Memo For:   Foreign-Trade Zone Grantees

From: Dennis Puccinelli

  Executive Secretary

Re:  Oil Refinery Subzones
  — Extension of NPF Authority for Certain Refineries
  — Five Year Review - Notification and Request for Information

This is to provide notice to FTZ grantees and refinery subzones regarding upcoming reviews that involve oil refining subzones. The first project involves the review of five applications for extension of NPF authority for subzones that were not included in the NPF extension approval in September 2000. To meet the September 2005 deadline, we need to receive applications in July 2004 and publish notices in October 2004, initiating the reviews. Each of the five subzones will need an individual application. We plan to coordinate our reviews of these five cases with another project, our five-year review of the use of zone procedures by the oil refining industry (discussed below). This should reduce the burden on the individual applicants, who will be able to refer to an upcoming report rather than individually provide industry information.

The second project involves an overall industry-wide evaluation of the national economic effects of the oil refining industry’s use of FTZ procedures. As you may recall, when the FTZ Board extended NPF authority for some 60 refinery subzones in September 2000, it had considered extending authority for only a five-year period, which would have forced another round of applications from all refinery subzones. In consultation with your representative, we developed an alternative to a five-year time limit on the NPF extension. This alternative involved a more detailed annual report, more careful monitoring, and a five-year industry review. (Attached is the memo I prepared in response to the request from the FTZ Board’s Alternate Chair to justify an alternative to a five-year time limit.)

Thus, the proposed five-year review will not involve applications from individual subzones (as was the case for the 2000 review). Rather, it will involve an overall review of the industry situation and will include input from the refining industry with respect to its use of zone procedures. Our focus will be on whether zone procedures continue to be needed by the industry to improve their international competitive situation and encourage investment in the United States that might otherwise be done abroad. We are also looking for evidence that zone procedures have resulted in positive economic effects that were indicated in previous applications. Please see attached guidelines.

We will begin our five-year review at the end of 2004. We plan to publish a Federal Register notice for public comment when we begin the evaluation in December 2004, and expect that an industry position paper from the subzone refineries would be submitted within the published 60-day comment period. Our report would be completed in mid-2005.

If we receive the industry report from the refineries as planned in early 2005, the report can also be used in the NPF review of the five subzones, as we discussed above.

Timeline Summary (Proposed)

– July 2004	Receive applications for five NPF extension cases
– October 2004	Federal Register notice on the five applications, public comment
– November 2004	Commencement of industry-wide five-year review
– December 2004	Federal Register notice on five-year review, public comment
– Jan. - Feb. 2005	Public comment period on five-year review
– February 2005	Industry submission
– March-June 2005	FTZ staff review and report on five NPF extension cases and industry-wide five-year review
– August 2005	Board decision on five NPF extension cases

If you have any questions please contact Diane Finver of my staff, who prepared the guidelines and will be coordinating the review, or Elizabeth Whiteman, who will be assisting Ms. Finver, at (202) 482-2862.

Attachments