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[Code of Federal Regulations] [Title 19, Volume 2, Parts 141 to 199] [Revised as of April 1, 1997] From the U.S. Government Printing Office via GPO Access [CITE: 19CFR146] [Page 88-124]
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CHAPTER I--UNITED STATES CUSTOMS SERVICE, PART 146--FOREIGN TRADE ZONES
Subpart A--General Provisions
Subpart B--Inventory Control and Recordkeeping System
Subpart C--Admission of Merchandise to a Zone
Subpart D--Status of Merchandise in a Zone
Subpart E--Handling of Merchandise in a Zone
Subpart F--Transfer of Merchandise From a Zone
[[Page 89]] Subpart G--Penalties; Suspension; Revocation
Subpart H--Petroleum Refineries in Foreign-Trade Subzones
Authority: 19 U.S.C. 66, 81a-81u, 1202 (General Note 20, Harmonized
Tariff Schedule of the United States (HTSUS)), 1623, 1624.
Source: T.D. 86-16, 51 FR 5049, Feb. 11, 1986, unless otherwise
noted.
Sec. 146.0 Scope.
Foreign trade zones are established under the Foreign Trade Zones
Act and the general regulations and rules of procedure of the Foreign
Trade Zones Board contained in 15 CFR part 400. This part 146 of the
Customs Regulations governs the admission of merchandise into a foreign
trade zone, manipulation, manufacture, or exhibition in a zone;
exportation of the merchandise from a zone; and transfer of merchandise
from a zone into Customs territory.
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Subpart A--General Provisions
Sec. 146.1 Definitions.
(a) The following words, defined in section 1 of the Foreign-Trade
Zones Act of 1934, as amended (19 U.S.C. 81a), are given the same
meaning when used in this part, unless otherwise stated: ``Board'',
``Grantee'', and ``Zones''.
(b) The following are general definitions for the purpose of this
part:
(1) Act. ``Act'' means the Foreign-Trade Zones Act of June 18, 1934,
as amended (48 Stat. 998-1003; 19 U.S.C. 81a-u).
(2) Activation. ``Activation'' means approval by the grantee and
port director for operations and for the admission and handling of
merchandise in zone status.
(3) Admit. ``Admit'' means to bring merchandise into a zone with
zone status.
(4) Alteration. ``Alteration'' means a change in the boundaries of
an activated zone or subzone; activation of a separate site of an
already-activated zone or subzone with the same operator at the same
port; or the relocation of an already-activated site with the same
operator.
(5) Customs territory. ``Customs territory'' is the territory of the
U.S. in which the general tariff laws of the U.S. apply. ``Customs
territory of the United States'' includes only the States, the District
of Columbia, and Puerto Rico. (General Note 2, Harmonized Tariff
Schedule of the United States (19 U.S.C. 1202)).
(6) Constructive transfer. ``Constructive transfer'' is a legal
fiction which permits acceptance of a Customs entry for merchandise in a
zone before its physical transfer to the Customs territory.
(7) Deactivation. ``Deactivation'' means voluntary discontinuation
of the activation of an entire zone or subzone by the grantee or
operator. Discontinuance of the activated status of only a part of a
zone site is an alteration.
(8) Default. ``Default'' means an action or omission that will
result in a claim for duties, taxes, charges, or liquidated damages
under the Foreign Trade Zone Operator Bond.
(9) Merchandise. ``Merchandise'' includes goods, wares and chattels
of every description, except prohibited merchandise. Building materials,
production equipment, and supplies for use in operation of a zone are
not ``merchandise'' for the purpose of this part.
(10) Domestic merchandise. ``Domestic merchandise'' is merchandise
which has been (i) produced in the U.S. and not exported therefrom, or
(ii) previously imported into Customs territory and properly released
from Customs custody.
(11) Foreign merchandise. ``Foreign merchandise'' is imported
merchandise which has not been properly released from Customs custody in
Customs territory.
[[Page 90]]
(12) Conditionally admissible merchandise. ``Conditionally
admissible merchandise'' is merchandise which may be imported into the
U.S. under certain conditions. Merchandise which is subject to permits
or licenses, or which may be reconditioned to bring it into compliance
with the laws administered by various Federal agencies, is an example of
conditionally admissible merchandise.
(13) Prohibited merchandise. ``Prohibited merchandise'' is
merchandise the importation of which is prohibited by law on grounds of
public policy or morals, or any merchandise which is excluded from a
zone by order of the Board. Books urging treason or insurrection against
the U.S., obscene pictures, and lottery tickets are examples of
prohibited merchandise.
(14) Fungible merchandise. ``Fungible merchandise'' means
merchandise which for commercial purposes is identical and
interchangeable in all situations.
(15) Operator. ``Operator'' is a corporation, partnership, or person
that operates a zone or subzone under the terms of an agreement with the
zone grantee. Where used in this part, the term ``operator'' also
applies to a ``grantee'' that operates its own zone.
(16) Reactivation. ``Reactivation'' means a resumption of the
activated status of an entire area that was previously deactivated
without any change in the operator or the area boundaries. If the
boundaries are different, the action is an alteration. If the operator
is different, it is an activation.
(17) Subzone. ``Subzone'' is a special-purpose zone established as
part of a zone project for a limited purpose, that cannot be
accommodated within an existing zone. The term ``zone'' also applies to
a subzone, unless specified otherwise.
(18) Transfer. ``Transfer'' means to take merchandise with zone
status from a zone for consumption, transportation, exportation,
warehousing, cartage or lighterage, vessel supplies and equipment,
admission to another zone, and like purposes.
(19) Unique identifier. ``Unique identifier'' means the numbers,
letters, or combination of numbers and letters that identify merchandise
admitted to a zone with zone status.
(20) User. ``User'' means a person or firm using a zone or subzone
for storage, handling, or processing of merchandise.
(21) Zone lot. ``Zone lot'' means a collection of merchandise
maintained under an inventory control method based on specific
identification of merchandise admitted to a zone by lot.
(22) Zone site. ``Zone site'' means the physical location of a zone
or subzone.
(23) Zone status. ``Zone status'' means the status of merchandise
admitted to a zone, i.e., nonprivileged foreign, privileged foreign,
zone restricted, or domestic.
[T.D. 86-16, 51 FR 5049, Feb. 11, 1986, as amended by T.D. 89-1, 53 FR
51263, Dec. 21, 1988]
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Sec. 146.2 Port director as Board representative.
The port director where the zone is located shall be in charge of
the zone as the representative of the Board.
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Sec. 146.3 Customs supervision.
(a) Assignment of Customs officers. Customs officers will be
assigned or detailed to a zone as necessary to maintain appropriate
Customs supervision of merchandise and records pertaining thereto in the
zone, and to protect the revenue.
(b) Supervision. Customs supervision over any zone or transaction
provided for in this part will be in accordance with Sec. 161.1 of this
chapter. The port director may direct a Customs officer to supervise any
transaction or procedure at a zone. Supervision may be performed through
a periodic audit of the operator's records, quantity count of goods in a
zone inventory, spot check of selected transactions or procedures, or
review of recordkeeping, security, or conditions of storage in a zone.
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Sec. 146.4 Operator responsibility and supervision.
(a) Supervision. The operator shall supervise all admissions,
transfers, removals, recordkeeping, manipulations, manufacturing,
destruction, exhibition, physical and procedural security, and
conditions of storage in the
[[Page 91]]
zone as required by law and regulations. Supervision by the operator
shall be that which a prudent manager of a storage, manipulation, or
manufacturing facility would be expected to exercise, and may take into
account the degree of supervision exercised by the zone user having
physical possession of zone merchandise.
(b) Customs access. The operator shall permit any Customs officer
access to a zone.
(c) Safekeeping of merchandise and records. The operator is
responsible for safekeeping of merchandise and records concerning
merchandise admitted to a zone. The operator, at its liability, may
allow the zone importer or owner of the goods to store, safeguard, and
otherwise maintain or handle the goods and the inventory records
pertaining to them.
(d) Records maintenance. The operator shall (1) maintain the
inventory control and recordkeeping system in accordance with the
provisions of subpart B, (2) retain all records required in this part
and defined in Sec. 162.1(a) of this chapter, pertaining to zone
merchandise for 5 years after the merchandise is removed from the zone,
and (3) protect proprietary information in its custody from unauthorized
disclosure. Records shall be readily available for Customs review at the
zone.
(e) Merchandise security. The operator shall maintain the zone and
establish procedures adequate to ensure the security of merchandise
located in the zone in accordance with applicable Customs security
standards and specifications.
(f) Storage and handling. The operator shall store and handle
merchandise in a zone in a safe and sanitary manner to minimize damage
to the merchandise, avoid hazard to persons, and meet local, state, and
Federal requirements applicable to a specific kind of goods. All trash
and waste will be promptly removed from a zone. Aisles will be
established and maintained, and doors and entrances left unblocked for
access by Customs officers and other persons in the performance of their
official duties.
(g) Guard service. The operator is authorized to provide guards or
contract for guard service to safeguard the merchandise and ensure the
security of the zone. This authorization does not limit the authority of
the port director to assign Customs guards to protect the revenue under
section 4 of the Act (19 U.S.C. 81d).
(h) Miscellaneous responsibilities. The operator is responsible for
complying with requirements for admission, manipulation, manufacture,
exhibition, or destruction, shortage, or overage; inventory control and
recordkeeping systems, transfer to Customs territory, and other
requirements as specified in this part. If the operator elects to
transfer merchandise from within the port limits (see definition of
``district'' at Sec. 112.1) to his zone, he shall receipt for the
merchandise at the time he picks it up for transportation to his
facility. He becomes liable for the merchandise at that time.
[T.D. 86-16, 51 FR 5049, Feb. 11, 1986, as amended by T.D. 94-81, 59 FR
51496, Oct. 12, 1994; T.D. 95-77, 60 FR 50020, Sept. 27, 1995]
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Sec. 146.5 [Reserved]
Sec. 146.6 Procedure for activation.
(a) Application. A zone operator, or where there is no operator, a
grantee, shall make written application to the port director
geographically nearest to where the zone is located to obtain approval
of activation of a zone or zone site. The area to be activated may be
all or any portion of the zone approved by the Board. The application
must include a description of all the zone sites covered by the
application, any operation to be conducted therein, and a statement of
the general character of the merchandise to be admitted. The port
director may also require the operator or grantee to submit fingerprints
on Standard Form 87 at the time of filing the application. If the
operator is an individual, that individual's fingerprints may be
required. If the operator or grantee is a business entity, fingerprints
of all officers and managing officials may be required.
(b) Supporting documents. The application must be accompanied by the
following:
(1) [Reserved]
(2) A blueprint of the area approved by the Board to be activated
showing
[[Page 92]]
area measurements, including all openings and buildings; and all
outlets, inlets, and pipelines to any tank for the storage of liquid or
similar product, that portion of the blueprint certified to be correct
by the operator of the tank;
(3) A gauge table, when appropriate, showing the capacity, in the
appropriate unit, of any tank, certified to be correct by the operator
of the tank;
(4) A procedures manual describing the inventory control and
recordkeeping system that will be used in the zone, certified by the
operator or grantee to meet the requirements of subpart B; and
(5) The written concurrence of the grantee, when the operator
applies for activation, in the requested zone activation.
(c) Inquiry by port director. As a condition of approval of the
application, the port director may order an inquiry by a Customs officer
into:
(1) The qualifications, character, and experience of an operator
and/or grantee and their principal officers; and
(2) The security, suitability, and fitness of the facility to
receive merchandise in a zone status.
(d) Decision of the port director. The port director shall promptly
notify the applicant in writing of his decision to approve or deny the
application to activate the zone. If the application is denied, the
notification will state the grounds for denial which need not be limited
to those listed in Sec. 146.82. The decision of the port director will
be the final Customs administrative determination in the matter. On
approval of the application, a Foreign Trade Zone Operator's Bond shall
be executed on Customs Form 301, containing the bond conditions of
Sec. 113.73 of this chapter.
(e) Activation. Upon the port director's approval of the application
and acceptance of the executed bond, the zone or zone site will be
considered activated; and merchandise may be admitted to the zone.
Execution of the bond by an operator does not lessen the liability of
the grantee to comply with the Act and implementing regulations.
[T.D. 86-16, 51 FR 5049, Feb. 11, 1986, as amended by T.D. 93-18, 58 FR
15773, Mar. 24, 1993; T.D. 95-99, 60 FR 62733, Dec. 7, 1995]
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Sec. 146.7 Zone changes.
(a) Alteration of an activated area. An operator shall make written
application to the port director for approval of an alteration of an
activated area, including an alteration resulting from a zone boundary
modification. The application must be accompanied by the supporting
document requirements specified in Sec. 146.6, as applicable. The port
director may review the security, suitability, and fitness of the area,
and shall reply to the applicant as provided for in Sec. 146.6.
(b) Deactivation or reactivation. A grantee, or an operator with the
concurrence of a grantee, shall make written application to the port
director for deactivation of a zone site, indicating by layout or
blueprint the exact site to be deactivated. The port director shall not
approve the application unless all merchandise in the site in zone
status (other than domestic status) has been removed at the risk and
expense of the operator. The port director may require an accounting of
all merchandise in a zone as a condition of approving the deactivation.
A zone may be reactivated using the above procedure if a sufficient bond
is on file under Sec. 146.6(d).
