CBP Rewriting Part 146 FTZ Regs to 'Streamline' Requirements; In-Bond Final Rule Coming in May-June

CBP is in the midst of a rewrite of its Part 146 Foreign Trade Zones regulations that will include modernizing and automating current procedures, as well as eliminating burdensome requirements that serve CBP no purpose, said David Murphy, acting assistant commissioner in the CBP office of field operations. The reforms will “improve efficiencies, and remove redundancies and burdensome paper requirements, while at the same time balancing the need to expedite cargo and maintain security,” he said at the National Association of Foreign Trade Zones 2013 Regulatory and Legislative Seminar Feb. 12 in Washington, D.C. CBP is also close to finalizing changes to its in-bond regulations, and the final rule could come out in May or June, another official said.

“We want to eliminate outdated and unnecessary processes that are of no benefit to CBP or to the trade community,” Murphy said.

FTZ Reg Rewrite Will Eliminate Redundancies; Changes to Five-Day Rule, Direct Delivery

CBP is currently reviewing and updating its foreign trade zones regulations at 19 CFR 146, said Murphy. Changes will first be published as a proposed rule to get public comment, he said. Through the proposed rule, CBP will eliminate the blanket form CF 216 (Application for FTZ Activity Permit), and make mandatory electronic filing of CF e214 (Application for FTZ Admission and/or Status Designation).

Other Potential changes that could be seen in the proposed rewrite include eliminating the owner-purchaser element of direct delivery criteria, and modifying the “five-day rule” at 19 CFR 146.71(c) by increasing the time period for removal of merchandise to seven to ten days, said Lydia Jackson, CBP program manager for Cargo & Conveyance Security.

Elimination of blanket form 216. “The blanket 216 is redundant and unnecessary in today’s automated environment,” Murphy said. CBP will eliminate blanket 216 filing for manufacturing, manipulation, and on-property exhibition activities outside of an FTZ. As such, the CF 216 will only be required for destruction and temporary removals to include exhibition off property, he said. Port directors will continue to have discretion on the frequency of destruction (weekly or monthly), Murphy said. Temporary removals will only be granted for 120 days.

Mandatory e214 and incorporation into SE. The proposed rule would also make automated filing of CF e214 mandatory, Murphy said. While current e214 filing in the Automated Broker Interface (ABI) already includes capabilities such as electronic notifications about acceptance, data errors, cargo exams and holds, CBP’s next steps include building on Simplified Entry to achieve full cargo release in ACE, to include form e214, he said. “CBP has developed the planned approach that will enable us to complete all remaining core trade functionality in ACE within an estimated three years,” said Murphy.

CBP will come out with a pilot program to test these proposals, said Jackson, and hopes to get it going by the end of the current fiscal year by Sept. 30.

In-Bond Rule Set for Final Version Soon

CBP is in the “final stages” of its revisions to in-bond regulations, said Murphy. “All in-bond will be electronic, diversions will only be allowed if requested, [and] in-bonds must be delivered to the facility’s information and resource management system,” he said.

The draft final rule has been circulated to the various offices within CBP, and is now with CBP attorneys for drafting of a final version, said Gary Rosenthal, manager of CBP’s in-bond program. Once the draft is complete, it will again be circulated around CBP offices, and then go for final department review. CBP rules may be reviewed by the Department of Homeland Security and the Treasury Department, Rosenthal said, but the proposed rule was only reviewed by Treasury.

Rosenthal anticipates publication of the final rule in May or June.

Electronic Background Checks for FTZ & Bonded Warehouse Key Personnel

CBP has completed development of an electronic system of background checks for key employees at FTZs and bonded warehouses, including officers, and employees with recordkeeping responsibilities, said Murphy. “The implementation of this system will lower processing costs and improve processing time of applications,” he said.

The electronic vetting will be done through the Global Enrollment System (GES), which already compiles electronic data for CBP’s trusted traveler and customs broker license background checks. According to Rosenthal, the FTZ/bonded warehouse GES system will be separate from the traveler and license components, so a record in one component of GES will not satisfy a requirement for a record in another (i.e., trusted travelers will still have to provide information for inclusion in the FTZ/bonded warehouse GES component).

“We’re not going to be looking at the guy that pushes a box across the floor,” Rosenthal said. “We’re going to rely on you as the owners and operators to continue to do that.” Instead, CBP is looking at principals, directors, and officers noted in the articles of incorporation, that are involved in FTZ/bonded warehouse activities.

CBP headquarters sent internal instructions to all ports of entry in November to get the process started, Rosenthal said. The system will require no new equipment, being entirely web-based. Some ports will be sending out a Customs Form 3078 to request information, and will input the information on completed forms into GES, Rosenthal said. CBP is also looking to build a generic checklist for FTZs and bonded warehouses to fill out and return for input into GES, he said. The new system will also inform FTZs and bonded warehouses when vetting of their employees have been vetted and are eligible to work.

Changes Should Drive Down Costs, says Murphy

The cumulative effect of the changes should drive down transaction costs, Murphy said. “They will expedite the clearance and review process,” and align security and trade targeting with CBP enforcement efforts,” he said. “We’ve made progress in many areas by changing the way we conduct business in this new century. We fully trust to build on our successes and not to impede the progress that we’ve accomplished already.”— Brian Feito

(See ITT’s Online Archives 12022218, 12022317, 12022418, and 12022721 for parts I, II, III, and IV of ITT’s summary of CBP’s February 2012 proposed in-bond changes.)