A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a country's typical economic laws. The category 'SEZ' covers a broad range of more specific zone types, including Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Zones (FZ), Industrial Estates (IE), Free Ports, Urban Enterprise Zones and others. Usually the goal of a structure is to increase foreign direct investment by foreign investors, typically an international business or a multinational corporation (MNC).

In the People's Republic of China, Special Economic Zones were founded by the central government under Deng Xiaoping in the early 1980s. The most successful Special Economic Zone in China, Shenzhen, has developed from a small village into a city with a population over 10 million within 20 years.

Following the Chinese examples, Special Economic Zones have been established in several countries, including Brazil, India, Iran, Jordan, Kazakhstan, Pakistan, the Philippines, Poland, Republic of Korea, Russia, Ukraine, United Arab Emirates, Cambodia. Currently, Puno, Peru has been slated to become a "Zona Economica" by its president Alan Garcia.

A single SEZ can contain multiple 'specific' zones within its boundaries. The most prominent examples of this layered approach are Subic Bay Freeport Zone in the Philippines, the Aqaba Special Economic Zone Authority in Jordan,QuEST Global SEZ, Sricity Multi-product SEZ and Mundra SEZ in India and According to World Bank estimates, as of 2007 there are more than 3,000 projects taking place in SEZs in 120 countries worldwide.

SEZs have been implemented using a variety of institutional structures across the world ranging from fully public (government operator, government developer, government regulator) to 'fully' private (private operator, private developer, public regulator). In many cases, public sector operators and developers act as quasi-government agencies in that they have a pseudo-corporate institutional structure and have budgetary autonomy. SEZs are often developed under a public-private partnership arrangement, in which the public sector provides some level of support (provision of off-site infrastructure, equity investment, soft loans, bond issues, etc) to enable a private sector developer to obtain a reasonable rate of return on the project (typically 10-20% depending on risk levels).

Contents

[hide] 1 China 2 India

o 2.1 List of SEZs in India 3 Indonesia 4 Iran 5 Kazakhstan 6 North Korea

7 Pakistan o 7.1 List of SEZs in the Pakistan

8 Philippines o 8.1 List of SEZs in the Philippines

9 Poland 10 Republic of Korea (South Korea) 11 Russia

o 11.1 Technical/Innovational Zones o 11.2 Industrial/developmental Zones o 11.3 Tourist Zones

12 Ukraine 13 U.S.S.R. 14 References

15 External links

[edit] China

Main article: Special Economic Zones of the People's Republic of China

Currently, the most prominent SEZs in the country are Shenzhen, Xiamen, Shantou, Zhuhai and Hainan Province. It is notable that Shenzhen, Shantou, and Zhuhai are all in Guangdong province, and all are on the southern coast of China where sea is very accessible for transportation of goods.

[edit] India

Considering the need to enhance foreign investment and promote exports from the country and realising the need that a level playing field must be made available to the domestic enterprises and manufacturers to be competitive globally, the Government of India had in April 2000 announced the introduction of Special Economic Zones policy in the country, deemed to be foreign territory for the purposes of trade operations, duties and tariffs. As of 2007, more than 500 SEZs have been proposed, 220 of which have been created. This has raised the concern of the World Bank, which questions the sustainability of such a large number of SEZs. The Special Economic Zones in India closely follow the PRC model.

India passed special economic zone act in 2005. In India, the government has been proactive in the development of the SEZs. They have formulated policies, reviewed them occasionally and have ensured that ample facilities are provided to the developers of the SEZs as well as to the companies setting up units in the SEZs.

[edit] List of SEZs in India

Ahmedabad , Baroda, Kandla and Surat (Gujarat)

Agra (Uttar Pradesh) Belgaum Aerospace SEZ Operational SEZ in (Karnataka) from QuEST Group Chennai ,Trichy, Ilandaikulam Madurai, Nanguneri and Tirunelveli (Tamil Nadu) Chennai One (Thoraipakkam, Chennai) ETA Technopark (Navalur, Chennai) Falta (West Bengal) Hyderabad (Andhra Pradesh) Kensington (Powai, Mumbai) Cochin (Kerala) Mahindra World City , (Chennai and Jaipur) from Mahindra Group Mangalore (Karnataka) MARG Swarnabhoomi (SEZs) for Engineering and Multi Services, (Tamil Nadu)

(http://www.margswarnabhoomi.com) Nagpur also refer MIHAN, Pune and SEEPZ in Mumbai (Maharashtra) NOIDA , Greater NOIDA (Uttar Pradesh) UP Pharma and Biotech SEZ, Aurangabad, Maharashtra