(c) Suspension of activated site. When approval of an activated
status has been suspended through the procedure in subpart G, the port
director may require all goods in that area in zone status (other than
domestic status) to be transferred to another zone, a bonded warehouse,
or other location where they may lawfully be stored, if the port
director considers that transfer advisable to protect the revenue or
administer any Federal law or regulation.
(d) New bond. The port director may require an operator to furnish,
on 10 days notice, a new Foreign Trade Zone Operator's Bond on Customs
Form 301. If the operator fails to furnish the new bond, no more
merchandise will be received in the zone in zone status. Merchandise in
zone status (other than domestic status) will be removed at the risk and
expense of the operator. A new bond may be required if (1) the activated
zone area is substantially altered; (2) the character of merchandise
admitted to the zone or operations performed in the zone are
substantially
[[Page 93]]
changed; (3) the existing bond lacks good and sufficient surety; or (4)
for any other reason that substantially affects the liability of the
operator under the bond. Although a new bond may not be required, the
operator shall obtain the consent of the surety to any material
alteration in the boundaries of the zone.
(e) New operator. A grantee of an activated zone site shall make
written application to the port director for approval of a new operator,
submitting with the application a certification by the new operator that
the inventory control and recordkeeping system meets the requirements of
subpart B, and a copy of the system procedures manual if different from
the previous operator's manual. The port director may order an inquiry
into the qualifications, character, and experience of the operator and
its principal officers.
(f) The bond in Sec. 146.6 shall be submitted by the operator before
the operating agreement may become effective in respect to merchandise
in zone status. The port director shall promptly notify the grantee, in
writing, of the approval or disapproval of the application.
(g) List of officers, employees, and other persons. The port
director may make a written demand upon the operator to submit, within
30 days after the date of the demand, a written list of the names,
addresses, social security numbers, and dates and places of birth of
officers and persons having a direct or indirect financial interest in
the operator, and of persons employed in the carriage, receipt or
delivery of merchandise in zone status, whether employed by the zone
operator or a zone user. If a list was previously furnished, the port
director may make a written demand for the same information in respect
to new persons employed in the carriage, receipt, or delivery of zone
status merchandise within 10 days after such employment. The list need
not include employees of common or contract carriers transporting goods
to or from the zone.
[T.D. 86-16, 51 FR 5049, Feb. 11, 1986, as amended by T.D. 95-99, 60 FR
62733, Dec. 7, 1995]
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Sec. 146.8 Seals, authority of operator to break and affix.
The port director may authorize an operator to break a Customs in-
bond seal affixed under Sec. 18.4 of this chapter, or under any Customs
order or directive, on any vehicle or intermodal container containing
merchandise approved for admission to the zone upon its arrival at the
zone; or to affix a Customs in-bond seal to any vehicle or intermodal
container of merchandise for which an entry, withdrawal, or other
approval document has been obtained for movement in-bond from the zone.
The authorized affixing or breaking of that seal will be considered to
have been done under Customs supervision. The operator shall report to
the port director, upon arrival of the vehicle or container at the zone,
any seal found to be broken, missing, or improperly affixed, and hold
the vehicle or container and its contents intact pending instructions
from the port director. If the operator does not obtain the written
concurrence of the carrier as to the condition of the seal or delivering
conveyance, the port director shall deem the seal or delivering
conveyance to be intact.
[T.D. 86-16, 51 FR 5049, Feb. 11, 1986; 51 FR 11012, Apr. 1, 1986]
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Sec. 146.9 Permission of operator.
An application for permission to admit merchandise into a zone, or
to manipulate, manufacture, exhibit, or destroy merchandise in a zone
must include the written concurrence of the operator, except where the
regulations of this part provide for the making of application by the
operator itself or where the operator files a separate specific or
blanket application. The written concurrence of the operator in the
removal of merchandise from a zone is not required because the
merchandise is released by the port director to the operator for
delivery from the zone, as provided in Sec. 146.71 (a).
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Sec. 146.10 Authority to examine merchandise.
The port director may cause any merchandise to be examined before or
at the time of admission to a zone, or
[[Page 94]]
at any time thereafter, if the examination is considered necessary to
facilitate the proper administration of any law, regulation, or
instruction which Customs is authorized to enforce.
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Sec. 146.11 Transportation of merchandise to a zone.
(a) From outside Customs territory. Merchandise may be admitted
directly to a zone from any place outside Customs territory.
(b) Through Customs territory, foreign merchandise. Foreign
merchandise destined to a zone and transported in-bond through Customs
territory will be subject to the laws and regulations applicable to
other merchandise transported in-bond between two places in Customs
territory.
(c) From Customs territory, domestic merchandise. Domestic
merchandise may be admitted to a zone from Customs territory by any
means of transportation which will not interfere with the orderly
conduct of business in the zone.
(d) From a bonded warehouse. Merchandise may be withdrawn from a
bonded warehouse under the procedures in Sec. 144.37(g) of this chapter
and transferred to a zone for admission in zone-restricted status.
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Sec. 146.12 Use of zone by carrier.
(a) Primary use; lading and unlading. The water area docking
facilities, and any lading and unlading stations of a zone are intended
primarily for the unlading of merchandise into the zone or the lading of
merchandise for removal from the zone. Their use for other purposes may
be terminated by Customs if found to endanger the revenue, or by the
Board if found to impede the primary use of the zone.
(b) Carrier in zone not exempt from law or regulations. Nothing in
the Act or the regulations in this part shall be construed as excepting
any carrier entering, remaining in, or leaving a zone from the
application of any other law or regulation.
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Sec. 146.13 Customs forms and procedures.
Where a Customs form or other document is required in this part, the
number of copies of the form or document required to be presented and
their manner of distribution and processing shall be determined by the
port director, except as otherwise specified in this part.
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Sec. 146.14 Retail trade within a zone.
Retail trade is prohibited within a zone except as provided in 19
U.S.C. 81o(d). See also the regulations of the Board as contained in 15
CFR part 400.
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Subpart B--Inventory Control and Recordkeeping System
Sec. 146.21 General requirements.
(a) Systems capability. The operator shall maintain either manual or
automated inventory control and recordkeeping systems or combination
manual and automated systems capable of:
(1) Accounting for all merchandise, including domestic status
merchandise, temporarily deposited, admitted, granted a zone status and/
or status change, stored, exhibited, manipulated, manufactured,
destroyed, transferred, and/or removed from a zone;
(2) Producing accurate and timely reports and documents as required
by this part;
(3) Identifying shortages and overages of merchandise in a zone in
sufficient detail to determine the quantity, description, tariff
classification, zone status, and value of the missing or excess
merchandise;
(4) Providing all the information necessary to make entry for
merchandise being transferred to the Customs territory;
(5) Providing an audit trail to Customs forms from admission through
manipulation, manufacture, destruction or transfer of merchandise from a
zone either by zone lot or Customs authorized inventory method.
(b) Procedures manual. (1) The operator shall provide the port
director with an English language copy of its written inventory control
and recordkeeping systems procedures manual in accordance with the
requirements of this part.
(2) The operator shall keep current its procedures manual and shall
submit to the port director any change at the time of its
implementation.
[[Page 95]]
(3) The operator may authorize a zone user to maintain its
individual inventory control and recordkeeping system and procedures
manual. The operator shall furnish a copy of the zone user's procedures
manual, including any subsequent changes, to the port director. However,
the operator will remain responsible to Customs and liable under its
bond for supervision, defects in, or failures of a system.
(4) The operator's procedures manual and subsequent changes will be
furnished to the port director for information purposes only. Customs
receipt of a manual does not indicate approval or rejection of a system.
(c) Liability of operator. Upon zone activation approval the
operator remains liable for complying with all inventory control and
recordkeeping system requirements set forth in this part.
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Sec. 146.22 Admission of merchandise to a zone.
(a) Identification. All merchandise will be recorded in a receiving
report or document using a zone lot number or unique identifier. All
merchandise, except domestic status merchandise for which no permit for
admission is required under Sec. 146.43, will be traceable to a Customs
Form 214 and accompanying documentation.
(b) Reconciliation. Quantities received will be reconciled to a
receiving report or document such as an invoice with any discrepancy
reported to the port director as provided in Sec. 146.37.
(c) Incomplete documentation. Merchandise received without complete
Customs documentation or which is unacceptable to the inventory control
and recordkeeping system will be recorded in a suspense account or
record until documentation is complete or the system is capable of
accepting the information, at which time it will be formally admitted to
the zone under Sec. 146.32 or 146.40. The receiving report or document
will provide sufficient information to identify the merchandise and
distinguish it from other merchandise. The suspense account or record
will be completely documented for Customs review to explain the
differences noted and corrections made.
(d) Recordation. Merchandise received will be accurately recorded in
the inventory system records from the receiving report or document using
the zone lot number or unique identifier for traceability. The inventory
record will state the quantity and date admitted, cost or value where
applicable, zone status, and description of the merchandise, including
any part or stock number.
(e) Harbor maintenance fee. When imported cargo is unloaded from a
commercial vessel at a U.S. port and admitted into a foreign trade zone,
the applicant for admission of that cargo into the zone may be subject
to the harbor maintenance fee as set forth in Sec. 24.24 of this
chapter.
[T.D. 86-16, 51 FR 5049, Feb. 11, 1986, as amended by T.D. 87-44, 52 FR
10211, Mar. 30, 1987; 52 FR 10970, Apr. 6, 1987]
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Sec. 146.23 Accountability for merchandise in a zone.
(a) Identification of merchandise--(1) General. A zone lot number or
unique identifier will be used to identify and trace merchandise.
(2) Fungible merchandise. Fungible merchandise may be identified by
an inventory method authorized by Customs, which is consistently
applied, such as First-In-First-Out (FIFO) and using a unique
identifier.
(b) Inventory records. The inventory records will specify by zone
lot number or unique identifier:
(1) Location of merchandise;
(2) Zone status;
(3) Cost or value, unless operator's or user's financial records
maintain cost or value and the records are made available for Customs
review;
(4) Beginning balance, cumulative receipts and removals,
adjustments, and current balance on hand by date and quantity;
(5) Destruction of merchandise; and
(6) Scrap, waste, and by-products.
(c) Physical inventory. The operator shall take at least an annual
physical inventory of all merchandise in the zone (unless continuous
cycle counts are taken as part of an ongoing inventory control program)
with prior notification of the date(s) given to Customs for any
supervision of the inventory deemed necessary. The operator shall notify
the port director of any discrepancies in accordance with Sec. 146.53.
[[Page 96]]
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Sec. 146.24 Transfer of merchandise from a zone.
(a) Accountability. (1) All zone status merchandise transferred from
a zone will be accurately recorded within the inventory control and
recordkeeping system.
(2) The inventory control and recordkeeping system for merchandise
transfers must have the capability to trace all transfers back to a zone
admission under a Customs authorized inventory method.
(b) Information. The inventory control and recordkeeping system must
be capable of providing all information necessary to make entry for
transfer of merchandise from the zone.
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Sec. 146.25 Annual reconciliation.
(a) Report. The operator shall prepare a reconciliation report
within 90 days after the end of the zone/subzone year unless the port
director authorizes an extension for reasonable cause. The operator
shall retain that annual reconciliation report for a spot check or audit
by Customs, and need not furnish it to Customs unless requested. There
is no form specified for the preparation of the report.
(b) Information required. The report must contain a description of
merchandise for each zone lot or unique identifer, zone status, quantity
on hand at the beginning of the year, cumulative receipts and transfers
(by unit), quantity on hand at the end of the year, and cumulative
positive and negative adjustments (by unit) made during the year.
(c) Certification. The operator shall submit to the port director
within 10 working days after the annual reconciliation report, a letter
signed by the operator certifying that the annual reconciliation has
been prepared, is available for Customs review, and is accurate. The
certification letter must contain the name and street address of the
operator, where the required records are available for Customs review;
and the name, title, and telephone number of the person having custody
of the records. Reporting of shortages and overages based on the annual
reconciliation will be made in accordance with Sec. 146.53. These
reports must accompany the certification letter.
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Sec. 146.26 System review.
The operator shall perform an annual internal review of the
inventory control and recordkeeping system and shall report to the port
director any deficiency discovered and corrective action taken, to
ensure that the system meets the requirements of this part.
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Subpart C--Admission of Merchandise to a Zone
Sec. 146.31 Admissibility of merchandise into a zone.
Merchandise of every description may be admitted into a zone unless
prohibited by law. A distinction is made between prohibited and
conditionally admissible merchandise.
(a) Prohibited merchandise. Port directors shall not admit
prohibited merchandise. If there is a question as to whether the
merchandise may be prohibited, port directors may permit the temporary
deposit of the merchandise in a zone pending a final determination of
its status. Any prohibited merchandise which is found within a zone will
be disposed of in the manner provided for in the laws and regulations
applicable to that merchandise.
(b) Conditionally admissible merchandise. The admission of this
merchandise into a zone is subject to the regulations of the Federal
agency concerned.
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Sec. 146.32 Application and permit for admission of merchandise.
(a) Application on Customs Form 214 and permit. Merchandise may be
admitted into a zone only upon application on a uniquely and
sequentially numbered Customs Form 214 (``Application for Foreign Trade
Zone Admission and/or Status Designation'') and the issuance of a permit
by the port director. Exceptions to the Customs Form 214 requirement are
for merchandise temporarily deposited (Sec. 146.33), transiting
merchandise (Sec. 146.34), or domestic merchandise admitted without
permit (Sec. 146.43). The applicant for admission shall present the
application to the port director and shall include a statistical copy on
Customs Form 214-A for
[[Page 97]]
transmittal to the Bureau of Census, unless the applicant has made
arrangements for the direct transmittal of statistical information to
that agency.
