Foreign Trade Zones Board Can Do Better Job Documenting Its Decisions, GAO Says

The “procedures” of the federal Foreign Trade Zones board chaired by Commerce and Treasury “generally align” with established rules and regulations for approving or denying applications for storing goods in FTZs but can do a better job of more fully documenting their decisions, a GAO report said. Customs and trade experts have described FTZs as being among several good “deferral mechanisms” for companies seeking to mitigate the higher costs of Trade Act Section 301 tariffs on Chinese imports because companies that store foreign goods in FTZs don't pay duties on them unless the goods are imported or consumed (see 1809240011). The FTZ program "offers a range of benefits" to encourage companies "to maintain and expand their operations" in the U.S., said GAO. As of July, 262 FTZs were approved for operation, it said. GAO audited 59 applications to store goods in FTZs between July 2017 and November 2018, and found 49 were approved, the rest denied “for reasons such as new or complex policy issues that required further review,” it said. Staff evaluating the applications correctly “collected and considered comments” from the public, industry specialists and Customs and Border Protection and made recommendations to the board whether to authorize the requests, said GAO. The rules require consideration of a “number of criteria” for evaluating applications, but staff didn't always “document consideration of all required criteria,” and the procedures “do not require” them to do so, it said. Without such documentation, the board “lacks an institutional record that all required criteria were considered and also lacks assurance that its decisions comply with U.S. trade and tariff law and public policy,” it said. It recommended the board write documentation requirements into its procedures.