NAFTZ Lays Out Priorities for 2021
Board members and people who provide services to foreign-trade zones talked about what the National Association of Foreign-Trade Zones should work on now that it lost the battle on USMCA rules of origin treatment for goods produced in those zones. “Now that provision’s back in the act, it’s going to be a real challenge,” said Melissa Irmen, chair of the NAFTZ board. The group wants to make sure a U.S.-United Kingdom free trade agreement doesn't prohibit goods made in FTZs from qualifying for rules of origin, as USMCA does. “They are concerned that the USMCA approach could be a precedent.”
She said getting the FTZs for America Act passed would help clarify what happens if goods entered an FTZ in privileged status, but the tariff changed while the goods were in the zone, either through a revision in the rate, or through an exclusion.
Irmen reminded listeners at the NAFTZ seminar on Feb. 11 that there have been problems with tariffs affecting goods manufactured in zones with imported content from China. All the foreign material taxed under Section 301 is treated as Chinese, even if it wasn't from China, because of the way the Census Bureau reports goods made in FTZs.
James Grogan, a senior manager at Ernst & Young in the indirect tax practice, also said the privileged foreign status tariff issue that the FTZs for America Act addresses could also be addressed through changes to the part 146 customs regulations.
Shannon Fura, an attorney who works with FTZs, said that NAFTZ is part of the Ship Safe Coalition, and they're hoping that there will be congressional action in 2021 that would allow warehouses in foreign-trade zones to send small-value packages to individual consumers. She said there are supporters of this proposal, but some offices have asked them for examples of how companies have decided to move to Canada to send those packages under de minimis. She said, “You don’t want them to get to that point, because if they do, they’re not going to come back.”
Fura also talked about forced labor. She said that CBP is interested in allowing FTZs to hold goods under withhold release orders before a final decision is made (see 2102100013). She warned about the forced labor ban: “This is a strict liability standard. It doesn't matter how reasonable you are. That's not how they're looking at it at all.” She added, “It's also important to recognize that each of the WROs they're looking at aren't necessarily handled the same way. They're kind of learning how they go. Each of the reviews we’ve been engaged on have been different.”
Grogan told NAFTZ they should be educating congressional offices about the fact that the production scope of authority doesn't allow sufficient flexibility. They want to be allowed to go to a six-digit Harmonized Tariff Schedule code for the production scope. “We’re hopeful with the new administration, we’re going to be able to make more progress with that,” Grogan said. FTZs would also like the option to do a retrospective notification for changes in scope.