(b) Supporting documents--(1) Commercial documentation. The
applicant shall submit with the application two copies of an examination
invoice meeting the requirements of subpart F, part 141, of this
chapter, for any merchandise, other than that excepted in paragraph (a)
of this section, to be admitted to a zone. The notation of tariff
classification and value required by Sec. 141.90 of this chapter need
not be made, unless the merchandise is to be admitted in privileged
status.
(2) Evidence of right to make entry. The applicant for admission
shall submit with the application a document similar to that which would
be required as evidence of the right to make entry for merchandise in
Customs territory under Sec. 141.11 or Sec. 141.12 of this chapter.
(3) Release order. Merchandise will not be authorized for delivery
by Customs to a zone until a release order has been executed by the
carrier which brought the merchandise to the port, unless the
merchandise is released back to that same carrier for delivery to the
zone (see Sec. 141.11 of this chapter). When a release order is
required, it will be made on any of the forms specified in Sec. 141.111
of this chapter, or by the following statement attached to Customs Form
214:
Authority is hereby given to release the merchandise described in
this
application to__________________________________________________________
_______________________________________________________________________
Name of Carrier_________________________________________________________
_______________________________________________________________________
Signature and title of carrier
representative__________________________________________________________
_______________________________________________________________________
A blanket or qualified release order may be authorized for the
transfer of merchandise to a zone as provided for in Sec. 141.111 of
this chapter.
(4) Application to unlade. For merchandise unladen in the zone
directly from the importing carrier, the application on Customs Form 214
will be supported by an application to unlade on Customs Form 3171.
(5) Other documentation. The port director may require additional
information or documentation as needed to conduct an examination of
merchandise under Customs selective entry processing criteria, or to
determine whether the merchandise is admissible to the zone.
(c) Conditions for issuance of a permit. The port director will
issue a permit for admission of merchandise to a zone when:
(1) The application is properly executed and includes the zone
status desired for the merchandise, as provided in subpart D of this
part;
(2) The operator's approval appears either on the application or in
a separate specific or blanket approval;
(3) The merchandise is retained for examination at the place of
unlading, the zone, or other location designated by the port director,
except for merchandise for direct delivery to a zone under Secs. 146.39
and 146.40. The merchandise may be examined as if it were to be entered
for consumption or warehouse; and
(4) All requirements have been fulfilled.
(d) Blanket application for admission of merchandise. Merchandise
may be admitted to a zone under blanket application upon presentation of
a Customs Form 214 covering more than one shipment of merchandise. A
blanket application for admission is for:
(1) Shipments which arrive under one transportation entry as
described in Sec. 141.55 of this chapter, or
(2) Shipments which are destined to the same zone applicant on a
single business day, in which case the applicant shall:
(i) Present the examination invoices required by paragraph (b) of
this section to the port director before the merchadise is admitted into
the zone,
(ii) Have been approved for the direct transmittal of statistical
trade information to the Bureau of Census under an agreement with that
agency; and
(iii) Have examination invoices containing a unique identifier to
trace the shipment to the manifest of the carrier that brought the
merchandise to the port having jurisdiction over the zone, as well as to
the inventory control and recordkeeping system of the operator as
described in subpart B.
[[Page 98]]
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Sec. 146.33 Temporary deposit for manipulation.
Imported merchandise for which an entry has been made and which has
remained in continuous Customs custody may be brought temporarily to a
zone for manipulation and return to Customs territory under Customs
supervision, pursuant to section 562, Tariff Act of 1930, as amended (19
U.S.C. 1562), and Sec. 19.11 of this chapter. That merchandise will not
be considered within the purview of the Act but will be treated as
though remaining in Customs territory. No zone form or procedure will be
considered applicable, but the merchandise will remain subject to any
requirements necessary for the enforcement of section 562 and other
Customs laws while in the zone.
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Sec. 146.34 Merchandise transiting a zone.
The following procedure is applicable when merchandise is to be
unladen from any carrier in the zone for immediate transfer to Customs
territory, or if it is to be transferred from Customs territory through
the zone for immediate lading on any carrier in the zone:
(a) Application. Application for permission to lade or unlade will
be filed with the port director on Customs Form 3171 prior to transfer
of the merchandise into the zone.
(b) Permit. The port director shall permit the transfer unless he
has reason to believe that the merchandise will not be moved promptly
from the zone or will be made the subject of an application for
admission in accordance with Sec. 146.32(a).
(c) Treatment of merchandise. Upon the issuance of a permit to lade,
or unlade, the merchandise will be treated as though the lading or
unlading were in the Customs territory.
(d) Delay in zone transit. Merchandise delayed while transiting a
zone must be made the subject of an application for admission in
accordance with Sec. 146.32, or it must be removed from the zone.
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Sec. 146.35 Temporary deposit in a zone; incomplete documentation.
(a) General. Temporary deposit of merchandise in a zone is allowed
in circumstances where the information or documentation necessary to
complete the Customs Form 214 is not available at the time of arrival of
merchandise within the jurisdiction of the port. The merchandise will be
subject to examination as provided in Sec. 146.36.
(b) Application. An application for temporary deposit will be made
to the port director on a properly signed and uniquely numbered Customs
Form 214, annotated clearly ``Temporary Deposit in a Zone''.
(c) Conditions. Merchandise temporarily deposited under the
provisions of this section has no zone status and is considered to be in
the Customs territory. It will:
(1) Be physically segregated from all other zone merchandise;
(2) Be held under the bond and at the risk of the operator; and
(3) Be manipulated only to the extent necessary to obtain sufficient
information about the merchandise to file the appropriate admission or
entry documentation.
(d) Approval. The port director shall approve the application for
temporary deposit of merchandise in a zone if the provisions of
paragraphs (b) and (c) of this section are met.
(e) Submission of Customs Form 214. A complete and accurate Customs
Form 214 will be submitted, as provided in Sec. 146.32, within 5 working
days plus any extension granted by the port director, or the merchandise
shall be placed in general order.
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Sec. 146.36 Examination of merchandise.
Except for direct delivery procedures provided for in Sec. 146.39,
all merchandise covered by a Customs Form 214 may be retained for
Customs examination at the place of unlading, the zone, or another
location, as designated by the port director. The port director may
authorize release of the merchandise without examination, as provided in
Sec. 151.2 of this chapter. If a physical examination is conducted, the
Customs officer shall note the results of the examination on the
examination invoices.
[[Page 99]]
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Sec. 146.37 Operator admission responsibilities.
(a) Maintenance of admission documentation. The operator shall
maintain either:
(1) Lot file. The operator shall open and maintain a lot file
containing a copy of the Customs Form 214, the examination invoice, and
all other documentation necessary to account for the merchandise covered
by each Customs Form 214. The lot file will be maintained in sequential
order by using the unique number assigned to each Customs Form 214 as
the file reference number; or
(2) Authorized inventory method. Where a Customs authorized
inventory method other than a lot system (specific identification of
merchandise) is used, e.g., First-In-First-Out (FIFO), no lot file is
required but the operator shall maintain a file of all Customs Form's
214 in sequential order.
(b) Examination invoice. The operator shall give a copy of the
examination invoice to the person making entry to transfer the
merchandise from the zone upon request of that person or the port
director.
(c) Liability for merchandise. The operator will be held liable
under its bond for the receipt of merchandise admitted in the quantity
and condition as described on the Customs Form 214, except as modified
by a discrepancy report:
(1) Signed jointly by the operator and carrier on the Customs Form
214 or other approved form within 15 days after admission of the
merchandise, and reported to the port director within 2 working days
thereafter; or
(2) Submitted on Customs Form 5931 under the provisions of subpart
A, part 158, of this chapter within 20 days after admission of the
merchandise. The operator may file a Customs Form 5931 on behalf of the
person who applied for admission of merchandise to the zone.
(d) Supervision of merchandise. The port director may authorize the
receipt of zone status merchandise at a zone without physical
supervision by a Customs officer (see Sec. 146.3). In that case, the
operator shall supervise the receipt of merchandise into the zone,
report the receipt and condition of the merchandise, and mark packages
with the unique Customs Form 214 number so that the merchandise can be
traced to a particular Customs Form 214. Packages that are accounted for
under a Customs-authorized inventory method other than specific
identification, need not be marked with a unique Customs Form 214 number
but must be adequately identified so Customs can conduct an inventory
count. The operator shall submit the Custom Form 214 to Customs at the
location specified by the port director.
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Sec. 146.38 Certificate of arrival of merchandise.
Whenever a certificate prepared by Customs as to the arrival of any
merchandise in a zone is required by a Federal agency, the port director
shall issue the document certifying only that authorization to deliver
the merchandise to a zone has been made. The operator shall issue a
certificate of arrival of merchandise at a zone.
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Sec. 146.39 Direct delivery procedures.
(a) General. This procedure is for delivery of merchandise to a zone
without prior application and approval on Customs Form 214.
(b) Application. An operator, meeting the criteria of paragraph (c)
of this section, shall file a written application with the port director
at least 30 days before the special procedure is to become effective.
The application will describe the merchandise to be handled or
processed, and the kind of operation which it will undergo in the zone.
(c) Criteria. The port director shall approve the application if the
following criteria are met:
(1) The merchandise is not restricted or of a type which requires
Customs examination or documentation review before or upon its arrival
at the zone;
(2) The merchandise to be admitted to the zone, and the operations
to be conducted therein, are known well in advance, are predictable and
stable over the long term, and are relatively fixed in variety by the
nature of the business conducted at the site; and
(3) The operator is the owner or purchaser of the goods.
(d) Application decision. The port director shall promptly notify
the operator, in writing, of Customs decision on
[[Page 100]]
the application. If the application is denied, the port director shall
specify the reason for denial in his reply. The port director's decision
will constitute the final Customs administrative determination
concerning the application.
(e) Revocation of approval. The port director may revoke the
approval given under this section if it becomes necessary for Customs
routinely to examine the merchandise or documentation before or upon
admission to the zone.
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Sec. 146.40 Operator responsibilities for direct delivery.
(a) Arrival of conveyance. Upon arrival at a subzone or zone site of
a conveyance containing foreign merchandise, the operator shall:
(1) Collect in-bond or cartage documentation from the carrier;
(2) Check the condition of any seal affixed to the conveyance, and
if broken, missing or improperly affixed, notify the port director and
receive instructions before unloading the merchandise;
(3) Check each incoming in-bond and cartage shipment to determine if
the manifested quantity or the quantity on the cartage document agrees
with the quantity actually received;
(4) Sign and date the in-bond or cartage documentation to accept
responsibility for the merchandise under the Foreign Trade Zone
Operator's Bond and to relieve the carrier of responsibility.
(5) Forward the in-bond or cartage documentation so as to reach the
port director within 2 working days after the date of arrival of the
conveyance at the subzone or zone site;
(6) Maintain a file of open in-bond manifests in chronological order
of date of conveyance arrival to identify shipments that have arrived
but the entire contents of which have not been admitted to the subzone
or zone site; and
(7) Notify the port director, by annotation on the Customs Form 214,
when the entire contents of a shipment have been admitted.
(b) Transportation by operator. If merchandise is transported to a
subzone or zone site by the foreign trade zone operator from a location
in the district (see definition of ``district'' at Sec. 112.1) in which
the subzone or zone site is situated, the merchandise is deemed admitted
at the time the foreign trade zone operator picks it up. At the time of
pick-up, the operator is responsible for:
(1) Receipting for the merchandise and recording on the appropriate
document any discrepancies regarding quantity, condition or the status
of the seals;
(2) Transporting the merchandise to the zone or subzone; and
(3) Ensuring that the zone records reflect that the merchandise is
received in the zone.
(c) Admission of merchandise: alternative procedures--(1) Cumulative
Customs Form 214. If the operator has an agreement with the Bureau of
Census for direct transmittal of statistical information, he shall
submit to the port director each business day a properly signed and
uniquely numbered Customs Form 214 listing all merchandise except for
domestic status merchandise admitted under Sec. 146.43 recorded into the
inventory control and recordkeeping system during the previous business
day. The Customs Form 214 must contain a list of all in-bond (I.T.)
numbers or the unique number of any cartage document, as well as the
number of invoices for each I.T. or cartage document, pertaining to
merchandise which has been entered into the system.
(2) Individual Customs Form 214. If a cumulative Customs Form 214 is
not submitted as provided in paragraph (b)(1) of this section, the
operator shall file with the port director each business day an
individual Customs Form 214 and 214-A covering each shipment recorded
into the inventory control and recordkeeping system during the previous
business day. The forms shall be submitted within 10 days after the end
of the month in which the merchandise was received in the zone, and no
extension beyond that time will be approved by the port director.
(3) General order. Merchandise which is not admitted into a subzone
or zone site as provided in this section within 5 working days after its
arrival there may be sent to general order unless:
[[Page 101]]
(i) The port director grants the operator's request for an extension
of the 5 working day period; or
(ii) The importer of record files an appropriate Customs entry for
the mechandise and removes it from the zone premises.
(4) Inventory control and recordkeeping system. The operator shall
establish and maintain a continuing input quality control program to
ensure that information concerning merchandise in admission documents,
verified or corrected by counts and checks, is accurately recorded in
the inventory control and recordkeeping system. Quantities recorded in
the system, after allowance by the port director for any discrepancies,
will be the quantities of merchandise for which the operator shall be
held liable under its bond for admission to the subzone or zone site. A
discrepancy involving a within-case shortage (or overage) need not be
reported on Customs Form 5931, if the operator is able to report that
information in another manner so that the port director can determine
whether there is liability for the discrepancy under the bond of any
party to the importation.
