§ 81c. — Exemption from customs laws of merchandise brought into foreign trade zone.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 19USC81c]
TITLE 19--CUSTOMS DUTIES
CHAPTER 1A--FOREIGN TRADE ZONES
Sec. 81c. Exemption from customs laws of merchandise brought
into foreign trade zone
(a) Handling of merchandise in zone; shipment of foreign merchandise
into customs territory; appraisal; reshipment to zone
Foreign and domestic merchandise of every description, except such
as is prohibited by law, may, without being subject to the customs laws
of the United States, except as otherwise provided in this chapter, be
brought into a zone and may be stored, sold, exhibited, broken up,
repacked, assembled, distributed, sorted, graded, cleaned, mixed with
foreign or domestic merchandise, or otherwise manipulated, or be
manufactured except as otherwise provided in this chapter, and be
exported, destroyed, or sent into customs territory of the United States
therefrom, in the original package or otherwise; but when foreign
merchandise is so sent from a zone into customs territory of the United
States it shall be subject to the laws and regulations of the United
States affecting imported merchandise: Provided, That whenever the
privilege shall be requested and there has been no manipulation or
manufacture effecting a change in tariff classification, the appropriate
customs officer shall take under supervision any lot or part of a lot of
foreign merchandise in a zone, cause it to be appraised and taxes
determined and duties liquidated thereon. Merchandise so taken under
supervision may be stored, manipulated, or manufactured under the
supervision and regulations prescribed by the Secretary of the Treasury,
and whether mixed or manufactured with domestic merchandise or not may,
under regulations prescribed by the Secretary of the Treasury, be
exported or destroyed, or may be sent into customs territory upon the
payment of such liquidated duties and determined taxes thereon. If
merchandise so taken under supervision has been manipulated or
manufactured, such duties and taxes shall be payable on the quantity of
such foreign merchandise used in the manipulation or manufacture of the
entered article. Allowance shall be made for recoverable and
irrecoverable waste; and if recoverable waste is sent into customs
territory, it shall be dutiable and taxable in its condition and
quantity and at its weight at the time of entry. Where two or more
products result from the manipulation or manufacture of merchandise in a
zone the liquidated duties and determined taxes shall be distributed to
the several products in accordance with their relative value at the time
of separation with due allowance for waste as provided for above:
Provided further, That subject to such regulations respecting identity
and the safeguarding of the revenue as the Secretary of the Treasury may
deem necessary, articles, the growth, product, or manufacture of the
United States, on which all internal-revenue taxes have been paid, if
subject thereto, and articles previously imported on which duty and/or
tax has been paid, or which have been admitted free of duty and tax, may
be taken into a zone from the customs territory of the United States,
placed under the supervision of the appropriate customs officer, and
whether or not they have been combined with or made part, while in such
zone, of other articles, may be brought back thereto free of quotas,
duty, or tax: Provided further, That if in the opinion of the Secretary
of the Treasury their identity has been lost, such articles not entitled
to free entry by reason of noncompliance with the requirements made
hereunder by the Secretary of the Treasury shall be treated when they
reenter customs territory of the United States as foreign merchandise
under the provisions of the tariff and internal-revenue laws in force at
that time: Provided further, That under the rules and regulations of the
controlling Federal agencies, articles which have been taken into a zone
from customs territory for the sole purpose of exportation, destruction
(except destruction of distilled spirits, wines, and fermented malt
liquors), or storage shall be considered to be exported for the purpose
of--
(1) the draw-back, warehousing, and bonding, or any other
provisions of the Tariff Act of 1930, as amended, and the
regulations thereunder; and
(2) the statutes and bonds exacted for the payment of draw-back,
refund, or exemption from liability for internal-revenue taxes and
for the purposes of the internal-revenue laws generally and the
regulations thereunder.
