{ "id": "R42686", "type": "CRS Report", "typeId": "REPORTS", "number": "R42686", "active": true, "source": "EveryCRSReport.com, University of North Texas Libraries Government Documents Department", "versions": [ { "source": "EveryCRSReport.com", "id": 611854, "date": "2019-12-19", "retrieved": "2019-12-20T16:16:20.196791", "title": "U.S. Foreign-Trade Zones: Background and Issues for Congress", "summary": "U.S. foreign-trade zones (FTZs) are geographic areas declared to be outside the normal customs territory of the United States. This means that, for foreign merchandise entering FTZs and re-exported as different products, customs procedures are streamlined and tariffs do not apply. For products intended for U.S. consumption, full customs procedures are applied and duties are payable when they exit the FTZ. \nIn 1934, in the midst of the Great Depression, Congress passed the U.S. Foreign Trade Zones Act. It was designed to expedite and encourage international trade while promoting domestic activity and investment. The U.S. FTZ program offers a variety of customs benefits to businesses which combine foreign and domestic merchandise in FTZs. Similar types of \u201czones\u201d exist in 147 countries, employing roughly 90 to 100 million workers worldwide. Though some aspects differ, all have streamlined customs procedures and no duties applicable on components and raw materials combined in zones and then re-exported. The worldwide network of free trade zones facilitates the integration of economies into global supply chains.\nU.S. FTZs can affect the competitiveness of U.S. companies by allowing savings through (1) duty reduction on \u201cinverted tariff structures\u201d (where tariffs are higher on imported components than on finished products); (2) customs and inventory efficiencies; and (3) duty exemption on goods exported from, or consumed, scrapped, or destroyed in, a zone. Though difficult to achieve, other possible alternatives, such as broad-based tariff reductions through multilateral negotiations, and overall customs reform might provide some of the same competitive advantages as zone use in a more efficient manner, while also ensuring that all importers have equal access. \nZone activity represents a significant share of U.S. trade. According to the FTZ Board\u2019s 2018 Annual Report to Congress, foreign goods entering the United States through FTZs accounted for almost 10% of total U.S. imports. Oil/petroleum (25%), vehicles and related parts (17%), and electronics (16%) made up the majority of foreign goods entering FTZs. A majority of goods entering FTZs are used in production activities (63%), while the remaining are used in warehouse and other logistical activities (37%). Most goods (86%) arriving through FTZs were consumed in the United States; the rest were exported. The industries that account for a significant portion of zone production activity include the oil refining, automotive, electronics, and pharmaceutical sectors. \nAdministration of the U.S. FTZ system is overseen by the Secretaries of Commerce and the Treasury, who constitute the U.S. FTZ Board. The Board is responsible for the establishment of zones, the authorization of specific production activity, and the general oversight of zones. It also appoints an Executive Secretary, who oversees the Board\u2019s staff. Homeland Security\u2019s Customs and Border Protection (CBP) directly oversees FTZs and enforces regulations set by the Board. It activates the zones and secures and controls dutiable merchandise moving into and out of them. CBP oversight also includes both protection of U.S. tariff revenue and protection from illegal activity through screening, targeting, and inspections. \nIn 2012, the U.S. FTZ Board issued new regulations. They focused primarily on streamlining the application procedures and shortening, generally from a year to four months, the time for FTZ approval for production activity under certain circumstances. \nCongressional Interest\nCongress has demonstrated a continuing interest in U.S. Foreign Trade Zones (FTZs), as they (1) may help to maintain U.S. employment opportunities and the competitiveness of U.S. producers; (2) encompass a portion of U.S. trade; and (3) affect U.S. tariff revenue. U.S. FTZs account for less than one-half of 1% of all world zone workers and a small share of the U.S. workforce. However, most of this employment is in manufacturing, which has lost a significant share of its workers over the past several decades. Today, every state has at least one FTZ, and many have numerous manufacturing operations. \nCurrent issues for Congress relating to the U.S. FTZ program may include the FTZ program in relation to the implementation of a series of tariff measures in 2018, as well as long-term issues, such