[T.D. 86-16, 51 FR 5049, Feb. 11, 1986, as amended by T.D. 94-81, 59 FR
51497, Oct. 12, 1994; T.D. 95-77, 60 FR 50020, Sept. 27, 1995]
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Subpart D--Status of Merchandise in a Zone
Sec. 146.41 Privileged foreign status.
(a) General. Foreign merchandise which has not been manipulated or
manufactured so as to effect a change in tariff classification will be
given status as privileged foreign merchandise on proper application to
the port director.
(b) Application. Each application for this status will be made on
Customs Form 214 at the time of filing the application for admission of
the merchandise into a zone or at any time thereafter before the
merchandise has been manipulated or manufactured in the zone in a manner
which has effected a change in tariff classification.
(c) Supporting documentation. Each applicant for this status shall
submit to the port director, with the application, an invoice notated as
provided for in Sec. 141.90 of this chapter.
(d) Determination of duties and taxes. Upon receipt of the
application and accompanying invoice, the port director may examine the
merchandise to determine whether to approve the application. The
merchandise will be subject to classification and valuation as provided
in Sec. 146.65.
(e) Status as privileged foreign merchandise binding. A status as
privileged foreign merchandise cannot be abandoned and remains
applicable to the merchandise even if changed in form by manipulation or
manufacture, except in the case of recoverable waste (see
Sec. 146.42(b)), as long as the merchandise remains within the purview
of the Act. However, privileged foreign merchandise may be exported or
withdrawn for supplies, equipment, or repair material of vessels or
aircraft without the payment of taxes and duties, in accordance with
Secs. 146.67 and 146.69.
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Sec. 146.42 Nonprivileged foreign status.
All of the following will have the status of nonprivileged foreign
merchandise:
(a) Foreign merchandise. Foreign merchandise properly in a zone
which does not have the status of privileged foreign merchandise or of
zone-restricted merchandise;
(b) Waste. Waste recovered from any manipulation or manufacture of
privileged foreign merchandise in a zone; and
(c) Certain domestic merchandise. Domestic merchandise in a zone,
which by reason of noncompliance with the regulations in this part has
lost its identity as domestic merchandise, will be treated as foreign
merchandise. Any domestic merchandise will be considered to have lost
its identity if the port director determines that it cannot be
identified positively by a Customs officer as domestic merchandise on
the basis of an examination of the articles or consideration of any
proof that may be submitted promptly by a party-in-interest.
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Sec. 146.43 Domestic status.
(a) General. Domestic status may be granted to merchandise:
[[Page 102]]
(1) The growth, product, or manufacture of the U.S. on which all
internal-revenue taxes, if applicable, have been paid;
(2) Previously imported and on which duty and tax has been paid; or
(3) Previously entered free of duty and tax.
(b) Application. No application or permit is required for the
admission of domestic status merchandise, including domestic packing and
repair material, to a zone, except upon order of the Commissioner of
Customs. No application or permit is required for the manipulation,
manufacture, exhibition, destruction, or transfer to Customs territory
of domestic status merchandise, including packing and repair materials,
except: (1) When it is mixed or combined with merchandise in another
zone status, or (2) upon order of the Commissioner of Customs. When the
Commissioner orders a permit to be required for domestic status
merchandise, he may also order the procedures, forms, and terms under
which the permit will be received and processed.
(c) Return of merchandise of Customs territory. Upon compliance with
the provisions of this section, any of the merchandise specified in
paragraph (a) of this section, may subsequently be returned to Customs
territory free of quotas, duty, or tax.
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Sec. 146.44 Zone-restricted status.
(a) General. Merchandise taken into a zone for the sole purpose of
exportation, destruction (except destruction of distilled spirits,
wines, and fermented malt liquors), or storage will be given zone-
restricted status on proper application. That status may be requested at
any time the merchandise is located in a zone, but cannot be abandoned
once granted. Merchandise in zone-restricted status may not be removed
to Customs territory for domestic consumption except where the Board
determines the return to be in the public interest.
(b) Application. Application for zone-restricted status will be made
on Customs Form 214.
(c) Merchandise considered exported--(1) For Customs purposes. If
the applicant desires a zone-restricted status in order that the
merchandise may be considered exported for the purpose of any Customs
law, all pertinent Customs requirements relating to an actual
exportation shall be complied with as though the admission of the
merchandise into zone constituted a lading on an exporting carrier at a
port of final exit from the U.S. Any declaration or form required for
actual exportation will be modified to show the merchandise has been
deposited in a zone in lieu of actual exportation, and a copy of the
approved Customs Form 214 may be accepted in lieu of any proof of
shipment required in cases of actual exportation.
(2) For other purposes. If the merchandise is to be considered
exported for the purpose of any Federal law other than the Customs laws,
the port director shall be satisfied that all pertinent laws,
regulations, and rules administered by the Federal agency concerned have
been complied with before the Customs Form 214 is approved.
(d) Merchandise entered for warehousing transferred to a zone.
Merchandise entered for warehousing and transferred to a zone, other
than temporarily for manipulation and return to Customs territory as
provided for in Sec. 146.33, will have the status of zone-restricted
merchandise when admitted into the zone. The application on Customs Form
214 will state that zone-restricted status is desired for the
merchandise.
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Subpart E--Handling of Merchandise in a Zone
Sec. 146.51 Customs control of merchandise.
No merchandise, other than domestic status merchandise provided for
in Sec. 146.43, will be manipulated, manufactured, exhibited, destroyed,
or transferred from a zone in any manner or for any purpose, except
under Customs permit as provided for in this part. The port director may
require segregation of any zone status merchandise whenever necessary to
protect the revenue or properly administer U.S. laws or regulations.
[[Page 103]]
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Sec. 146.52 Manipulation, manufacture, exhibition or destruction;
Customs Form 216.
(a) Application. Prior to any action, the operator shall file with
the port director an application (or blanket application) on Customs
Form 216 for permission to manipulate, manufacture, exhibit, or destroy
merchandise in a zone. After Customs approves the application (or
blanket application), the operator will retain in his recordkeeping
system the approved application.
(b) Approval. (1) The port director shall approve the application
unless (i) the proposed operation would be in violation of law or
regulation; (ii) the place designated for its performance is not
suitable for preventing confusion of the identity or status of the
merchandise, or for safeguarding the revenue; (iii) the port director is
not satisfied that the destruction will be effective; or (iv) the
Executive Secretary of the Board has not granted approval of a new
manufacturing operation.
(2) The port director is authorized to approve a blanket application
for a period of up to one year for a continuous or repetitive operation.
The port director may disapprove or revoke approval of any application,
or may require the operator to file an individual application.
(c) Appeal of adverse ruling. If an approved application is
subsequently rescinded by the port director for any reason, the
applicant or grantee may appeal the adverse ruling pursuant to the
hearing provisions of Sec. 146.82(b)(2). The rescission shall remain in
effect pending the decision on the appeal.
(d) Report results--(1) Separate application. The operator shall
report on Customs Form 216 the results of an approved manipulation,
manufacture, exhibition, or certification of destruction (other than by
a blanket application), unless the port director chooses physically to
supervise the operation.
(2) Blanket application. The operator shall maintain a record of an
approved manipulation, manufacture, exhibition, or certification of
destruction, in its inventory control and recordkeeping system so as to
provide an accounting and audit trail of the merchandise through the
approved operation.
(e) Destruction. The port director may permit destruction to be done
outside the zone, in whole or in part and at the risk and expense of the
applicant, and under such conditions as are necessary to protect the
revenue, if proper destruction cannot be accomplished within the zone.
Any residue from the destruction within a zone, which is determined to
be without commercial value, may be removed to Customs territory for
disposal.
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Sec. 146.53 Shortages and overages.
(a) Report required. The operator shall report, in writing, to the
port director upon identification, as such, of any:
(1) Theft or suspected theft of merchandise;
(2) Merchandise not properly admitted to the zone; or
(3) Shortage of one percent (1%) or more of the quantity of
merchandise in a lot or covered by a unique identifier, if the missing
merchandise would have been subject to duties and taxes of $100 or more
upon entry into the Customs territory. The operator shall record upon
identification all shortages and overages, whether or not they are
required to be reported to the port director at that time, in its
inventory control and recordkeeping system. The operator shall record
all shortages and overages as required in the annual reconciliation
report under Sec. 146.25.
(b) Certain domestic merchandise. Except in a case of theft or
suspected theft, the operator need not file a report with the port
director, or note in the annual reconciliation report, any shortage or
overage concerning domestic status merchandise for which no permit is
required.
(c) Shortage--(1) Operator responsibility. The operator is
responsible under its Foreign Trade Zone Operator's Bond for any loss of
merchandise or for any merchandise which cannot be located or otherwise
accounted for (except domestic status merchandise for which no permit is
required), unless the port director is satisfied that the merchandise
was:
(i) Never received in the zone;
(ii) Removed from the zone under proper permit;
[[Page 104]]
(iii) Not removed from the zone; or
(iv) Lost or destroyed in the zone through fire or other casualty,
evaporation, spillage, leakage, absorption, or similar cause, and did
not enter the commerce of the U.S.
(2) Liability for duty and taxes. Upon demand of the port director,
the operator shall make entry for and pay duties and taxes applicable to
merchandise which is missing or otherwise not accounted for.
(d) Overage. The person with the right to make entry shall file,
within 5 days after identification of an overage, an application for
admission of the merchandise to the zone on Customs Form 214 or file a
Customs entry for the merchandise. If a Customs Form 214 or a Customs
entry is not timely filed, and the port director has not granted an
extension of the time provided, the merchandise shall be sent to general
order.
(e) Damage. The liability of the operator under its Foreign Trade
Zone Operator's Bond may be adjusted for the loss of value resulting
from damage to merchandise occurring in the zone. The operator shall
segregate, mark, and otherwise secure damaged merchandise to preserve
its identity as damaged merchandise.
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Subpart F--Transfer of Merchandise From a Zone
Sec. 146.61 Constructive transfer to Customs territory.
The port director shall accept receipt of any entry in proper form
provided under this subpart, and the merchandise described therein will
be considered to have been constructively transferred to Customs
territory at that time, even though the merchandise remains physically
in the zone. If the entry is thereafter rejected or cancelled, the
merchandise will be considered at that time to be constructively
transferred back into the zone in its previous zone status.
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Sec. 146.62 Entry.
(a) General. Entry for foreign merchandise which is to be
transferred from a zone, or removed from a zone for exportation or
transportation to another port, for consumption or warehouse, will be
made on Customs Form 7512, Customs Form 3461, Customs Form 7501, or
other applicable Customs forms. If entry is made on Customs Form 3461,
the person making entry shall file an entry summary for all the
merchandise covered by the Customs Form 3461 within 10 working days
after the time of entry.
(b) Documentation. (1) Customs Form 7501 or the entry summary will
be accompanied by the entry documentation, including invoices as
provided in parts 141 and 142 of this chapter. The person with the right
to make entry shall submit any other supporting documents required by
law or regulations that relate to the transferred merchandise and
provide the information necessary to support the admissibility, the
declared values, quantity, and classification of the merchandise. If the
declared values are predicated on estimates or estimated costs, that
information must be clearly stated in writing at the time an entry or
entry summary is filed.
(2) Customs Form 7512 for merchandise to be transferred to another
port or zone or for exportation shall state that the merchandise covered
is foreign trade zone merchandise; give the number of the zone from
which the merchandise was transferred; state the status of the
merchandise; and, if applicable, bear the notation or endorsement
provided for in Sec. 146.64(c), Sec. 146.66(b), or Sec. 146.70(c).
(c) Waiver of supporting documents. The port director may waive
presentation of an invoice and supporting documentation required in
paragraph (b) of this section with the entry or entry summary, if
satisfied that presentation of those documents would be impractical, and
the person making entry or the operator either files invoices and
supporting documentation with the port director or maintains and makes
those records available for examination by Customs.
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Sec. 146.63 Entry for consumption.
(a) Foreign merchandise. Merchandise in foreign status or composed
in part of merchandise in foreign status may be entered for consumption
from a zone.
(b) Zone-restricted merchandise. Merchandise in a zone-restricted
status
[[Page 105]]
may be entered for consumption only when the Board has ruled that
merchandise can be entered for consumption.
(c) Estimated production--(1) Weekly entry. When merchandise is
manufactured or otherwise changed in a zone (exclusive of packing) to
its physical condition as entered within 24 hours before physical
transfer from the zone for consumption, the port director may allow the
person making entry to file an entry on Customs Form 3461 for the
estimated removals of merchandise during the calendar week. The Customs
Form 3461 must be accompanied by a pro forma invoice or schedule showing
the number of units of each type of merchandise to be removed during the
week and their zone and dutiable values. Merchandise covered by an entry
made under the provisions of this section will be considered to be
entered and may be removed only when the port director has accepted the
entry on Customs Form 3461. If the actual removals will exceed the
estimate for the week, the person making entry shall file an additional
Customs Form 3461 to cover the additional units before their removal
from the zone. Notwithstanding that a weekly entry may be allowed, all
merchandise will be dutiable as provided in Sec. 146.65. When estimated
removals exceed actual removals, that excess merchandise will not be
considered to have been entered or constructively transferred to the
Customs territory.