Such a transfer may also be considered an exportation for the purposes
of other Federal laws insofar as Federal agencies charged with the
enforcement of those laws deem it advisable. Such articles may not be
returned to customs territory for domestic consumption except where the
Foreign-Trade Zones Board deems such return to be in the public
interest, in which event the articles shall be subject to the provisions
of paragraph 1615(f) of section 1201 of this title: Provided further,
That no operation involving any foreign or domestic merchandise brought
into a zone which operation would be subject to any provision or
provisions of section 1807, chapter 15, chapter 16, chapter 17, chapter
21, chapter 23, chapter 24, chapter 25, chapter 26, or chapter 32 of the
Internal Revenue Code if performed in customs territory, or involving
the manufacture of any article provided for in paragraphs 367 or 368 of
section 1001 of this title, shall be permitted in a zone except those
operations (other than rectification of distilled spirits and wines, or
the manufacture or production of alcoholic products unfit for beverage
purposes) which were permissible under this chapter prior to July 1,
1949: Provided further, That articles produced or manufactured in a zone
and exported therefrom shall on subsequent importation into the customs
territory of the United States be subject to the import laws applicable
to like articles manufactured in a foreign country, except that articles
produced or manufactured in a zone exclusively with the use of domestic
merchandise, the identity of which has been maintained in accordance
with the second proviso of this section may, on such importation, be
entered as American goods returned: Provided, further, That no
merchandise that consists of goods subject to NAFTA drawback, as defined
in section 3333(a) of this title, that is manufactured or otherwise
changed in condition shall be exported to a NAFTA country, as defined in
section 3301(4) of this title, without an assessment of a duty on the
merchandise in its condition and quantity, and at its weight, at the
time of its exportation (or if the privilege in the first proviso to
this subsection was requested, an assessment of a duty on the
merchandise in its condition and quantity, and at its weight, at the
time of its admission into the zone) and the payment of the assessed
duty before the 61st day after the date of exportation of the article,
except that upon the presentation, before such 61st day, of satisfactory
evidence of the amount of any customs duties paid or owed to the NAFTA
country on the article, the customs duty may be waived or reduced
(subject to section 508(b)(2)(B) of the Tariff Act of 1930 [19 U.S.C.
1508(b)(2)(B)]) in an amount that does not exceed the lesser of (1) the
total amount of customs duties paid or owed on the merchandise on
importation into the United States, or (2) the total amount of customs
duties paid on the article to the NAFTA country: Provided, further,
That, if Canada ceases to be a NAFTA country and the suspension of the
operation of the United States-Canada Free-Trade Agreement thereafter
terminates, with the exception of drawback eligible goods under section
204(a) of the United States-Canada Free-Trade Agreement Implementation
Act of 1988, no article manufactured or otherwise changed in condition
(except a change by cleaning, testing or repacking) shall be exported to
Canada during the period such Agreement is in operation without the
payment of a duty that shall be payable on the article in its condition
and quantity, and at its weight, at the time of its exportation to
Canada unless the privilege in the first proviso to this subsection was
requested.
(b) Applicability to bicycle component parts
The exemption from the customs laws of the United States provided
under subsection (a) of this section shall not be available on or before
December 31, 1992, to bicycle component parts unless such parts are
reexported from the United States, whether in the original package, as
components of a completely assembled bicycle, or otherwise.
(c) Articles manufactured or produced from denatured distilled spirits
withdrawn free of tax from distilled spirits plant; products
unfit for beverage purposes
(1) Notwithstanding the provisions of the fifth proviso of
subsection (a) of this section, any article (within the meaning of
section 5002(a)(14) of title 26) may be manufactured or produced from
denatured distilled spirits which have been withdrawn free of tax from a
distilled spirits plant (within the meaning of section 5002(a)(1) of
title 26), and articles thereof, in a zone.
(2) Notwithstanding the provisions of the fifth proviso of
subsection (a) of this section, distilled spirits which have been
removed from a distilled spirits plant (as defined in section 5002(a)(1)
of title 26) upon payment or determination of tax may be used in the
manufacture or production of medicines, medicinal preparation, food
products, flavors, or flavoring extracts, which are unfit for beverage
purposes, in a zone. Such products will be eligible for drawback under
the internal revenue laws under the same conditions applicable to
similar manufacturing or production operations occurring in customs
territory.