as (1) whether U.S. FTZs encourage a misallocation of U.S. resources; (2) data availability issues; (3) security concerns; and (4) the U.S. employment and global competitiveness impact of FTZs. Broader considerations relating to the world zone network include (5) the effectiveness of trade zones worldwide as a tool for economic development; and (6) trade zones worldwide and worker rights.", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "https://www.crs.gov/Reports/R42686", "sha1": "393186a3026041f172c63c1a2745576235884bdd", "filename": "files/20191219_R42686_393186a3026041f172c63c1a2745576235884bdd.html", "images": { "/products/Getimages/?directory=R/html/R42686_files&id=/6.png": "files/20191219_R42686_images_86a6774035f51b1ce39305bd6806524e94c8c155.png", "/products/Getimages/?directory=R/html/R42686_files&id=/3.png": "files/20191219_R42686_images_b66f9027b3d9471e37c158dd8ecd04904e61396a.png", "/products/Getimages/?directory=R/html/R42686_files&id=/4.png": "files/20191219_R42686_images_441c8554866db36c8d5a21504b3b34ef990cad94.png", "/products/Getimages/?directory=R/html/R42686_files&id=/2.png": "files/20191219_R42686_images_f349bb24d4e19f96b32a34f114d415ff315be15e.png", "/products/Getimages/?directory=R/html/R42686_files&id=/1.png": "files/20191219_R42686_images_309907ace1f3b221246812a91d9358b4c9e330b0.png", "/products/Getimages/?directory=R/html/R42686_files&id=/5.png": "files/20191219_R42686_images_ff3ecf0f9fcf19cffa6ceab42edcb6913499f6be.png", "/products/Getimages/?directory=R/html/R42686_files&id=/0.png": "files/20191219_R42686_images_30ba2e25bd75c524fc3f88de70995b84c35b2179.png" } }, { "format": "PDF", "encoding": null, "url": "https://www.crs.gov/Reports/pdf/R42686", "sha1": "ce9027569b8b4fc28c8c4c0e2fc51a17113f896f", "filename": "files/20191219_R42686_ce9027569b8b4fc28c8c4c0e2fc51a17113f896f.pdf", "images": {} } ], "topics": [ { "source": "IBCList", "id": 4865, "name": "Import Policy" } ] }, { "source": "EveryCRSReport.com", "id": 425674, "date": "2013-11-12", "retrieved": "2016-04-06T20:52:14.487170", "title": "U.S. Foreign-Trade Zones: Background and Issues for Congress", "summary": "U.S. foreign-trade zones (FTZs) are geographic areas declared to be outside the normal customs territory of the United States. This means that, for foreign merchandise entering FTZs and re-exported as different products, customs procedures are streamlined and tariffs do not apply. For products intended for U.S. consumption, full customs procedures are applied and duties are payable when they exit the FTZ. \nIn 1934, in the midst of the Great Depression, Congress passed the U.S. Foreign-Trade Zones Act. It was designed to expedite and encourage international trade while promoting domestic activity and investment. The U.S. FTZ program offers a variety of customs benefits to businesses which combine foreign and domestic merchandise in FTZs. Similar types of \u201czones\u201d exist in 135 countries, employing about 66 million workers worldwide. Though some aspects differ, all have streamlined customs procedures and no duties applicable on components and raw materials combined in zones and then exported. Use of the zones can facilitate cooperative international production for a substantial share of the global supply chain.\nU.S. FTZs can affect the competitiveness of U.S. companies by allowing savings through (1) duty reduction on \u201cinverted tariff structures\u201d (where tariffs are higher on imported components than on finished products); (2) customs and inventory efficiencies; and (3) duty exemption on goods exported from, or consumed, scrapped, or destroyed in, a zone. Though difficult to achieve, other possible alternatives, such as broad-based tariff reductions through multilateral negotiations, and overall customs reform might provide some of the same competitive advantages as zone use in a more efficient manner, while also ensuring that all importers have equal access. \nZone activity represents a significant share of U.S. trade. In 2012, over 13% of foreign goods entered the United States through FTZs or bonded warehouses\u201472% of them as crude oil. Most shipments arriving through FTZs were consumed in the United States; the rest were exported. Crude oil byproducts such as gasoline, diesel, jet fuel, kerosene, and petrochemicals dominate FTZ output. Other key products include autos, consumer electronics, and machinery. U.S. zone activity occurs primarily in FTZ manufacturing operations. \nAdministration of the U.S. FTZ system is overseen by the Secretaries of Commerce and the Treasury, who constitute the U.S. FTZ Board. The Board is responsible for the establishment of zones, the authorization of specific production activity, and the general oversight of zones. It also appoints an Executive Secretary, who