(2) Individual transfers. After acceptance of the weekly entry,
individual transfers of merchandise covered by the entry may be made
from the zone.
(d) Textiles and textile products. Subject to the existing statutory
authority of the Board, textiles and textile products admitted into a
zone, regardless of whether the merchandise has privileged or
nonprivileged foreign status, which would have been subject to quota or
visa or export license requirements in their condition at the time of
importation (if entered for consumption rather than admitted to a zone),
may not be subsequently transferred into Customs territory for
consumption if, during the time the merchandise is in the zone, there
has been a change by manipulation, manufacture, or other means:
(1) In the country of origin of the merchandise as defined by
Sec. 12.130 of this chapter;
(2) To exempt from quota or visa or export license requirements
other than a change brought about by statute, treaty, executive order or
Presidential proclamation; or
(3) From one textile category to another textile category.
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Sec. 146.64 Entry for warehouse.
(a) Foreign merchandise. Merchandise in privileged foreign status or
composed in part of merchandise in privileged foreign status may not be
entered for warehouse from a zone. Merchandise in nonprivileged foreign
status containing no components in privileged foreign status may be
entered for warehouse in the same or at a different port.
(b) Zone-restricted merchandise. Foreign merchandise in zone-
restricted status may be entered for warehouse in the same or at a
different port only for storage pending exportation, unless the Board
has approved another disposition.
(c) Textiles and textile products. Textiles and textile products
which have been changed as provided for in Sec. 146.63(d) may be entered
for warehouse only if the entry is endorsed by the port director to show
that the merchandise may not be withdrawn for consumption.
(d) Time limit. Merchandise may neither be placed nor remain in a
Customs bonded warehouse after 5 years from the date of importation of
the merchandise.
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Sec. 146.65 Classification, valuation, and liquidation.
(a) Classification--(1) Privileged foreign merchandise. Privileged
foreign merchandise provided for in this section will be subject to
tariff classification according to its character, condition and
quantity, at the rate of duty and tax in force on the date of filing, in
complete and proper form, the application for privileged status.
Classification of merchandise subject to a tariff-rate import quota will
be made only at
[[Page 106]]
the higher non-quota duty rate in effect on the date privileged foreign
status was granted. Notwithstanding the grant of privileged status,
Customs may correct any misclassification of any such entered
merchandise when it posts the bulletin notice of liquidation under
Sec. 159.9 of this chapter.
(2) Nonprivileged foreign merchandise. Nonprivileged foreign
merchandise provided for in this section will be subject to tariff
classification in accordance with its character, condition and quantity
as constructively transferred to Customs territory at the time the entry
or entry summary is filed with Customs.
(b) Valuation--(1) Total zone value. The total zone value of
merchandise provided for in this section will be determined in
accordance with the principles of valuation contained in sections 402
and 500 of the Tariff Act of 1930, as amended by the Trade Agreements
Act of 1979 (19 U.S.C. 1401a, 1500). The total zone value shall be that
price actually paid or payable to the zone seller in the transaction
that caused the merchandise to be transferred from the zone. Where there
is no price paid or payable, the total zone value shall be the cost of
all materials and zone processing costs related to the merchandise
transferred from the zone.
(2) Dutiable value. The dutiable value of merchandise provided for
in this section shall be the price actually paid or payable for the
merchandise in the transaction that caused the merchandise to be
admitted into the zone, plus the statutory additions contained in
section 402(b)(1) of the Tariff Act of 1930, as amended by the Trade
Agreements Act of 1979 (19 U.S.C. 1401a(b)(1)), less, if included,
international shipment and insurance costs and U.S. inland freight
costs. If there is no such price actually paid or payable, or no
reasonable representation of that cost or of the statutory additions,
the dutiable value may be determined by excluding from the zone value
any included zone costs of processing or fabrication, general expenses
and profit and the international shipment and insurance costs and U.S.
inland freight costs related to the merchandise transferred from the
zone. The dutiable value of recoverable waste or scrap provided for in
Sec. 146.42(b) will be the price actually paid or payable to the zone
seller in the transaction that caused the recoverable waste or scrap to
be transferred from the zone.
(3) Allowance. An allowance in the dutiable value of zone
merchandise may be made by the port director in accordance with the
provisions of subparts B and C of part 158 of this chapter, for damage,
deterioration, or casualty while the merchandise is in the zone.
(c) Liquidation; extension to update cost data. When the declared
value or values of the merchandise are based on an estimate or
estimates, the person making entry may request an extension of
liquidation pending the presentation of updated or actual cost data. A
request for an extension may be granted at the discretion of the port
director.
[T.D. 86-16, 51 FR 5049, Feb. 11, 1986, as amended by T.D. 91-79, 56 FR
46372, Sept. 12, 1991; T.D. 95-35, 60 FR 20632, Apr. 27, 1995]
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Sec. 146.66 Transfer of merchandise from one zone to another.
(a) At the same port. A transfer of merchandise to another zone with
a different operator at the same port (including a consolidated port)
will be by a licensed cartman or a bonded carrier as provided for in
Sec. 112.2(b) of this chapter or by the operator of the zone for which
the merchandise is destined under an entry for immediate transportation
on Customs Form 7512 or other appropriate form with a Customs Form 214
filed at the destination zone. A transfer of merchandise between zone
sites at the same port having the same operator may be made under a
permit on CF 6043 or under a local control system approved by the port
director wherein any loss of merchandise between sites will be treated
as if the loss occurred in the zone.
(b) At a different port. A transfer of merchandise from a zone at
one port of entry to a zone at another port will be by bonded carrier
under an entry for immediate transportation on Customs Form 7512. All
copies of the entry must bear a notation that the merchandise is being
transferred to another zone designated by its number.
(c) Forwarding of merchandise history; documentation. When
merchandise is
[[Page 107]]
transferred under the provisions of this section, the operator of the
transferring zone shall provide the operator of the destination zone
with the documented history of the merchandise being transferred.
(1) The following documentation must accompany merchandise
maintained under a lot inventory control system:
(i) A copy of the original Customs Form(s) 214 with accompanying
invoices for admission of the merchandise and all components thereof;
(ii) A copy of any Customs Form 214 filed subsequent to admission to
change the status of the merchandise or its components; and
(iii) A copy of any Customs Form 216 to manipulate or manufacture
the merchandise.
(2) The following documentation must accompany merchandise not under
a lot system, and not manufactured in a zone:
(i) A copy of the original Customs Form(s) 214 with accompanying
invoices for admission of the merchandise as attributed under the
particular zone inventory method;
(ii) A copy of any Customs Form 214 filed subsequent to admission to
change the status of the merchandise as attributed under the particular
zone inventory method; and
(iii) A copy of any Customs Form 216 to manipulate the merchandise
as attributed under the particular zone inventory method.
(3) If the documents specified in paragraph (c)(2) of this section
are not presented, the operator of the transferring zone shall submit
the following:
(i) A statement of the zone value, dutiable value, quantity,
description, unique identifier, and zone status (showing any changes of
status after admission and whether the merchandise was manipulated so as
to change its tariff classification) of all the merchandise in the
shipment covered by the transportation entry; and
(ii) A certification that the statement in paragraph (c)(3)(i) of
this section, is true and that the information contained therein is
contained in the inventory control and recordkeeping system of the
transferring zone.
(4) The following documentation must accompany merchandise not under
a lot system, but manufactured in a zone:
(i) A statement by the transferring zone operator of the zone value,
dutiable value, quantity, description, unique identifier, and zone
status of all the merchandise (and components thereof, where applicable)
covered by the transportation entry. The statement will also show any
change in zone status in the transferring zone and whether the
merchandise has been manufactured or manipulated in the zone so as to
change its tariff classification; and
(ii) A certification by the operator of the transferring zone that
the statement in paragraph (c)(4)(i) of this section is true and the
information therein is contained in the inventory control and
recordkeeping system of the zone.
(5) The operator of the transferring zone shall transmit the
historical documentation of the merchandise to the receiving zone within
10 working days after it has been delivered to the bonded carrier for
transportation. The documentation will be referenced to the I.T. number
covering the merchandise.
(d) Arrival at destination zone. Upon arrival of the merchandise at
the destination zone, it will be admitted under the procedure provided
for in Sec. 146.32, except that no invoice or Customs examination will
be required. When the historical documentation is received, the operator
of the destination zone shall associate it with the Customs Form 214 for
admission of the merchandise and incorporate that information into the
zone inventory control and recordkeeping system.
[T.D. 86-16, 51 FR 5049, Feb. 11, 1986, as amended by T.D. 94-81, 59 FR
51497, Oct. 12, 1994]
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Sec. 146.67 Transfer of merchandise for exportation.
(a) Direct exportation. Any merchandise in a zone may be exported
directly therefrom (without transfer into Customs territory) upon
compliance with the procedures of paragraph (b) of this section.
(b) Immediate exportation. Each transfer of merchandise to the
Customs territory for exportation at the port
[[Page 108]]
where the zone is located, will be made under an entry for immediate
exportation on Customs Form 7512. The person making entry shall furnish
an export bond on Customs Form 301 containing the bond conditions
provided for in Sec. 113.62 of this chapter.
(c) Transportation and exportation. Each transfer of merchandise to
the Customs territory for transportation to and exportation from a
different port, will be made under an entry for transportation and
exportation on Customs Form 7512. The bonded carrier will be responsible
for exportation of the merchandise in accordance with Sec. 18.26 of this
chapter.
(d) Textiles and textile products. Textiles and textile products
which have been changed as provided for in Sec. 146.63(d) may be
exported and returned to Customs territory for warehousing provided the
entry for warehouse is endorsed by the port director to show that the
merchandise may not be withdrawn for consumption.
(e) Merchandise produced or manufactured in a zone and returned to
Customs territory after exportation. Merchandise produced or
manufactured in a zone and exported without having been transferred to
Customs territory other than for exportation or for transportation and
exportation will be subject, on its return to Customs territory, to the
duties and taxes applicable to like articles of wholly foreign origin,
unless it is conclusively established that it was produced or
manufactured exclusively with the use of domestic merchandise. The
identity of the domestic merchandise must have been maintained in
accordance with the provisions of this part, in which case that
merchandise will be subject to the provisions of Chapter 98, Subchapter
I, Harmonized Tariff Schedule of the United States (19 U.S.C. 1202).
[T.D. 86-16, 51 FR 5049, Feb. 11, 1986, as amended by T.D. 89-1, 53 FR
51263, Dec. 21, 1988
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Sec. 146.68 Transfer for transportation or exportation; estimated
production.
(a) Weekly permit. The port director may allow the person making
entry for merchandise provided for in Sec. 146.63(c) to file an
application for a weekly permit to enter and release merchandise during
a calendar week for exportation, transportation, or transportation and
exportation. The application will be on Customs Form 7512 stating at the
top the words ``Application for Weekly Zone Permit,'' and will be filed
with the port director. The application must be accompanied by a pro
forma invoice or schedule like that required in Sec. 146.63(c)(1). If
actual transfers will exceed the estimate for the week, the person with
the right to make entry shall file a supplemental Customs Form 7512 to
cover the additional merchandise to be transferred from the subzone or
zone site. No merchandise covered by the weekly permit may be
transferred from the zone before approval of the application by the port
director.
(b) Individual entries. After approval of the application for a
weekly permit by the port director, the person making entry will be
authorized to execute individual Customs Forms 7512 for exportation,
transportation, or transportation and exportation of the merchandise
covered by permit. Upon transfer of the merchandise, the operator shall
obtain a receipt from the carrier on Customs Form 7512 to ensure its
assumption of liability under the carrier's or cartman's bond. Customs
will consider the time of entry to be when the removing carrier signs
the receipt for the merchandise. The operator shall give the bonded
carrier a copy of the individual Customs Form 7512 and the destination
copy (Customs Form 7512-C), as provided for in Sec. 18.2(c) of this
chapter. The operator also shall ensure that the port director receives
a copy of the Customs Form 7512 and the origin copy (Customs Form 7512-
C) by the end of the next working day after the carrier has receipted
for the merchandise.
(c) Statement of merchandise entered. The person making entry for
merchandise under an approved weekly permit shall file with the port
director, by the close of business on the second working day of the week
following the week designated on the permit, a statement of the
merchandise entered under that permit. The statement must list each
Customs Form 7512 by its unique I.T.
[[Page 109]]
number, and will provide a reconciliation of the quantities on the
weekly permit with the manifested quantities on the individual Customs
Forms 7512 submitted to Customs, as well as an explanation of any
discrepancy.
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Sec. 146.69 Supplies, equipment, and repair material for vessels or
aircraft.
(a) General. Any merchandise which may be withdrawn duty and tax
free in Customs territory under section 309 or 317, Tariff Act of 1930,
as amended (19 U.S.C. 1309, 1317), and under Secs. 10.59 through 10.65
of this chapter, may similarly be transferred from a zone, regardless of
its zone status, under those statutes and regulations. Each transfer
from a zone for delivery to a qualified vessel or aircraft, will be made
on Customs Form 5512 (see Sec. 10.60 of this chapter). The person making
entry shall furnish a bond on Customs Form 301 containing the bond
conditions provided for in Sec. 113.62 of this chapter.
(b) Merchandise for delivery within zone. Upon acceptance of the
entry and bond, the port director shall release the merchandise to the
operator for delivery to the qualified vessel or aircraft for lading in
the zone.
