NAFTZ Still Pushing Against Reinstatement of NAFTA Rules of Origin

A change in administrations could boost the National Association for Foreign-Trade Zones' rear guard action against a proposal for the USMCA technical fixes bill, lobbyist Brian Hannigan told listeners at the NAFTZ virtual conference Oct. 29.

At issue is how goods manufactured in FTZs are treated when they enter into U.S. commerce. Under NAFTA, a car that had enough regional value content to qualify for duty-free status was not considered U.S.-produced if made in an FTZ. The NAFTA rewrite changed that, but, according to NAFTZ President Erik Autor, the Office of the U.S. Trade Representative is trying to reinstate the NAFTA approach to rules of origin.

“We've been successful so far” in fighting that reinstatement, Autor said.

Hannigan said they don't know if USTR Robert Lighthizer will reinsert this provision and try to push a USMCA fix bill through in the lame-duck session. If he doesn't, and Democratic Party nominee Joe Biden is the next president, “I don't expect it to come back next year,” Hannigan said.

Autor said NAFTZ has made more progress than he thought it would in working on the FTZs for America Act, a bill to change how trade remedies affect goods in foreign-trade zones. He said he thinks Sen. John Cornyn, R-Texas, will sponsor its introduction. If it were to be introduced during the lame duck but not pass both chambers before year-end, it would have to be reintroduced in 2021.

The bill would clarify that applying Section 301 duties to all foreign content of a good manufactured in a zone is not the correct policy. “So many of our companies” have had to pay duties on imported parts that aren't from China at all, or are not on a 301 list because the Census Bureau said the largest part of imported content is from China, Autor said. “It’s cost a lot of companies a lot of money that they should not have been required to pay,” he said.

The bill would also clarify what happens when a product is admitted into an FTZ under privileged foreign status, but the rate is either raised or lowered before the good containing that input exits the zone, or the item receives an exclusion.

The group's third priority is to allow warehouses in FTZs to distribute small packages to e-commerce customers. Autor said it's beneficial for companies to set up warehouses in Canada or Mexico and send packages under de minimis. He said that priority is the least likely to be successful in the short term. “The [Section] 321 issue [on de minimis] has a few other political issues swirling around it that are going to take some time to resolve,” he said.

The past three years have been “extraordinarily active” in FTZ advocacy, Autor said. Hannigan urged conference viewers to respond to NAFTZ's action alerts. He said that even if a company doesn't want to speak directly with its delegation, if the company shares how these issues affect its bottom line, NAFTZ can relay the information. He said NAFTZ is focusing on senators from Nebraska, Maryland, Pennsylvania, North Carolina and Kansas. “Grassroots is essential to move the needle on our issues,” Hannigan said. He said the track record of members responding the action alerts “has not been as strong as we need it to be.”