors into 

account in determining the appropriate 

sunset period for a given site (e.g., 

nature of the site, public ownership of 

the site). For a usage-driven site, the 


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sunset limit would require within five 

years of approval admission into the site 

of foreign non-duty paid material for a 

bona fide customs purpose. Experience 

in administering the framework could 

also reveal a need to adjust practice for 

usage-driven sites to implement 

intermediate benchmarks (such as 

progress towards activation) rather than 

a single deadline date at the end of a 

five-year period. 

10. Magnet sites and usage-driven 

sites would also be subject to ongoing 

‘‘recycling’’ whereby activation at a site 

during the site’s initial sunset period 

would serve to push back the sunset 

date by another five years (when the 

sunset test would again apply). Finally, 

if all of a grantee’s sites were due to 

sunset based on lack of activation, the 

grantee would need to apply to the FTZ 

Board at least 12 months in advance of 

the ultimate sunset termination to 

request designation of at least one site 

for the period beyond the sunset of the 

previously approved sites. 

11. An optional five-year transitional 

phase would be available for grantees of 

zones with existing configurations that 

differ from the general parameters 

envisioned in the proposal. For the 

optional transitional phase, an 

individual grantee could apply to 

reorganize its zone and request 

continued FTZ designation for existing 

sites that the grantee determines warrant 

further opportunity to demonstrate a 

need for FTZ status. For the transition 

period, there would be no specific goal 

in terms of numbers of existing sites 

which could be proposed for magnet 

designation. However, sites proposed 

for a zone’s transitional phase would 

need to comply with the framework’s 

limit of 2,000 floating acres within the 

zone’s site (see further discussion 

below). 

12. For the transitional phase for a 

particular zone, the grantee would have 

the option of requesting usage-driven 

designation for any site where a single 

entity is conducting (or ready to 

conduct) FTZ activity. For sites that the 

grantee believes are better suited to a 

magnet (multi-user) role, the grantee 

could request magnet designation. Any 

usage-driven sites would have the 

standard five-year sunset period for 

such sites. The FTZ Board would 

establish sunset limits for individual 

magnet sites based on the facts of the 

case (particularly as they pertain to each 

site). For the transition phase, the 

default sunset limit for magnet sites 

would be five years but the FTZ Board 

would be able to establish longer sunset 

limits for specific sites if warranted by 

the facts and circumstances present. 

13. The five-year transition period for 

a specific grantee would begin with 

approval of the grantee’s reorganization 

application by the FTZ Board. During 

the final year of the transition period, 

the FTZ Board staff would initiate a 

review of all of the zone’s sites for 

which the sunset limits align with the 

end of the transition period. The staff 

review would examine whether each of 

those sites had been activated during 

the transition period and, for activated 

sites, the specific FTZ activity which 

had taken place (including the 

operator(s)/user(s) for each site). The 

staff review of a zone’s transition period 

would result in a report noting any sites 

subject to the review which had 

remained unactivated during the period 

(for which FTZ designation would selfremove at the end of the period). The 

staff report would also make 

preliminary recommendations regarding 

magnet or usage-driven designation 

going forward for sites activated during 

the period. The FTZ Board staff would 

provide its preliminary 

recommendations to the zone’s grantee 

and allow a period of 30 days for the 

grantee to provide any response to the 

staff’s recommendations. After the end 

of the 30-day period, the staff would 

create a final report taking into account 

any response from the grantee regarding 

the preliminary recommendations. 

Where appropriate, the Board’s 

Executive Secretary would be able to 

take action on a recommended 

transition of a site from magnet to usagedriven designation via the minor 

boundary modification process. 

14. The transitional phase for any 

zone would be limited by the defining 

2,000 acre limit inherent in the 

proposed framework. In this context, if 

existing sites which a grantee wishes to 

propose for a transitional phase 

cumulatively exceed 2,000 acres in their 

current configuration, the grantee would 

need to determine the amount of 

‘‘floating’’ acreage to propose within the 

boundaries of each such existing site. 