(c) Merchandise for delivery outside zone. Upon acceptance of the
entry and bond, the port director shall release the merchandise to the
operator for delivery to the bonded cartmen, lighterman, or carrier, for
transportation through the Customs territory to the qualified lading
vessel or aircraft.
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Sec. 146.70 Transfer of zone-restricted merchandise into Customs
territory.
(a) General. Zone-restricted merchandise may be transferred to
Customs territory only for entry for exportation, for entry for
transportation and exportation, for warehousing pending exportation, for
destruction (except destruction of distilled spirits, wines and
fermented malt liquors), for transfer from one zone to another, or for
delivery to a qualified vessel or aircraft or as ground equipment of a
qualified aircraft under section 309 or 317, Tariff Act of 1930, as
amended (19 U.S.C. 1309, 1317), unless the Board has ruled that the
return of the merchandise to Customs territory for domestic consumption
is in the public interest. With Board approval (See 15 CFR part 400),
that merchandise may be entered for consumption, for warehousing, for
immediate transportation without appraisement, or under any other
provision of the Customs laws, unless the Board has specified the form
of entry to be made.
(b) For consumption. If the return of zone-restricted merchandise to
Customs territory for consumption has been ruled by the Board to be in
the public interest, the entry shall be endorsed by the port director to
show the authority under which it was made, and that the merchandise is
subject to the provisions of Chapter 98, Subchapter I, Harmonized Tariff
Schedule of the United States (19 U.S.C. 1202).
(c) For warehousing. Zone-restricted merchandise may be transferred
from a zone to a Customs bonded warehouse for storage pending
exportation. The Customs Form 7501 shall be endorsed by the port
director to show that the merchandise may not be withdrawn for
consumption. In the case of zone-restricted merchandise transported in
bond to another port for warehousing and exportation, Customs Form 7512
shall be endorsed by the port director to show that the merchandise is
foreign trade zone merchandise in zone-restricted status, which shall be
entered for warehouse with proper endorsement on Customs Form 7501, and
which may not be withdrawn for consumption. Zone-restricted merchandise
transferred from a zone to a Customs bonded warehouse may not be
manipulated, except for packing or unpacking incidental to exportation.
(d) For other purposes. Upon acceptance of an entry or withdrawal
for zone-restricted merchandise for any purpose other than that
described in a Board order, the entry shall be endorsed by the person
making entry to show that actual exportation of the merchandise is
required by the fourth proviso to section 3 of the Act, as amended, or
the entry endorsed to require delivery to a qualified vessel or
aircraft, under section 309 or 317, Tariff
[[Page 110]]
Act of 1930, as amended (19 U.S.C. 1309, 1317).
[T.D. 86-16, 51 FR 5049, Feb. 11, 1986, as amended by T.D. 89-1, 53 FR
51263, Dec. 21, 1988]
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Sec. 146.71 Release and removal of merchandise from zone.
(a) General. Except as provided for in Sec. 146.43, no merchandise
will be transferred from a zone without a Customs permit on the
appropriate entry or withdrawal form or other document as required in
this part. This port director may authorize transfer from a zone without
physical supervision or examination by a Customs officer. Upon issuance
of a permit, the port director will authorize delivery of the
merchandise only to the operator, who then may release the merchandise
to the importer or carrier.
(b) Liability for discrepancy. When a transfer is not physically
supervised by a Customs officer, the operator will be relieved of
responsibility only for the merchandise in a zone in the condition and
quantity as shown on the entry, withdrawal, or other appropriate form.
The operator will be relieved of responsibility only if it receives the
signed receipt on the document of the importer or the carrier named in
that document. The responsibility of the operator may be adjusted by any
discrepancy report made jointly by the operator and the bonded cartman,
lighterman, or carrier, or the importer, and signed by the above or an
authorized representative within 15 days after transfer of the
merchandise from the zone. Any adjustment must be noted on the permit
copy of the entry, withdrawal, or other appropriate form or document. A
copy of any joint report of discrepancy must be submitted to the port
director within 10 working days of signing by the parties.
(c) Time limit. Except in the case of articles for use in a zone,
merchandise for which a Customs permit for transfer to Customs territory
has been issued must be physically removed from the zone within 5
working days of issuance of that permit. The port director, upon request
of the operator, may extend that period for good cause. Merchandise
awaiting removal within the required time limit will not be further
manipulated or manufactured in the zone, but will be segregated or
otherwise identified by the operator as merchandise that has been
constructively transferred to Customs territory.
(d) Retention or return of merchandise to zone for consumption. (1)
The port director shall cancel any entry for consumption where: (i) The
merchandise is not removed from the zone within the period specified in
paragraph (c) of this section, or (ii) the merchandise was removed from
the zone but did not enter the commerce of the U.S. in Customs territory
and was subsequently readmitted to a zone in domestic status. If the
port director has reason to believe any new entry would be cancelled
under the provisions of this paragraph, he may reject the entry or
demand a written stipulation, as a condition of entry acceptance, that
the merchandise will not be returned to a zone in domestic status.
Merchandise covered by an entry which has been cancelled under this
paragraph shall be restored to its last foreign status.
(2) A component of merchandise which has been entered, but not
physically removed from a zone, shall be restored to its last zone
status, provided the port director determines that the component was
included in the entry through clerical error, mistake of fact, or other
inadvertence not amounting to an error in the construction of the law.
Such an error, including that in appraisement of any entry or
liquidation due to the above circumstances, may be corrected pursuant to
section 520(c)(1), Tariff Act of 1930, as amended (19 U.S.C.
1520(c)(1)), in accordance with the procedures described in part 173 of
this chapter. If the port director decides there has been no error,
mistake, or inadvertence, or that the information was not timely
provided, the component will be considered as an overage and subject to
the provisions of Sec. 146.53(d).
(3) When merchandise which has been entered for consumption is
subsequently returned to a zone for a reason other than that specified
in paragraph (d)(1) of this section, it shall be admitted in domestic
status.
[T.D. 86-16, 51 FR 5049, Feb. 11, 1986; 51 FR 11012, Apr. 1, 1986]
[[Page 111]]
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Subpart G--Penalties; Suspension; Revocation
Sec. 146.81 Penalties.
(a) Amount. Upon violation of the Act, or any regulation issued
under the Act, by the grantee, or any officer, agent, operator or
employee thereof, the person responsible for or permitting the violation
shall be subject to a fine of not more than $1,000. Each day during
which a violation continues will constitute a separate offense.
Liquidated damages, where applicable, will be imposed in addition to the
fine (19 U.S.C. 81s).
(b) Review. All fines assessed by the port director under this
section will be reviewed by the Director, International Trade Compliance
Division, Headquarters, to determine whether further action against the
grantee or operator, such as suspension or a recommendation for
revocation of the grant, is warranted.
[T.D. 86-16, 51 FR 5049, Feb. 11, 1986, as amended by T.D. 91-77, 56 FR
46115, Sept. 10, 1991]
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Sec. 146.82 Suspension.
(a) For cause. The port director may suspend for cause the activated
status of a zone or zone site, or the privilege to admit, manufacture,
manipulate, exhibit, destroy, transfer or remove merchandise at a zone
or zone site for a period not to exceed 90 days. Upon order of the Board
the suspension may be continued. If appropriate, the suspension may be
limited to an individual user or users and not to the zone or zone site
as a whole, or may be limited to a particular activity of an operator or
user, such as suspension of the privilege to admit merchandise or the
privilege to manufacture. An action to suspend will be taken in
accordance with the procedure in paragraph (b) of this section if:
(1) The approval of the application to activate the zone was
obtained through fraud or the misstatement of a material fact;
(2) The operator neglects or refuses to obey any proper order of a
Customs officer or any Customs order, rule, or regulation relating to
the operation or administration of a zone;
(3) The operator, or any officer of a corporation which has been
granted the right to operate a zone, is convicted of or has commited
acts which would constitute a felony, or misdemeanor involving theft,
smuggling, or a theft-connected crime. Any change in the employment
status of the corporate officer (e.g., discharge, resignation, demotion,
or promotion) prior to conviction of a felony or prior to conviction of
a misdemeanor involving theft, smuggling, or a theft-connected crime,
resulting from acts committed while a corporate officer, will not
preclude application of this provision;
(4) The operator fails to furnish a current list of names,
addresses, or other information as required by Sec. 146.7;
(5) The operator does not provide a secure facility or properly
safeguard merchandise within a zone;
(6) [Reserved]
(7) The operator, or any officer, agent, or employee of the
operator, discloses to an unauthorized person proprietary information
contained on a Customs form or in the inventory control and
recordkeeping system; or
(8) The inventory control and recordkeeping system is impaired to
the point where the identity of merchandise in zone status has been lost
and cannot be reestablished without a suspension of zone operations.
(b) Procedure--(1) Notice. The port director may, at any time, serve
notice, in writing, upon an operator to show cause why its right to
continue operation of a zone should not be suspended or why an
individual user or activities of an individual user should not be
suspended, as provided for in paragraph (a) of this section. The notice
will advise the operator of the grounds for the proposed action and will
afford the operator an opportunity to respond, in writing, within 15
days after receipt of the notice. Thereafter, the port director shall
consider the allegations and any response made by the operator and issue
a decision, unless the operator requests a hearing in the matter.
(2) Hearing. If the operator requests a hearing, it will be held
before a hearing officer designated by the Commissioner of Customs or
his designee within 30 days following the operator's request. The
operator may be represented by
[[Page 112]]
counsel at the hearing, and any evidence and testimony of witnesses in
the proceeding, including substantiation of the allegations and the
response thereto, will be presented. The right of cross-examination will
be available to both parties. A stenographic record of the proceeding
will be made and a copy will be delivered to the operator. At the
conclusion of the hearing, the hearing officer shall transmit promptly
all papers and the stenographic record of the hearing to the Assistant
Commissioner, Office of Field Operations, or designee, together with a
recommendation for final action.
(3) Decision of Assistant Commissioner. Within 10 calendar days
after delivery to the operator of a copy of the stenographic record of
the hearing, the operator may submit to the Assistant Commissioner,
Office of Field Operations, or designee, in writing any additional views
or arguments. The Assistant Commissioner, Office of Field Operations, or
designee, shall then render a written decision stating his reasons
therefor. That decision will be served on the operator and will be
considered the final Customs administrative action in the case.
(4) Grantee. If the grantee of the zone is not the operator, a copy
of the notice to show cause will be served upon the grantee. The
grantee, as a party-in-interest, may join the operator in any
proceedings under this section.
[T.D. 86-16, 51 FR 5049, Feb. 11, 1986, as amended by T.D. 88-63, 53 FR
40220, Oct. 14, 1988; T.D. 95-99, 60 FR 62733, Dec. 7, 1995]
Return to Top
Sec. 146.83 Revocation of zone grant.
(a) Recommendation of port director. The port director may at any
time recommend to the Board that the privilege of establishing,
operating, and maintaining a zone or subzone under Customs jurisdiction
be revoked for willful and repeated violations of the Act (19 U.S.C.
81r). If the port director believes that a substantial question of law
exists as to whether willful and repeated violations of the Act have
occurred, that officer may request internal advice under the provisions
of part 177 of this chapter from the Director, Tariff Classification
Appeals Division, Headquarters. A recommendation to the Board that a
zone or subzone grant be revoked does not preclude, and may be in
addition to, any liquidated damages, penalty, or suspension for cause.
(b) Decision of the Board. The procedure for revocation of a grant,
the decision of the Board, and appeal is covered by the provisions of
the Act and title 15, chapter IV, part 400, Code of Federal Regulations.
[T.D. 86-16, 51 FR 5049, Feb. 11, 1986, as amended by T.D. 91-77, 56 FR
46115, Sept. 10, 1991]
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Subpart H--Petroleum Refineries in Foreign-Trade Subzones
Source: T.D. 95-35, 60 FR 20632, Apr. 27, 1995, unless otherwise
noted.
Sec. 146.91 Applicability.
This subpart applies only to a petroleum refinery (as defined
herein) engaged in refining petroleum in a foreign-trade zone or
subzone. Further, the provisions relating to zones generally, which are
set forth elsewhere in this part, including documentation and document
retention requirements, and entry procedures, such as weekly entry,
shall apply as well to a refinery subzone, insofar as applicable to and
not inconsistent with the specific provisions of this subpart. It does
not cover zone-to-zone transfers in which the fact of removal from one
zone is ignored.
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Sec. 146.92 Definitions.
(a) Attribution. ``Attribution'' means the association of a final
product with its source material.
(b) Feedstocks. ``Feedstocks'' means crude petroleum or intermediate
product that is used in a petroleum refinery to make a final product.
(c) Feedstock factor. ``Feedstock factor'' means the relative value
of final products utilizing T.D. 66-16 (see Sec. 146.92(h)), and which
takes into account any volumetric loss or gain.
(d) Final product. ``Final product'' means any petroleum product
that is produced in a refinery subzone and thereafter removed therefrom
or consumed within the zone.
(e) Manufacturing period. ``Manufacturing period'' means a period
selected by the refiner which must be no more than a calendar month
basis, for which
[[Page 113]]
attribution to a source feedstock must be made for every final product
made, consumed in, or removed from the refinery subzone.
(f) Petroleum refinery. ``Petroleum refinery'' means a facility that
refines a feedstock listed on the top line of the tables set forth in
T.D. 66-16 into a product listed in the left column of the tables set
forth in T.D. 66-16.
(g) Price of product. ``Price of product'' means the average per
unit market value of each final product for a given manufacturing period
or the published standard product value if updated each month.
