22 September 2013

FREE TRADE ZONE

FREE TRADE ZONE

A free trade zone (FTZ) also called foreign-trade zone, formerly free port, is an area within which goods may be landed, handled, manufactured or reconfigured, and exported without the intervention of the customs authorities. Only when the goods are moved to consumers within the country in which the zone is located do they become subject to the prevailing custom duties. Free-trade zones are organized around major seaports, international airports, and national frontiers—areas with many geographic advantages for trade. It is a region where a group of countries has agreed to reduce or eliminate trade barriers. Free trade zones can be defined as a labor intensive manufacturing center that involve the import of raw materials or components and the export of factory products. This was an attempt by the Irish Government to promote employment within a rural area, make use of a small regional airport and generate revenue for the Irish economy. It was hugely successful, and is still in operation today. The number of worldwide free-trade zones proliferated in the late 20th century.

BENEFIT OF FREE TRADE ZONE
Governments provide the carriers and shippers flexibility. Without FTZ, any mistaken would mean that the cargo be sent out of the country, an expensive solution. It is good way for unstable countries to get some free and fair enterprise. Foreign companies are often shy entering an unstable country, but an free trade zone is usually much safer.
Delay tariffs - As long as the cargo sits in the Free trade zone, it does not pay the import duties. The FTZ is physically just a warehouse, usually, but it is more expensive than an average warehouse.
Avoid Tariffs before on shipment – The cargo may not be destined for that country at all. It may sit in an free trade zone and then be exported.
Processing – This is more like export processing zone (EPZ), but even free trade zone do some processing
Correct mistakes – The customs authority may have told the importer that the cargo was not up to the local law, so it can sit in the free trade zone to be fixed
Sell – the cargo may be bought and sold while sitting in the free trade zone.

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