International Trade: Foreign Trade Zones Program Needs Clarified Criteria
NSIAD-89-85
Published: Feb 07, 1989. Publicly Released: Feb 14, 1989.
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Highlights
Pursuant to a congressional request, GAO provided information on the Foreign Trade Zones (FTZ) program, focusing on: (1) program growth; (2) the economic effects of subzones; (3) industry concerns about subzones; (4) the FTZ Board's operations and standards for approving new subzones; and (5) the effectiveness of the U.S Customs Service's supervision over zone activities.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| Congress should amend the FTZ Act to provide guidance for decisions on grant applications, particularly those involving manufacturing. Such an amendment should establish that subzone grants, with their potential tariff revenue loss, are a privilege to be based on a demonstrated public benefit. It should also specify factors to be considered, such as the estimated effects of a proposed grant on exports, imports, employment, and investment. The FTZ Board's 1986 draft regulations provide public benefit criteria that could be included in the amendment. |
Closed – Not Implemented
|
The House Government Operations Committee and Ways and Means Committee held hearings in 1989, and received testimony from many interested parties, including GAO. Bills incorporating GAO suggestions were introduced in 1990, but died. No bills were introduced on this issue in 1991, indicating interest in the issue has dissipated and, possibly, satisfaction with revisions to Commerce regulations. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Commerce | The Secretary of Commerce should consider providing the FTZ Board with additional professional staff from existing resources within the International Trade Administration on at least a temporary basis to relieve the backlog of applications and facilitate adoption of new regulations. If applications continue at a high level, these positions could be made permanent. |
Closed – Implemented
Commerce has determined that the Board requires additional permanent staff. The President's fiscal year 1991 budget calls for three new positions, including two professional economists. Import Administration has provided interim authority to hire two staff members, recruitment has been completed, and the two new staff are now on board.
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| Foreign Trade Zones Board | The FTZ Board should revise its application processing procedures to minimize delays, instituting deadlines and revising its criteria in accord with any action Congress may take. After clarifying its criteria, the FTZ Board should revise its system for acquiring information on zone operations to permit determination of whether grants continue to meet the criteria upon which their award was based. |
Closed – Implemented
Commerce initiated improvements in the application process, thus reducing processing time on non-controversial cases and providing expedited consideration for urgent circumstances. More comprehensive revision of procedures will depend on anticipated direction from Congress. Commerce published proposed regulations on January 26, 1990, and expects final regulations by July 31, 1991.
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Automobile industryCustoms administrationEconomic growthForeign investments in USForeign trade policiesImport regulationImportingInternational economic relationsMacroeconomic analysisTariffs