(h) Producibility. ``Producibility'' is a method of attributing
products to feedstocks for petroleum manufacturing in accordance with
the Industry Standards of Potential Production set forth in T.D. 66-16.
(i) Relative value. ``Relative value'' means a value assigned to
each final product attributed to the separation from a privileged
foreign feedstock based on the ratio of the final product's value
compared to the privileged foreign feedstock's duty.
(j) Time of Separation. ``Time of separation'' means the
manufacturing period in which a privileged foreign status feedstock is
deemed to have been separated into two or more final products.
(k) Weighted Average. ``Weighted average'' means the relative value
of merchandise, which is determined by dividing the total value of
shipments in a given period by the total quantity shipped in the same
given period. See example in section VI of the appendix to this part.
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Sec. 146.93 Inventory control and recordkeeping system.
(a) Attribution. All final products removed from or consumed within
a petroleum refinery subzone must be attributed to feedstock admitted
into said petroleum refinery subzone in the current or prior
manufacturing period. Attribution must be based on records maintained by
the operator. Attribution may be made by applying one of the authorized
methods set forth in this section. Records must be maintained on a
weight or volume basis.
(1) Producibility. The producibility method of attribution requires
that records be kept to attribute final products to feedstocks which are
eligible for attribution as set forth in this section during the current
or prior manufacturing period.
(2) Actual production records. An operator may use its actual
production records as provided for under Sec. 146.95(b) of this subpart.
(3) Other inventory method. An operator may use the FIFO (first-in,
first-out) method of accounting (see Sec. 191.22(c) of this chapter).
The use of this method is illustrated in the appendix to this part.
(b) Feedstock eligible for attribution. Only a feedstock that has
been admitted into the refinery subzone is eligible for attribution. For
a given manufacturing period, the quantity of feedstock eligible for
attribution may be computed as beginning inventory, plus receipts less
shipments of feedstock out of the subzone, and less ending inventory.
(c) Consumption or removal of final product. Each final product that
is consumed in or removed from a refinery subzone must be attributed to
a feedstock eligible for attribution during the current or a prior
manufacturing period. Each final product attributed as being produced
from the separation of a privileged foreign status feedstock must be
assigned the proper relative value as set forth in paragraph (d) of this
section.
(d) Relative value. A relative value calculation is required when
two or more final products are produced as the result of the separation
of privileged foreign status feedstock. Ad valorem and compound rates of
duty must be converted to specific rates of duty in order to make a
relative value calculation.
(e) Privileged status after admission. Nonprivileged status
feedstock is eligible for privileged status only if the request shows to
the satisfaction of the Customs Service that there was no manipulation
or manufacture of the feedstock to change its tariff classification
before the request is granted. The absence of such manipulation or
manufacture can be shown by demonstrating that the feedstock was placed
in an
[[Page 114]]
empty tank, in a tank that contained only feedstock with the same
nominal specifications or providing a sample which shows there was no
change in tariff status. The existence of negligible amounts of other
feedstocks may be disregarded only in accordance with Sec. 146.95(b). A
request for after-admission privileged foreign status shall be denied
unless the feedstock's tank records from admission to the time that the
request is made accompany the request. A refiner who makes such a
request shall not put any other feedstock having different nominal
specifications into the tank until the request for privileged status is
granted. The Customs Service will deny or revoke a post-admission
request if a refiner fails to retain the integrity of the feedstock in
the tank.
(f) Consistent use required. The operator must use the selected
method, measurement (weight or volume), and the price of product
consistently (see Sec. 146.92(g) of this subpart and paragraph (a) of
this section).
Return to Top
Sec. 146.94 Records concerning establishment of manufacturing period.
(a) Feedstock admitted into the refinery subzone. The operator must
maintain appropriate inventory records during the manufacturing period
to substantiate the feedstock(s) eligible for attribution under
Sec. 146.93(b) and in accordance with the operator's selected
attribution method.
(b) Final product consumed in or removed from subzone. The operator
must record the date and amount of each final product consumed in, or
removed from the subzone.
(c) Consumption or removal. The consumption or removal of a final
product during a week may be considered to have occurred on the last day
of that week for purposes of attribution and relative value calculation
instead of the actual day on which the removal or consumption occurred,
unless the refiner elects to attribute using the FIFO method (see
section II of the appendix to this part).
(d) Gain or loss. A gain or loss that occurs during a manufacturing
period must be taken into account in determining the attribution of a
final product to a feedstock and the relative value calculation of
privileged foreign feedstocks. Any gain in a final product attributed to
a non-privileged foreign status feedstock is dutiable if entered for
consumption unless otherwise exempt from duty.
(e) Determining gain or loss; acceptable methods.--(1) Converting
volume to weight. Volume measurements may be converted to weight
measurements using American Petroleum Institute conversion factors to
account for gain or loss.
(2) Calculating feedstock factor to account for volume gain or loss.
A feedstock factor may be calculated by dividing the value per barrel of
production per product category by the quotient of the total value of
production divided by all feedstock consumed. This factor would be
applied to a finished product that has been attributed to a feedstock to
account for volume gain.
(3) Calculating volume difference. Volume difference may be
determined by comparing the amount of feedstocks introduced for a given
period with the amount of final products produced during the period, and
then assigning the volume change to each final product proportionately.
Return to Top
Sec. 146.95 Methods of attribution.
(a) Producibility.--(1) General. A subzone operator must attribute
the source of each final product. The operator is limited in this regard
to feedstocks which were eligible for attribution during the current or
prior manufacturing period. Attribution of final products is allowable
to the extent that the quantity of such products could have been
produced from such feedstocks, using the industry standards of potential
production on a practical operating basis, as published in T.D. 66-16.
Once attribution is made for a particular product, that attribution is
binding. Subsequent attributions of feedstock to product must take prior
attributions into account. Each refiner shall keep records showing each
attribution.
(2) Industry standards of potential production. The industry
standards of potential production on a practical operating basis
necessary for the producibility attribution method are
[[Page 115]]
contained in tables published in T.D. 66-16. With these tables, a
subzone operator may attribute final products consumed in, or removed
from, the subzone to feedstocks during the current or a prior
manufacturing period.
(3) Attribution to product or feedstock not listed in T.D. 66-16.
(i) For purposes of attribution, where a final product or a feedstock is
not listed in T.D. 66-16, the operator must submit a proposed
attribution schedule, supported by a technical memorandum, to the
appropriate port director. The port director shall refer the request to
the Director, Office of Regulatory Audit (``ORA''), who will verify the
refiner's records and will coordinate with the Director, Office of
Laboratories and Scientific Services (``OLSS''). The Director, ORA,
shall either approve or deny the request. If the request is approved,
the Director, ORA, shall publish a modification of T.D. 66-16. If an
operator elects to show attribution on a producibility basis, but fails
to keep records on that basis, the operator shall use its actual
operating records to determine attribution and any necessary relative
value calculation upon the Customs Service demand and subject to
verification.
(ii) An operator may attribute a final product to a feedstock in
excess of the amount allowed under T.D. 66-16, when authorized by
Customs, without losing the ability to attribute under T.D. 66-16 for
all other feedstock-final product combinations. The operator must use
its actual production records for the requested feedstock-final product
combination. The operator must agree in writing that it will not, and it
will not enable any other person, to file a drawback claim under 19
U.S.C. 1313 inconsistent with those actual production records for that
feedstock-final product combination. The operator shall file its request
in accordance with paragraph (a)(3) of this section. The Director, ORA,
and the Director, OLSS, must determine whether T.D. 66-16 needs to be
modified and shall publish in the Customs Bulletin each approval granted
under this paragraph and request public comments with each such
approval.
(4) Attribution to privileged foreign feedstock; relative value. If
a final product is attributed to the separation of a privileged foreign
feedstock a relative value must be assigned (see section IV of the
appendix to this part).
(b) Refinery operating records. An operator may use the actual
refinery operating records to attribute the feedstocks used to the
removed or consumed products. Customs shall accept the operator's
operating conventions to the extent that the operator demonstrates that
it actually uses these conventions in its refinery operations. Whatever
conventions are elected by the operator, they must be used consistently
in order to be acceptable to Customs. Additionally, Customs may use
these records to test the validity of admissions into the subzone,
consumption within and removals from the subzone.
Example. If the operator mixes three equal quantities of material in
a day tank and treats that product as a three-part mixture in its
production unit, Customs will accept the resulting product as composed
of the three materials. If, in the alternative, the operator assumes
that the three products do not mix and treats the first product as being
composed of the first material put into the day tank, the second product
as composed of the second material put into the day tank, and the third
product as being composed of the third material put into the day tank,
Customs will accept that convention also.
Return to Top
Sec. 146.96 Approval of other recordkeeping systems.
(a) Approval procedure. An operator must seek prior approval of
another recordkeeping procedure by submitting the following to the
Director, Office of Regulatory Audit:
(1) An explanation of the method describing how attribution will be
made when a finished product is removed from or consumed in the subzone,
and how and when the feedstocks will be decremented;
(2) A mathematical example covering at least two months which shows
the amounts attributed, all necessary relative value calculations, the
dates of consumption and removal, and the amounts and dates that the
transactions are reported to Customs.
[[Page 116]]
(b) Failure to comply. Requests received that fail to comply with
paragraph (a) of this section will be returned to the requester with the
defects noted by the Director, Office of Regulatory Audit.
(c) Determination by Director. When the Director, Office of
Regulatory Audit, determines that the recordkeeping procedures provide
an acceptable basis for verifying the admissions and removals from or
consumption in a refinery subzone, the Director will issue a written
approval to the applicant.
Return to Top
Appendix to Part 146--Guidelines for Determining Producibility and
Relative Values for Oil Refinery Zones
Where an example is set out in this appendix, the example is for
purposes of illustrating the application of a provision, and where there
is any inconsistency between the example and the provision, the
provision prevails to the extent of the inconsistency. Alternative
formats are also acceptable so long as they are consistent with the
provisions of this part.
I. Attribution Using Producibility Showing Manufacturing Periods From
Admission to Removal Within a Calender Month.
Volume losses and gains accounted for by weight.
Day 1
Receipt into the refinery subzone during a 30-day month:
50,000 pounds privileged foreign (PF) class II crude oil.
50,000 pounds PF class III crude oil.
50,000 pounds domestic status class III crude oil.
Day 10
Removal from the refinery subzone for exportation of 50,000 pounds
of aviation gasoline.
The period of manufacture for the aviation gasoline is Day 1 to Day
10. The refiner must first attribute the designated source of the
aviation gasoline.
In order to maximize the duty benefit conferred by the zone
operation, the refiner chooses to attribute the exported aviation
gasoline to the privileged foreign status crude oil. Under the tables
for potential production (T.V. 66-16), class II crude has a 30%
potential, and class III has a 40% potential. The maximum aviation
gasoline producible from the class II crude oil is 15,000 pounds (50,000
x .30). The maximum aviation gasoline producible from the privileged
foreign status class III crude oil is 20,000 pounds (50,000 x .40).
The domestic class III crude would also make 20,000 pounds of aviation
gasoline.
The refiner could attribute 15,000 pounds of the privileged foreign
class II crude oil, 20,000 pounds of the privileged foreign class III
crude oil, and 15,000 pounds of the domestic class III crude oil as the
source of the 50,000 pounds of the aviation gasoline that was exported;
35,000 pounds of class II crude oil would be available for further
production for other than aviation gasoline, 30,000 pounds of privileged
foreign class III crude oil would be available for further production
for other than aviation gasoline, and 35,000 pounds of domestic status
class III crude oil would be available for further production, of which
up to 5,000 pounds could be attributed to aviation gasoline.
Day 21
Receipt in the refinery subzone:
50,000 pounds PF status class I crude oil.
50,000 pounds PF status class IV crude oil.
Day 30
Removal from the refinery subzone:
30,000 pounds of motor gasoline for consumption.
10,000 pounds of jet fuel sold to the US Air Force for use in military
aircraft.
10,000 pounds of aviation gasoline sold to a U.S. commuter airline for
domestic flights.
10,000 pounds of kerosene for exportation.
To the extent that the crude oils that entered production on Day 1
are attributed as the designated sources for the products removed on Day
30, the period of manufacture is Day 1 to Day 30. If the refiner chooses
to attribute the crude oils that were admitted on Day 21 as the
designated sources of the products removed on Day 30 using the
production standards published in T.D. 66-16, the manufacturing period
is Day 21 to Day 30. This choice will be important if a relative value
calculation on the privileged foreign status crude oil is required,
because the law requires the value used for computing the relative value
to be the average per unit value of each product for the manufacturing
period. Relative value must be calculated if a source feedstock is
separated into two or more products that are removed from the subzone
refinery. If the average per unit value for each product differs between
the manufacturing period from Day 1 to Day 30 and the manufacturing
period from Day 21 to Day 30, the correct period must be used in the
calculation.
In order to minimize duty liability, the refiner would try to
attribute the production of the exported kerosene and the sale of the
jet fuel to the US Air Force to the privileged foreign crude oils. For
the same reason, the refiner would try to attribute the removed motor
gasoline and the aviation gasoline for
[[Page 117]]
the commuter airline to the domestic crude oil.
Accordingly, the refiner chooses to attribute up to 5,000 pounds of
the domestic status class III crude as the source of the 10,000 pounds
of aviation gasoline removed from the subzone refinery for the commuter
airline. Since no other aviation gasoline could have been produced from
the crude oils that were admitted into the refinery subzone Day 1, the
refiner must attribute the remainder to the crude oils that entered
production on Day 21. Again, using the production standards from T.D.