(d) Foreign trade zones
In regard to the calculation of relative values in the operations of
petroleum refineries in a foreign trade zone, the time of separation is
defined as the entire manufacturing period. The price of products
required for computing relative values shall be the average per unit
value of each product for the manufacturing period. Definition and
attribution of products to feedstocks for petroleum manufacturing may be
either in accordance with Industry Standards of Potential Production on
a Practical Operating Basis as verified and adopted by the Secretary of
the Treasury (known as producibility) or such other inventory control
method as approved by the Secretary of the Treasury that protects the
revenue.
(e) Production equipment
(1) In general
Notwithstanding any other provision of law, if all applicable
customs laws are complied with (except as otherwise provided in this
subsection), merchandise which is admitted into a foreign trade zone
for use within such zone as production equipment or as parts for
such equipment, shall not be subject to duty until such merchandise
is completely assembled, installed, tested, and used in the
production for which it was admitted.
(2) Admission procedures
The person who admits the merchandise described in paragraph (1)
into the zone shall, at the time of such admission, certify to the
Customs Service that the merchandise is admitted into the zone
pursuant to this subsection for use within the zone as production
equipment or as parts for such equipment and that the merchandise
will be entered and estimated duties deposited when use of the
merchandise in production begins.
(3) Entry procedures
At the time use of the merchandise in production begins, the
merchandise shall be entered, as provided for in section 484 of the
Tariff Act of 1930 [19 U.S.C. 1484], and estimated duties shall be
deposited with the Customs Service. The merchandise shall be subject
to tariff classification according to its character, condition, and
quantity, and at the rate of duty applicable, at the time use of the
merchandise in production begins.
(4) Foreign trade zone
For purposes of this subsection, the term ``foreign trade zone''
includes a subzone.
(June 18, 1934, ch. 590, Sec. 3, 48 Stat. 999; June 17, 1950, ch. 296,
Sec. 1, 64 Stat. 246; Pub. L. 91-271, title III, Sec. 309, June 2, 1970,
84 Stat. 292; Pub. L. 98-573, title II, Sec. 231(a)(2), Oct. 30, 1984,
98 Stat. 2990; Pub. L. 99-514, title XVIII, Sec. 1894, Oct. 22, 1986,
100 Stat. 2931; Pub. L. 100-418, title I, Sec. 1783(f), Aug. 23, 1988,
102 Stat. 1300; Pub. L. 100-449, title II, Sec. 204(c)(5), Sept. 28,
1988, 102 Stat. 1863; Pub. L. 100-647, title IX, Sec. 9002, Nov. 10,
1988, 102 Stat. 3808; Pub. L. 101-382, title III, Secs. 481, 484F, Aug.
20, 1990, 104 Stat. 706, 710; Pub. L. 103-182, title II, Sec. 203(b)(5),
Dec. 8, 1993, 107 Stat. 2091; Pub. L. 104-295, Sec. 31(a), Oct. 11,
1996, 110 Stat. 3536; Pub. L. 106-36, title I, Sec. 1001(b)(2), June 25,
1999, 113 Stat. 131.)
References in Text
The customs laws, referred to in text, are classified generally to
this title.
The Tariff Act of 1930, as amended, referred to in subsec. (a)(1),
is act June 17, 1930, ch. 497, 46 Stat. 590, as amended, which is
classified generally to chapter 4 (Sec. 1202 et seq.) of this title. For
complete classification of this Act to the Code, see Tables.
Sections 1001 and 1201 of this title, referred to in subsec. (a),
which comprised the dutiable and free lists for articles imported into
the United States, were repealed by Pub. L. 87-456, title I,
Sec. 101(a), May 24, 1962, 76 Stat. 72, which act also revised the
Tariff Schedules of the United States. The Tariff Schedules of the
United States were replaced by the Harmonized Tariff Schedule of the
United States which is not set out in the Code. See Publication of
Harmonized Tariff Schedule note set out under section 1202 of this
title.
References in subsec. (a) to section and chapters of the Internal
Revenue Code are references to section and chapters of the Internal
Revenue Code, 1939, which was repealed by section 7851 of Title 26,
I.R.C. 1954. The Internal Revenue Code of 1954 was redesignated the
Internal Revenue Code of 1986 by Pub. L. 99-514, Sec. 2, Oct. 22, 1986,
100 Stat. 2095. Corresponding sections of I.R.C. 1986 to section and
chapters of I.R.C. 1939 referred to in the text are set out below. For
provision deeming a reference in other laws to a provision of I.R.C.