(For example, if an existing site is the 

340-acre Acme Industrial Park, the 

grantee could propose 200 floating acres 

within the 340-acre Acme Industrial 

Park.) A grantee might opt for a simple 

mechanism to apportion a certain total 

amount of floating acreage among sites 

it is proposing for the transitional phase 

(after making allowance for the amount 

of acreage the grantee determines it 

needs to keep in reserve for possible 

future minor boundary modifications; a 

grantee retaining a minimum of 200 

acres in reserve is advisable). 

It is important to note that the 

elements of the proposal support each 

other in furthering the goals of 

flexibility and focus for FTZ site 

designation (with important resulting 

resource- and efficiency-related benefits 

for the government). As such, a 

framework incorporating these types of 

elements would include the package of 

elements as an available alternative to 

the Board’s current practice. FTZ 

grantees opting to manage their zones 

under the Board’s current framework 

would be unaffected by this proposal. 

As is currently the case, minor 

boundary modification actions would be 

approved by the Board’s staff while 

modifications to a zone’s ‘‘plan’’ (e.g., 

increase in authorized FTZ acreage, 

modifications to service area) would be 

matters for the FTZ Board’s 

consideration. 

In addition, in order to help the FTZ 

Board evaluate the effectiveness and 

appropriateness of the alternative 

framework after actual experience with 

FTZ grantees, the FTZ staff would 

report to the Board on a periodic basis 

regarding the actual usage of the 

alternative framework. The staff’s 

reporting regarding implementation of 

the framework at individual 

participating FTZs would result from 

staff-initiated reviews and would not 

require any request or application from 

the grantee. 

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 (202) 482–0002. 

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 

31, 2008. Any questions about this 

request for comments may be directed to 

the FTZ Board staff at (202) 482–2862. 

Dated: September 8, 2008. 

Andrew McGilvray, 

Executive Secretary. 

[FR Doc. E8–21232 Filed 9–10–08; 8:45 am] 

BILLING CODE 3510–DS–P 

DEPARTMENT OF COMMERCE 

Bureau of Industry and Security 

Action Affecting Export Privileges; 

Ralph Michel 

Ralph Michel, 41 Rosewood Drive, 

Easton, CT 06612, U.S., Respondent; 

Order 

On November 12, 2003, having 

approved the terms of a settlement 


rmajette on PRODPC74 with NOTICES
Appendix 6 

Comments on Revised Proposal 

(published September 11, 2008) 

In response to the revised proposal published on September 11, 2008, the following comments 

were received from three parties (with some overlap between parties’ comments): 

1) Inclusion of a geographic area within the designated service area of one grantee should not 

preclude another grantee from including the same geographic area within its service area. There 

are many situations where the service areas of two or more grantees may overlap. To provide 

the initial grantee with exclusivity to a geographical area could lead to a race between 

participating grantees to participate in the ASF, a result which would not be intended or 

equitable. 

2) To establish a service area, a grantee should be required to obtain letters of agreement from 

neighboring grantees in addition to endorsements from local/regional governmental bodies. 

3) The sunset limit for usage-driven sites should be reduced from the proposed five year period 

to a period of three years. The sunset test for usage-driven sites should be based on the 

admission into the site of foreign-status merchandise (as defined in 19 CFR 146.41 and 146.42) 

or zone-restricted merchandise (as defined in 19 CFR 146.44) for a bona fide purpose. 

4) Clear identification and tracking of each grantee’s magnet and usage-driven sites will be 

needed for the benefit of the FTZ Board, CBP and actual or potential operators/users. It would 

be beneficial for grantees that participate in the ASF to provide quarterly reports to the FTZ 

Board indicating all sites and their status, with the Board posting such reports on its web site. 

The Board should also issue a directive specifying how all magnet and usage-driven sites will be 

numbered and tracked. 

5) The FTZ Board should not require a formal reorganization application to designate magnet 

sites for a grantee if the sites are existing general-purpose FTZ sites designated through Board 

Order(s). A grantee should be able to designate – in a letter to the FTZ Staff – the magnet nature 

of the site and the amount of acreage to be apportioned to the site from the grantee’s 2,000-acre 

limit. One of each grantee’s magnet sites should have permanent FTZ designation (not be 

subject to a sunset limit), with preference given to a publicly owned site. Further, a grantee 

should be able to transfer the permanent status from one magnet site to another by MBM request 

to the FTZ Staff.