FTZ Operator, Not User, Responsible for Proving Merchandise Status, CBP Says

A foreign-trade zone (FTZ) operator retains the responsibility for maintaining information necessary to prove the status of merchandise coming in and out of an FTZ, CBP said in a April 3 ruling (here). CBP ruled on the issue in response to an internal advice request from Louisiana Offshore Oil Port (LOOP), an FTZ operator, and a memorandum from the Petroleum Center of Excellence and Expertise. LOOP sought CBP input related to the difficulty of "obtaining entry documents for crude oil imported to the United States due to the multiple shipment and sales transactions that occur before the crude oil reaches" the FTZ, it said.

The FTZ Subzone 124D is operated by LOOP in Louisiana and provides "storage for domestically produced crude oil and domestic status crude oil from Canada," CBP said. Keeping crude oil documentation is difficult because it is "bought, sold, and traded in batches" while moving in a pipeline, on a barge or during transfer into storage tanks located on the Gulf Coast, LOOP said. "Due to LOOP’s tracking and accounting responsibilities as a zone operator, LOOP seeks to clarify whether zone operators or zone users are responsible for proving the status of merchandise admitted into a FTZ," CBP said. "LOOP additionally asks what documents can be used to prove the domestic status of crude oil from Canada, specifically whether documents other than official [CBP] forms are acceptable."

While "a zone user can be authorized by a zone operator to maintain an individual recordkeeping system accounting for merchandise the zone user admits," the zone operator retains primary responsibility and liability for supervision, CBP said. "Accordingly, we find that as a zone operator, LOOP is responsible and liable to CBP for proving the status of merchandise admitted, stored, and removed from FTZ Subzone 124D," CBP said. The agency also said "that documents such as sales contracts and affidavits regarding the status of the crude oil in a transaction may be used to prove its domestic status in combination with the other documents referenced above, such as bills of lading and pipeline transit receipts."

As a result, LOOP "may prove the domestic status of the crude oil it admits, stores, commingles, and removes from FTZ Subzone 124D by utilizing an inventory control and recordkeeping system capable of satisfying the accounting requirements" described in CBP regulations, the agency said. It's also up to the port director to "to identify and request specific documents necessary to satisfy a zone operator’s regulatory compliance obligations," CBP said.