A Subzone is a single firm site designated for a special purpose, typically manufacturing, under Zone procedures. A Zone Grantee may apply for Subzone status on behalf of a firm when the operations of the firm cannot be accommodated within the existing General Purpose Zone. The application must demonstrate that a significant public benefit will result from the use of Zone procedures by the firm on whose behalf the proposed Subzone is established.
The Foreign-Trade Zones Board evaluates the Subzone application based on the net economic benefit to the U.S. economy. Approval of Subzone status has little to do with real estate. Subzone status and the specific benefits granted are dependent upon the specific operations to be conducted under Zone status. The applicant must demonstrate that the proposed use of Zone procedures is in the public interest; that is, that Subzone status for the firm will result in a significant economic benefit for the U.S. economy. "ABC Company will save money," does not meet this test.
In determining the appropriate Grantee for a firm wishing designation as a Subzone, preference is given to the Grantee of the nearest Zone project within the state.
The application itself consists of a letter of transmittal, an executive summary, and five exhibits. These elements are outlined below with some parenthetical tips or commentary where pertinent.
Letter of transmittal
- Must be currently dated and signed by officer of Grantee organization
- Type of Zone authority requested; e.g. Subzone status for the purpose of manufacturing widgets
- Proposed Subzone site and facilities
- Project background
- Additional pertinent information
Exhibit 1 -- Legal Authority to Apply
- Certified copy of state enabling legislation (check to make sure its current)
- Copy of pertinent sections of Grantees charter or organization papers
- Certified copy of Grantee resolution authorizing execution of the Letter of Transmittal and submission of the application
Exhibit 2 -- Site Description
- Address of proposed site or sites
- Description of proposed site or sites with appropriate legal descriptions; legal jurisdiction of site or sites (if multiple sites, label each, i.e. "Site 1," "Site 2," etc.)
- Geographical relationship to the nearest Customs port of entry
- Description of facilities, including current or proposed buildings, production units and/or storage facilities
- Description of existing or proposed site qualifications (zoning, etc.)
- Description of current or proposed activities
- Description of transportation facilities or access
Exhibit 3 -- Operation and financing
- Site ownership or right of use by the Subzone user
- Operational plan
- Customs automation (A specific statement that the user will utilize Customs automated procedures for FTZs when such procedures are developed must be included.)
- Estimated operating costs (FTZ administrative costs)
- Estimated time schedule for construction and/or activation
Exhibit 4 -- Economic Justification
- Company background
- Product description (HTS #s of inputs and finished products, production volume)
- Industry background
- Zone benefits to company
- Public benefits (Will FTZ procedures positively affect U.S. economy? Will FTZ procedures help the company displace offshore economic activity?)
- Impact on Domestic Industry (Whose loss will be the Subzone users gain?)
- Use of the Public Zone (Why cant the operation be accommodated within the General Purpose Zone?)
- Environmental Impact (Indicate local zoning and the status of any applications for construction approvals; discuss any land-use issues: discuss whether the FTZ operation change any physical aspects of the plant site or its operations; discuss whether Subzone status is a precondition for the proposed activity or construction at the plant.)
Exhibit 5 -- Maps
- Local and state maps indicating Subzone site or sites
- Detailed street map
- Detailed drawing of Subzone site or sites with boundaries in red (Include dimensions and metes and bounds if not included in Exhibit 2.)
- Geodetic (or equivalent) map of each proposed site
- $4,000 if the Subzone will produce 1 or 2 classes of finished products
- $6,500 if the Subzone will produce 3 or more classes of finished products
Review and Processing by the Foreign-Trade Zones Board
In order to be approved by the Foreign-Trade Zones Board, a Subzone application goes through the following review and process:
Submission and Prefiling Review
Upon receipt of the application the Foreign-Trade Zones Board staff reviews it for sufficiency. If the application is deficient, it will be returned to the applicant within 20 days. If the application is found to be sufficient, then the Board formally files the application, assigns it a docket number, and notifies the applicant. This normally occurs within 45 days of submission.
The Foreign-Trade Zones Board publishes public notice of the application in the Federal Register and assigns an examiner (an internal staff member) to the case.
Filing in the Federal Register triggers the public comment period. During the public comment period (normally 60 to 90 days) interested parties may submit comments to the Board in support of, or in opposition to, the application.
If negative comments are received, then the applicant has up to 15 days after the close of the public comment period during which it may submit rebuttal comments to the Board. (Sometimes public comment periods may be extended or re-opened in order to allow the various parties to reach a common understanding regarding the issues surrounding the application.)
The Board may arrange for a public hearing if it deems one necessary; however, for Subzone applications public comment and rebuttal is usually conducted by written correspondence.
The application is reviewed by the Foreign-Trade Zones Board examiner within the Department of Commerce, and by a representative of the Treasury Department, usually the office of the U.S. Customs Service having jurisdiction over the area served by the Grantee of the proposed Subzone.
Examiners Report and Recommendation
The examiners report (comments of the Department of Commerce staff and local office of U.S. Customs) is prepared and submitted to the Executive Secretary of the Foreign-Trade Zones Board. This normally occurs within 120 days of the close of the public comment period.
If the report is unfavorable, then the applicant (Grantee) will be notified (within 5 days of the reports submission) and the applicant will be given 30 days in which to respond with addition evidence to justify the applications approval.
If the report is favorable, then the application is sent to the Treasury Department and to the office of the Assistant Secretary of Commerce for Import Administration for final review.
Upon review and approval within the Departments of Commerce and Treasury, the Foreign-Trade Zones Board issues a Board Order and publishes the decision in the Federal Register and notifies the applicant (Grantee) of the applications approval.
Typically, Subzone applications take about 12 months for processing and review. Applications that are opposed may take longer. In certain instances, Subzone applications may be reviewed and processed on an expedited basis.