1939, also as a reference to corresponding provision of I.R.C. 1986, see
section 7852(b) of Title 26, I.R.C. 1986.
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I.R.C. 1939 I.R.C. 1986
------------------------------------------------------------------------
Sec. 1807...................... Omitted
Chapter 15...................... Sec. 5701 et seq.
Chapter 16...................... Sec. 4591 et seq., Sec. 4811 et seq.
Chapter 17...................... Sec. 4831 et seq.
Chapter 21...................... Omitted
Chapter 23...................... Sec. 4701 et seq.
Chapter 24...................... Sec. 4801 et seq.
Chapter 25...................... Secs. 4181, 4182, and 5811 et seq.
Chapter 26...................... Sec. 5001 et seq.
Chapter 32...................... Sec. 4501 et seq.
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Section 204 of the United States-Canada Free-Trade Agreement
Implementation Act of 1988, referred to in subsec. (a), is section 204
of Pub. L. 100-449, which is set out in a note under section 2112 of
this title.
The internal revenue laws, referred to in subsec. (c)(2), are
classified generally to Title 26, Internal Revenue Code.
Amendments
1999--Subsec. (a). Pub. L. 106-36 struck out second period at end of
last sentence.
1996--Subsec. (e). Pub. L. 104-295 added subsec. (e).
1993--Subsec. (a). Pub. L. 103-182, in provisions following par.
(2), inserted second proviso relating to goods subject to NAFTA
drawback, and in last proviso inserted ``, if Canada ceases to be a
NAFTA country and the suspension of the operation of the United States-
Canada Free-Trade Agreement thereafter terminates,'' after ``That'' and
substituted ``during the period such Agreement is in operation'' for
``on or after January 1, 1994, or such later date as may be proclaimed
by the President under section 204(b)(2)(B) of such Act of 1988,''.
1990--Subsec. (b). Pub. L. 101-382, Sec. 481, substituted ``on or
before December 31, 1992'' for ``before January 1, 1991''.
Subsec. (c). Pub. L. 101-382, Sec. 484F, designated existing
provisions as par. (1), struck out ``domestic'' before ``denatured
distilled'', inserted provisions relating to withdrawal free of tax from
a distilled spirits plant, and added par. (2).
1988--Subsec. (a). Pub. L. 100-449 inserted provision directing
that, ``with the exception of drawback eligible goods under section
204(a) of the United States-Canada Free-Trade Agreement Implementation
Act of 1988, no article manufactured or otherwise changed in condition
(except a change by cleaning, testing or repacking) shall be exported to
Canada on or after January 1, 1994, or such later date as may be
proclaimed by the President under section 204(b)(2)(B) of such Act of
1988, without the payment of a duty that shall be payable on the article
in its condition and quantity, and at its weight, at the time of its
exportation to Canada unless the privilege in the first proviso to this
subsection was requested.''
Subsec. (b). Pub. L. 100-418 substituted ``January 1, 1991'' for
``June 30, 1986''.
Subsec. (d). Pub. L. 100-647 added subsec. (d).
1986--Subsec. (c). Pub. L. 99-514 added subsec. (c).
1984--Subsec. (a). Pub. L. 98-573 designated existing provisions as
subsec. (a), redesignated former pars. (a) and (b) as pars. (1) and (2),
respectively, of subsec. (a), and added subsec. (b).
1970--Pub. L. 91-271 substituted references to the appropriate
customs officers for references to the collector of customs wherever
appearing.
1950--Act June 17, 1950, amended section generally to remove the
prohibition against, and to authorize specifically, manufacture and
exhibition within a zone.
Effective Date of 1996 Amendment
Section 31(b) of Pub. L. 104-295 provided that: ``The amendment made
by this section [amending this section] shall apply with respect to
merchandise admitted into a foreign trade zone after the date that is 15
days after the date of the enactment of this Act [Oct. 11, 1996].''
