FTZs Return to NAFTA Treatment in USMCA Technical Fixes

Foreign-trade zone users will no longer be able to claim tariff benefits under USMCA when the products manufactured in those zones meet the free trade agreement's rules of origin. However, none of the producers had yet been able to avoid tariffs on inputs, National Association of Foreign-Trade Zones CEO Erik Autor told International Trade Today Dec. 21, as there had been no administrative process at CBP to implement the change.

NAFTZ had lobbied hard to keep the change from NAFTA rules, and some of its champions had pushed even as late as the weekend to keep this provision out of the USMCA technical fixes bill. “I do not know the reason we were not able to convince the Ways and Means and Finance [committees'] leadership not to reinstate the rule of origin restriction on FTZs,” Autor said. “We were never given a persuasive policy reason other than they intended to keep the NAFTA restriction last year when they were drafting the implementing bill ... and that they needed the provision as a pay-for to offset the cost of the other provisions in the technical corrections package.”

The technical fixes also will allow importers to claim refunds of merchandise processing fees when those importers make post-entry claims of USMCA origin.

Foreign automakers that build cars in the U.S. thanked Sen. Tim Scott, R-S.C., and Senate Finance Committee Chairman Chuck Grassley, R-Iowa, for ensuring that the technical fixes, particularly the MPF, were included on the bill. Rep. Kevin Brady, R-Texas, the ranking member on the House Ways and Means Committee, said that he's open to having a debate about allowing FTZs to claim USMCA benefits, but didn't want the issue to hold up the broader USMCA fixes. “I’d like to have that debate and discussion in Congress as separate legislation,” Brady said during a phone call with reporters Dec. 21. He said he's a fan of FTZs, and noted that he told Sen. John Cornyn, R-Texas, that. Cornyn had lobbied against returning to NAFTA treatment for FTZs. Brady did not take a position on whether he'd support such legislation, however.

Rep. Bill Pascrell, D-N.J., “tried to begin this discussion ten years ago,” Brady said. “I think he ran into a bit of a buzzsaw on that.”