[Code of Federal Regulations]
[Title 15, Volume 2]
[Revised as of January 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 15CFR400.31]

[Page 72-74]
 
                  TITLE 15--COMMERCE AND FOREIGN TRADE
 
      CHAPTER IV--FOREIGN-TRADE ZONES BOARD, DEPARTMENT OF COMMERCE
 
PART 400_REGULATIONS OF THE FOREIGN-TRADE ZONES BOARD--Table of Contents
 
         Subpart D_Manufacturing and Processing Activity_Reviews
 
Sec.  400.31  Manufacturing and processing activity; criteria.


    (a) In general. Pursuant to section 15(c) of the Act (19 U.S.C. 
81o(c)), the Board has authority to restrict or prohibit zone activity 
``that in its judgment is detrimental to the public interest.'' When 
evaluating zone and subzone manufacturing and processing activity, 
either as proposed in an application, in a request for manufacturing/

[[Page 73]]

processing approval, or as part of a review of an ongoing operation, the 
Board shall determine whether the activity is in the public interest by 
reviewing it in relation to the evaluation criteria contained in 
paragraph (b) of this section. With regard to processing activity, this 
section shall apply only when the activity involves foreign articles 
subject to quantitative import controls (quotas) or results in articles 
subject to a lower duty rate (inverted tariff) than any of their foreign 
components. Such a review involves consideration of whether the activity 
is consistent with trade policy and programs, and whether its net 
economic effect is positive.
    (b) Evaluation criteria--(1) Threshold factors. It is the policy of 
the Board to authorize zone activity only when it is consistent with 
public policy and, in regard to activity involving foreign merchandise 
subject to quotas or inverted tariffs, when zone procedures are not the 
sole determining cause of imports. Thus, without undertaking a review of 
the economic factors enumerated in Sec.  400.31(b)(2), the Board shall 
deny or restrict authority for proposed or ongoing activity if it 
determines that:
    (i) The activity is inconsistent with U.S. trade and tariff law, or 
policy which has been formally adopted by the Executive branch;
    (ii) Board approval of the activity under review would seriously 
prejudice U.S. tariff and trade negotiations or other initiatives; or
    (iii) The activity involves items subject to quantitative import 
controls or inverted tariffs, and the use of zone procedures would be 
the direct and sole cause of imports that, but for such procedures, 
would not likely otherwise have occurred, taking into account imports 
both as individual items and as components of imported products.
    (2) Economic factors. After its review of threshold factors, if 
there is a basis for further consideration, the Board shall consider the 
following factors in determiing the net economic effect of the activity 
or proposed activity:
    (i) Overall employment impact;
    (ii) Exports and reexports;
    (iii) Retention or creation of manufacturing or processing activity;
    (iv) Extent of value-added activity;
    (v) Overall effect on import levels of relevant products, including 
import displacement;
    (vi) Extent and nature of foreign competition in relevant products;
    (vii) Impact on related domestic industry, taking into account 
market conditions; and
    (viii) Other relevant information relating to public interest and 
net economic impact considerations, including technology transfers and 
investment effects.
    (c) Methodology and evidence--(1)(i) The first phase (Sec.  
400.31(b)) involves consideration of threshold factors. If an examiner 
or reviewer makes a negative finding on any of the factors in paragraph 
(b)(1) of this section in the course of a review, the applicant shall be 
informed pursuant to Sec.  400.27(d)(3)(vii)(A). When threshold factors 
are the basis for a negative recommendation in a review of ongoing 
activity, the zone grantee and directly affected party shall be notified 
and given an opportunity to submit evidence pursuant to Sec.  
400.27(d)(3)(vii)(A). If the Board determines in the negative any of the 
factors in paragraph (b)(1) of this section, it shall deny or restrict 
authority for the proposed or ongoing activity.
    (ii) The process for paragraph (b)(2) of this section involves 
consideration of the enumerated economic factors, taking into account 
their relative weight and significance under the circumstances. Previous 
evaluations in similar cases are considered. The net effect is arrived 
at by balancing the positive and negative factors and arriving at a net 
economic effect.
    (2) Contributory effect. In assessing the significance of the 
economic effect of the zone activity as part of the consideration of 
economic factors, and in consideration of whether there is a significant 
public benefit, the Board may consider the contributory effect zone 
savings have as an incremental part of cost effectiveness programs 
adopted by companies to improve their international competitiveness.
    (3) Burden of proof. Applicants for subzones shall have the burden 
of submitting evidence establishing that the

[[Page 74]]

activity does or would result in a significant public benefit, taking 
into account the factors in paragraph (b) of this section. Applicants 
for approval of manufacturing or processing in general-purpose zones 
shall submit evidence regarding the positive economic effects that would 
result from activity within the zone and may submit evidence and 
comments as to policy considerations. Both types of applicants are 
expected to submit information in response to evidence of adverse 
economic effects during the public comment period. Parties should submit 
evidence that is probative and substantial in addressing the matter in 
issue.
    (d) Monitoring and post-approval reviews--(1) Ongoing zone activity 
may be reviewed at anytime to determine whether it is in compliance with 
the Act and regulations, as well as the authority granted by the Board. 
Reviews may also be conducted to determine whether there are changed 
circumstances that raise questions as to whether the activity is 
detrimental to the public interest, taking into account the factors 
enumerated in Sec.  400.31. The Board may prescribe special monitoring 
requirements in its decisions when appropriate.
    (2) Reviews may be initiated by the Board, the Commerce Department's 
Assistant Secretary for Import Administration, or the Executive 
Secretary; or, they may be undertaken in response to requests from 
parties directly affected by the activity in question and showing good 
cause.
    (3) Upon review, if the Board finds that zone activity is no longer 
in the public interest, taking into account the provisions of Sec.  
400.31, it may restrict the activity in question. The appropriateness of 
a delayed effective date will be considered in such cases.

[56 FR 50798, Oct. 8, 1991; 56 FR 56544, Nov. 5, 1991]