Admission, Removal, Activities and Required Documents

There are only two Customs Forms (CF) specifically related to Zone operations: CF 214 and CF 216. The CF 214 is used for admission of foreign merchandise into the Zone. Under most circumstances, no 214 is necessary for domestic status merchandise. The form is usually handled by a Customs Broker for the Zone User or Operator, but the Operator may take responsibility for execution of 214s. Information included on a 214 is the same as the information on a Customs entry form, except that it may also be used as a delivery ticket.

One additional information item required on the 214 is a declaration of the material's FTZ status. There are four types of Zone status: domestic, privileged foreign (PF), non-privileged foreign (NPF), and Zone restricted (ZR). Status on material is maintained through its entire stay in the Zone and is critical in determining the amount of duties owed upon entry into the U.S. from the Zone. The 214 and the Operator's internal Receiving Report together make up the initiation of the inventory control and record-keeping system which must meet Customs requirements.

For any action to be performed on or with the merchandise, a CF 216 is required. The CF 216 is an application for activity; however a blanket 216 may be filed for a period of up to one year covering all types of activity anticipated. The Operator must maintain records, documenting approved activities so as to provide an accounting and audit trail of the merchandise through the approved operation.

To remove material from a Zone, the appropriate Customs document must be filed: either a CF 3461 for Entry into the U.S. or a CF 7512 for Export or transfer to another U.S. Zone. These documents are usually handled by a Customs Broker, unless the Operator also is a licensed Broker and chooses to conduct these operations in-house. Inventory Control and Record-Keeping.

An Operator's or User's inventory tracking system (ITS) must be able to account for all merchandise in a Zone and provide enough information to make entry for merchandising being removed from the Zone. Our experience shows that 99 times out of 100, the corporation's existing MRP, bill of materials or internal inventory tracking system(s) are 80-90% complete and sufficient for Customs purposes. The inventory records must indicate:
• Location of merchandise
• Zone status
• Beginning balance receipts, removals and current balance
• Any destruction, scrape, waste, and byproducts
• Cost or value unless the Operator's financial records maintain cost or value and are made available for Customs review

Customs requires a physical inventory at least once per year, and an annual reconciliation report. The annual reconciliation report must be available for Customs review and a letter stating that the report has been prepared must be sent to the local Customs District Director.

Customs, by regulation, accepts First-In-First-Out, Foreign-In-First-Out, lot specific, part number, bill of materials, liquid bulk FIFO, serial number specific, and almost any other inventory tracking system that "protects the Revenue of the U.S." For the 300 operating Zones and Sub-zones of the U.S., there are approximately 300 different ITS and operating systems. Customs also accepts the concept of "Work in Progress" as a "Black Box" that they are not allowed to penetrate. This means that if an Operator can demonstrate raw material balance, inputs to production, finished product balance and some form or correlation between the three, this is satisfactory for Customs.

Confidentiality of Proprietary Information
U.S. Customs is currently under specific legal restrictions against divulging company cost, quantity, and specification data on imported products. Becoming an FTZ makes your firm no more and no less subject to currently gathered and publicly reported trade statistics through the Department of Census, the PIERS network, and other statistical summations. Any application filed with the FTZ Board become public information; however, procedures exist in the regulations to protect sensitive and proprietary information. The protection supersedes the Freedom of Information Act and allows a level of confidentiality which has been acceptable to a large percentage of Fortune 500 companies who currently enjoy FTZ status.