oversees the Board\u2019s staff. Homeland Security\u2019s Customs and Border Protection (CBP) directly oversees FTZs. It activates the zones and secures and controls dutiable merchandise moving into and out of them. CBP oversight also includes both protection of U.S. tariff revenue and protection from illegal activity through screening, targeting, and inspections. \nIn 2012, the U.S. FTZ Board issued new regulations. They focused primarily on streamlining the application procedures and shortening, generally from a year to four months, the time for FTZ approval for manufacturing. \nCongressional Interest\nCongress has demonstrated a continuing interest in U.S. Foreign Trade Zones (FTZs), as they (1) may help to maintain U.S. employment opportunities and the competitiveness of U.S. producers; (2) encompass a portion of U.S. trade; and (3) affect U.S. tariff revenue. U.S. FTZs account for less than one-half of 1% of all world zone workers and a small share of the U.S. workforce. However, most of this employment is in manufacturing, which has lost a significant share of its workers over the past several decades. Today, every state has at least one FTZ, and many have numerous manufacturing operations. \nCurrent issues for Congress relating to the U.S. FTZ program may include (1) whether U.S. FTZs encourage a misallocation of U.S. resources; (2) data availability issues; (3) security concerns; and (4) the U.S. employment and global competitiveness impact of FTZs. Broader considerations relating to the world zone network include (5) the effectiveness of trade zones worldwide as a tool for economic development; and (6) trade zones worldwide and worker rights.", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/R42686", "sha1": "1ec3cea3e9a67a5f79645bd7fd8070543207b4b0", "filename": "files/20131112_R42686_1ec3cea3e9a67a5f79645bd7fd8070543207b4b0.html", "images": null }, { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/R42686", "sha1": "8a06ed12a2b8f2d80bf6eec1b340869ac23e6d2b", "filename": "files/20131112_R42686_8a06ed12a2b8f2d80bf6eec1b340869ac23e6d2b.pdf", "images": null } ], "topics": [ { "source": "IBCList", "id": 2212, "name": "Import Policy" } ] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc227786/", "id": "R42686_2012Sep05", "date": "2012-09-05", "retrieved": "2013-11-05T18:07:05", "title": "U.S. Foreign-Trade Zones: Background and Issues for Congress", "summary": "Report that provides a general perspective on the U.S. Foreign-Trade Zone (FTZ) system. The first section discusses free trade zones worldwide. The second section focuses on the U.S. FTZ program --its history, administrative mechanism, structure, growth and industry concentration, and benefits and costs. The third section focuses on current issues for Congress relating to the U.S. FTZ program.", "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20120905_R42686_6990ccd7bd3ce31777fb435ea6907a1e9f000462.pdf" }, { "format": "HTML", "filename": "files/20120905_R42686_6990ccd7bd3ce31777fb435ea6907a1e9f000462.html" } ], "topics": [ { "source": "LIV", "id": "Free ports and zones", "name": "Free ports and zones" }, { "source": "LIV", "id": "Trade", "name": "Trade" } ] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc822670/", "id": "R42686_2012Aug28", "date": "2012-08-28", "retrieved": "2016-03-19T13:57:26", "title": "U.S. Foreign-Trade Zones: Background and Issues for Congress", "summary": "Members of Congress have demonstrated their interest in the U.S. Foreign-Trade Zone (FTZ) system through hearings and legislation over the past seven decades. The program may enhance the competitiveness of U.S. businesses, support employment opportunities, and impact U.S. tariff revenues. Balancing these potential gains, others argue that the program may also be trade distorting, and may play a role in misallocating resources in the economy as a whole. This report provides a general perspective on the U.S. FTZ system. It is divided into three parts. As background, the first section discusses free trade zones worldwide. The second section focuses on the U.S. FTZ program\u2014its history, administrative mechanism, structure, growth and industry concentration, and benefits and costs. The third section focuses on current issues for Congress relating to the U.S. FTZ program.", "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20120828_R42686_bd98e864c29526e6dbec21f1f7a1955f040e548e.pdf" }, { "format": "HTML", "filename": "files/20120828_R42686_bd98e864c29526e6dbec21f1f7a1955f040e548e.html" } ], "topics": [ { "source": "LIV", "id": "Trade", "name": "Trade" }, { "source": "LIV", "id": "Free ports and zones", "name": "Free ports and zones" }, { "source": "LIV", "id": "Free trade", "name": "Free trade" } ] } ], "topics": [ "Foreign Affairs", "Industry and Trade" ] }