66-16, the class I crude could produce aviation gasoline in an amount up
to 10,000 pounds (50,000 x .20). Likewise, the class IV crude oil
could produce aviation gasoline in an amount up to 8,500 pounds (50,000
x .17).
The refiner selects use of the class I crude as the source of the
aviation gasoline. The refiner could attribute up to 27,300 pounds
(35,000-5,000 x .91) of the domestic class III crude oil as the source
of the motor gasoline. This would leave 2,700 pounds of domestic class
III crude available for further production for other than aviation
gasoline or motor gasoline. The remaining motor gasoline removed (also
2,700 pounds) must be attributed to a privileged foreign crude oil. The
refiner selects the privileged foreign class II crude oil that entered
production on Day 1 as the source for the remaining 2,700 pounds of
motor gasoline.
This would leave 32,300 pounds of privileged foreign class II crude
oil available for further production, of which no more than 27,400
pounds could be designated as the source of motor gasoline. The refiner
attributes the jet fuel that is removed from the refinery subzone for
the US Air Force for use in military aircraft to the privileged foreign
class II crude oil. The refiner could attribute up to 20,995 pounds of
jet fuel from that class II crude oil (32,300 x .65). Designating that
class II crude oil as the source of the 10,000 pounds of jet fuel leaves
22,300 pounds of privileged foreign class II crude oil available for
further production, of which up to 10,995 pounds could be attributed as
the source of the jet fuel. Because the motor gasoline and the jet fuel,
under the foregoing attribution, would be considered to have been
separated from the privileged foreign class II crude oil, a relative
value calculation would be required.
The jet fuel is eligible for removal from the subzone free of duty
by virtue of 19 U.S.C. 1309(a)(1)(A). The refiner could attribute the
privileged foreign class II crude oil as being the source of the 10,000
pounds of jet fuel (22,300 x .65). The refiner chooses to attribute
the privileged foreign class III crude oil as the source of the jet
fuel. The refiner could attribute to that class III crude oil up to
15,000 pounds of kerosene (30,000 x .50).
II. Attribution on a FIFO Basis
(Accounting for volume losses or gains by the weight method)
Day 1-5
Transfer, into the Refinery Subzone, from one or more storage tanks
into process 150 barrels of Privileged Foreign (PF) Class II crude oil,
equivalent to 50,000 pounds.
Day 6
Removal from the refinery subzone 119 barrels of residual oils to
customs territory, equivalent to 40,000 pounds.
Since the operator uses the FIFO method of attribution, as the
product is removed from the subzone, or consumed or lost within the
subzone, attribution must be to the oldest feedstock available for
attribution. Accordingly, the 40,000 pounds of residual oils will be
attributed to 40,000 pounds of the PF Class II crude oil from Day 1-5.
Day 10
Transfer, into the refinery subzone, from one or more storage tanks
4 barrels of domestic motor gasoline blend stock, equivalent to 1,000
pounds to motor gasoline blending tank.
Day 6-15
Transfer, into the refinery subzone, from one or more storage tanks
into process 320 barrels of Domestic Class III crude oil, equivalent to
100,000 pounds.
Day 16
Removal from the refinery subzone 14 barrels of asphalt to customs
territory, equivalent to 5,000 pounds.
The 5,000 pounds of asphalt will be attributed to 5,000 pounds of PF
Class II crude oil from Day 1-5.
Day 17
Removal from the refinery subzone, 324 barrels of motor gasoline to
customs territory, equivalent to 81,000 pounds.
The 81,000 pounds of motor gasoline will be attributed to 1,000
pounds of domestic motor gasoline blend stock from Day 10, to the
remaining 5,000 pounds of PF Class II crude oil from Day 1-5 and 75,000
pounds of domestic Class III crude oil from Day 6-15.
Day 16-20
Transfer, into the refinery subzone, from one or more storage tanks
into process 169 barrels of Privileged Foreign (PF) Class III crude oil,
equivalent to 50,000 pounds.
[[Page 118]]
Day 22
Removal from the refinery subzone, 214 barrels of jet fuel for
exportation, equivalent to 60,000 pounds.
The 60,000 pounds of jet fuel will be attributed to the remaining
25,000 pounds of domestic Class III crude oil from Day 6-15 and 35,000
pounds of PF Class III crude oil from Day 16-20.
Day 21-25
Transfer, into the refinery subzone from one or more storage tanks
into process, 143 barrels of domestic Class I crude oil, equivalent to
50,000 pounds.
Day 30 (End of the Manufacturing Period)
It is determined that during the manufacturing period just ended,
that 34 barrels of fuel, equivalent to 10,000 pounds was consumed, and 5
barrels of oil, equivalent to 1,500 pounds was lost in the refining
production process within the refinery subzone.
The 10,000 pounds of fuel consumed will be attributed 10,000 pounds
of PF Class III crude oil from Day 16-20. The 1,500 pounds of oil lost
in the refining production process will be attributed to 1,500 pounds of
PF Class III crude oil from Day 16-20. The remaining 3,500 pounds of PF
Class III crude oil from Day 16-20 will be the first to be attributed
during the next manufacturing period.
III. Relative Value Calculation
Because privileged foreign feedstocks transferred into process
during Day 1-5 and Day 16-20 have two or more products attributed to
them, each feedstock will require a relative value calculation.
Relative value calculation for UIN Day 1-5, 50,000 pounds,
equivalent to 150 barrels.
----------------------------------------------------------------------------
D Product E R.V. G Dutiable
A Lbs B BBLS C $/BBL value Factor F R.V.BBL BBL
----------------------------------------------------------------------------
Residual oil...40,000 119 15.00 1,785 .9047 108 108
Asphalt........ 5,000 14 13.00 182 .7840 11 11
Motor gasoline. 5,000 20 26.00 520 1.5682 31 31
-----------------------------------------------------------
Totals...50,000 153 ....... 2,487 ....... 150 150
----------------------------------------------------------------------------
A=Pounds Attributed.
B=Equivalent Barrels.
C=Price of Product.
D=B x C.
E=C/(Total of Column D/Attributed Crude BBLS).
Residual Oil RV Factor=15.00/(2,487/150)=.9047.
F=B x E.
G=Dutiable Barrels.
Since all products attributed to the 50,000 pounds (150 BBLS) of PF
Class II crude entered customs territory duty equals $7.88
(150 x .0525).
Feedstock factor calculation for UIN Day 16-20, 46,500 pounds
equivalent to 157 barrels.
----------------------------------------------------------------------------
Product Feedstock Dutiable
Lbs BBLS $/BBL value factor R.V. BBL BBL
----------------------------------------------------------------------------
Jet Fuel.... 35,000 125 27.00 3,375 1.1030 138 0
Fuel........ 10,000 34 12.00 408 0.4902 17 0
Consumed
Process Loss. 1,500 5 12.00 60 0.4902 2 0
--------------------------------------------------------------------------
Totals. 46,500 164 ...... 3,843 ...... 157 0
----------------------------------------------------------------------------
Since jet fuel was exported, no duty is applicable. Fuel consumed
for refinery process was consumed within the subzone premises and did
not enter customs territory, thus no duty is applicable (assume refinery
not barred by duty-free consumption restriction). Likewise, the process
loss occurred entirely within the subzone. Therefore, no duty is
applicable.
IV. Attribution to Privileged Foreign Feedstock; Relative Value; Monthly
Manufacturing Period, Weekly Entries, Attribution to a Prior Period;
Volume Loss or Gain Shown by Volume Differences.
An operator who elects to attribute on a monthly basis files the
following estimated removal of final products for the first week in
September:
Jet Fuel (deemed exported on international flights)........... 20,000
Gasoline--Domestic Consumption................................ 15,000
Duty-free certified as emergency war material................. 10,000
Petroleum coke exportations................................... 10,000
Distillate for consumption.................................... 5,000
Petrochemicals exported....................................... 10,000
--------
Total removals.......................................... 70,000
[[Page 119]]
Because it does not elect to make attributions for feedstocks that
were charged to operating units during the same week, the operator
attributes the estimated removals to final products made during August
from the following feedstocks:
Class II PF (privileged foreign) crude........................ 20,000
Class III PF crude............................................ 35,000
Class III D (domestic) crude.................................. 20,000
Class III NPF (nonprivileged foreign crude.................... 20,000
---------
95,000
During August the operator produced from those feedstocks:
Jet.......................................................... 35,000
Gasoline..................................................... 40,000
Petroleum Coke............................................... 10,000
Distillate................................................... 5,000
Petrochemicals............................................... 15,000
----------
105,000
There is a gain of 105,000-95,000=10,000................................
Using the tables in T.D. 66-16, the following choices are available
for attribution:
----------------------------------------------------------------------------
Petrolum Petro-
Charged Jet Gasoline coke Distillate chemical
----------------------------------------------------------------------------
Class II PF Crude...20,000 13,000 17,200 4,400 17,200 5,000
Class III PF Crude..35,000 24,500 31,850 14,000 31,150 10,150
Class III D Crude...20,000 14,000 18,200 8,000 17,800 5,800
Class III NPF Crude.20,000 14,000 18,200 8,000 17,800 5,800
----------------------------------------------------------------------------
Feedstock factors are calculated:
----------------------------------------------------------------------------
Value Feedstock
Barrels barrels Value factors
----------------------------------------------------------------------------
Gasoline............. 40,000 $25 $1,000,000 .9117
Jet Fuel............. 35,000 23 805,000 .8388
Distillate........... 5,000 20 100,000 .7294
Petroleum Coke....... 10,000 10 100,000 .3647
Petrochemicals....... 15,000 40 600,000 1.4587
-----------------------------------------------------
105,000 ....... 2,605,000
-----------------------------------------------------
Gain................. -10,000 $2,605,000 ...........
----------------------------
Total.......... \1\ 95,000
(2)=$27.42 average value p/bbl
----------------------------------------------------------------------------
Using the feedstock factor the refiner makes the following
attributions:
Jet Fuel......................... 24,192 (20,291 feedstock
attributed to Class III
PF Crude).
10,808 Class III NPF Crude
(attribution of 9066
solely for purpose of
accounting for the
amount of NPF used).
-------------
35,000
Gasoline....................... 5,000 (4,559 feedstock
attributed to Class III
PF Crude).
5,000 Class III NPF Crude
(attribution of 4599
solely for purpose of
accounting for the
amount of NPF used).
15,000 (13,676 feedstock
attributed to Class III
D Crude).
-------------
Petroleum Coke................... 8,418 (3,070 feedstock
attributed to Class II
PF Crude).
1,582 Class III NPF Crude
(attribution of 577
solely for purposes of
accounting for the
amount of NPF used).
-------------
10,000
Distillate....................... 5,000 (3,647 feedstock
attributed to Class III
Domestic).
Petrochemicals................... 3,975 (5,800 feedstock
attributed to Class III
NPF Crude).
6,025 (8,789 feedstock
attributed to Class III
PF Crude).
-------------
10,000
[[Page 120]]
V. Weekly Entry, Weekly Manufacturing Period, and Relative Values
Calculated on the Actual Weighted Average Values at the End of the Week.
On the weekly estimated production CF 3461, the refiner is required
to provide a pro forma invoice or schedule showing the number of units
of each type of merchandise to be removed during the week and their zone
and dutiable values. For example, on CF 3461 the refiner estimates the
following shipments and relative values for the next week and files this
on the preceding Friday.
----------------------------------------------------------------------------
PF shipments Value/barrel
Product week 1 (MBBLS) (platts) Total value
----------------------------------------------------------------------------
Motor Gasoline............... 20,000 $35 $700,000
Total Alkylate............... 25,000 35 875,000
Heavy Reformate.............. 60,000 35 2,100,000
Reformer Feed................ 110,000 35 3,850,000
Raffinates................... 200,000 35 7,000,000
Jet Fuel..................... 200,000 35 7,000,000
-------------- -------------
Total.................. 615,000 ............. $21,525,000
---------------------------------------------------------------------------
Attributed Feedstock--Class III Crude: 615,000@ $105=$64,575
(estimated duties)
During that week the refiner actually removes the following products
and reports those on the CF 7501 filed within 10 business days after the
CF 3461 is filed. Column 3 is the actual ``weighted average'' value for
the manufacturing period, therefore, no reconciliation is necessary.
-----------------------------------------------------------------------------
2 PF 3 Value/ 4 Total 5 Relative 6 Feedstock 7 Liq.
1 Product Shipments barrel value value factor distribu. duties
(mbbls) wt.avg.) (2)x(3) (3)/(8) (5)x(2) 6)x(10)(9)
-----------------------------------------------------------------------------
Week 1:
Motor Gasoline.19,977 $35.70 $713,179 1.104545 22,065 $2,317
Total Alkylate.22,907 42.50 973,548 1.314935 30,121 3,163
Heavy Reformate.58,164 31.42 1,827,513 .972123 56,542 5,937
Reformer Feed.100,279 31.42 3,150,766 .972123 97,484 10,235
Raffinates....170,293 29.55 5,032,158 .914266 155,693 16,348
Jet Fuel......168,433 30.04 5,059,727 .929426 156,546 16,437
-----------------------------------------------------------------------------
Total.....540,053 ....... 16,756,891 ....... 518,451 54,437
(9) (10)
-----------------------------------------------------------------------------
Class III Crude Consumed 518,451 x $.105 = $54,437......................
Volumetric Gain 21,602..................................................
Avg. Value/Barrel Crude Consumed=$16,756,891
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