Effective Date of 1993 Amendment
Amendment by Pub. L. 103-182 applicable (1) with respect to exports
from the United States to Canada on Jan. 1, 1996, if Canada is a NAFTA
country on that date and after such date for so long as Canada continues
to be a NAFTA country and (2) with respect to exports from the United
States to Mexico on Jan. 1, 2001, if Mexico is a NAFTA country on that
date and after such date for so long as Mexico continues to be a NAFTA
country, see section 213(c) of Pub. L. 103-182, set out as an Effective
Date note under section 3331 of this title.
Effective Date of 1990 Amendment
Section 485(a) of title III (Secs. 301-485) of Pub. L. 101-382
provided that: ``Except as otherwise provided in this title, the
amendments made by this title [amending this section and sections 1309,
1313, 1466, and 1553 of this title and enacting provisions set out as
notes under sections 1309, 1466, and 1553 of this title], shall apply
with respect to articles entered, or withdrawn from warehouse for
consumption, on or after October 1, 1990.''
Effective and Termination Dates of 1988 Amendments
Amendment by Pub. L. 100-449 effective on date the United States-
Canada Free-Trade Agreement enters into force (Jan. 1, 1989), and to
cease to have effect on date Agreement ceases to be in force, see
section 501(a), (c) of Pub. L. 100-449, set out in a note under section
2112 of this title.
Amendment by section 1783(f) of Pub. L. 100-418 applicable with
respect to articles entered or withdrawn from warehouse for consumption,
after Sept. 30, 1988, pursuant to section 1831(a) of Pub. L. 100-418.
Effective Date of 1984 Amendment
Section 231(a)(3) of Pub. L. 98-573 provided that: ``The amendments
made by paragraph (2) [amending this section] shall take effect on the
fifteenth day after the date of the enactment of this Act [Oct. 30,
1984].''
Effective Date of 1970 Amendment
Amendment by Pub. L. 91-271 effective with respect to articles
entered, or withdrawn from warehouse for consumption, on or after Oct.
1, 1970, and such other articles entered or withdrawn from warehouse for
consumption prior to such date, or with respect to which a protest has
not been disallowed in whole or in part before Oct. 1, 1970, see section
203 of Pub. L. 91-271, set out as a note under section 1500 of this
title.
Transfer of Functions
For transfer of functions, personnel, assets, and liabilities of the
United States Customs Service of the Department of the Treasury,
including functions of the Secretary of the Treasury relating thereto,
to the Secretary of Homeland Security, and for treatment of related
references, see sections 203(1), 551(d), 552(d), and 557 of Title 6,
Domestic Security, and the Department of Homeland Security
Reorganization Plan of November 25, 2002, as modified, set out as a note
under section 542 of Title 6.
All offices of collector of customs, comptroller of customs,
surveyor of customs, and appraiser of merchandise in Bureau of Customs
of Department of the Treasury to which appointments were required to be
made by President with advice and consent of Senate ordered abolished
with such offices to be terminated not later than December 31, 1966, by
Reorg. Plan No. 1 of 1965, eff. May 25, 1965, 30 F.R. 7035, 79 Stat.
1317, set out as a note under section 1 of this title. All functions of
offices eliminated were already vested in Secretary of the Treasury by
Reorg. Plan No. 26 of 1950, eff. July 31, 1950, 15 F.R. 4935, 64 Stat.
1280, set out in the Appendix to Title 5, Government Organization and
Employees.
Floor Stocks Tax Treatment of Articles in Foreign Trade Zones
Notwithstanding this chapter, articles located in a foreign trade
zone on the effective date of increases in tax under specific amendments
by Pub. L. 101-508 subject to floor stocks taxes under certain
circumstances, see section 11218 of Pub. L. 101-508, set out as a note
under section 5001 of Title 26, Internal Revenue Code.
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A
or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or title XVIII
[Secs. 1801-1899A] of Pub. L. 99-514 require an amendment to any plan,
such plan amendment shall not be required to be made before the first
plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub.
L. 99-514, as amended, set out as a note under section 401 of Title 26,
Internal Revenue Code.
Section Referred to in Other Sections
This section is referred to in sections 58c, 1508 of this title;
title 26 sections 5003, 5214.