(http://www.inspirainfra.com) Pithampur (Madhya Pradesh) Polepally (Andhra Pradesh) Visakhapatnam (Andhra Pradesh) Velankani SEZ, (Chennai) (http://www.velankanisez.com)

Currently, India has more than 1022 units in operations in over 9 functional SEZs, each an average size of 200 acres (0.81 km2). 8 Export Processing Zones (EPZs) have been converted into SEZs. These are fully functional. All these SEZs are in various parts of the country in the private/joint sectors or by the State Government. But this process of planning and development is under question, as the states in which the SEZs have been approved are facing intense protests, from the farming community, accusing the government of forcibly snatching fertile land from them, at heavily discounted prices as against the prevailing prices in the commercial real estate industry. Also some reputed companies like Bajaj and others have commented against this policy and have suggested using barren and wasteland for setting up of SEZs.

Attempts to set up a Special Economic Zone in Nandigram have led to protests by villagers in the area. A Parliamentary Committee to study and give recommendations on SEZs has said that no further SEZs be notified unless the existing law is amended to incorporate the changes related to the land acquisitions.

Genpact has announced its plans to expand its presence in Hyderabad by setting up a Special Economic Zone (SEZ) across 50 acres (200,000 m2) in the city at Jawahar Nagar.

India's first Aerospace SEZ at Belgaum S.A.B.C.A, Magellan Aerospace & Farinia GEIE signs MOU with QuEST Global at its SEZ.

[edit] Indonesia

Main article: Batam Island#SEZ - Special Economic Zones

[edit] Iran

Arg - e - Jadid Special Economic Zone: Vehicle Manufacturing Hub. PetZone: Petrochemical special economic Zone, Mahshahr. Kish : Kish island special economic zone. Sarakhs Sirjan Shahid Rajaee Port[1] Amirabad Special Economic Zone[2] Bushehr Port

[edit] Kazakhstan

Astana

Multiple Economic zones created by the mandate of the President. Each zone has a different focus. South Kazakhstan "Ontustyk" special economic zone is dedicated to the development of the textile industry in Kazakhstan.

[edit] North Korea

The Rajin-Sonbong Economic Special Zone was established under a UN economic development programme in 1994. Located on the bank of the Tuman River, the zone borders on the Yanbian Korean Autonomous Prefecture (or, Yeonbyeon in Korean) of the People's Republic of China, as well as Russia. In 2000 the name of the area was shortened to Rason and became separate from the North Hamgyeong Province.

[edit] Pakistan

Taking the example of the Chinese success with their SEZs, China is helping Pakistan develop the Haier-Ruba economic zone on the outskirts of Lahore.

Other economic zones include the China-Pakistan economic zone open only to Chinese investors and also the future crown jewel of Pakistan, Gwadar.

There are also talks of creating a Japanese city for foreign investors from Japan only.

There has also been new SEZ proposed on the currently under construction Sialkot-Lahore motorway, Qatar has proposed an investment for $1 billion in a new SEZ along the motorway.

There is also a new zone under construction in Faislababd, which will be the biggest industrial estate of Pakistan when complete, it has sections for each country and the first phrase is already complete with a special Chinese zone in it.

[edit] List of SEZs in the Pakistan

Karachi Export Processing Zone , Karachi, Sindh Risalpur Export Processing Zone, Risalpur Sialkot Export Processing Zone, Sialkot, Punjab Gujranwala Export Processing Zone, Gujranwala, Punjab Saindak Export Processing Zone, Saindak, Balochistan Reko Diq Export Processing Zone Khalifa Coastal Oil Refinery EPZ Gwadar Export Processing Zone, Gwadar, Balochistan Special Industrial Development Zone, Gwadar, Balochistan Faisalabad Export Processing Zone, Faisalabad, Punjab Special Inudstrial Economic Zone, Lahore, Punjab

[edit] Philippines

Philippine economic zones (ecozones) are collections of industries, brought together geographically for the purpose of promoting economic development. Although designed to operate separately from the political and economic milieu of surrounding communities, Philippine economic zones do in fact interact with their neighbors. There are 41 private-owned economic zones and 4 government owned economic zones in the Philippines. Of the 41 private economic zones, the biggest exporter is Gateway Business Park in General Trias, Cavite and the second biggest private ecozone is Laguna Technopark Inc. The four governmentally owned are Cavite Economic Zone, Bataan Economic Zone, Mactan Economic Zone and Baguio City Economic Zone. Thus it is a useful act for the growth of economic zone of the country.

[edit] List of SEZs in the Philippines

Subic Bay Metropolitan Authority Clark Special Economic Zone Philippine Economic Zone Authority PHIVIDEC Industrial Authority Zamboanga City Special Economic Zone Authority Cagayan Special Economic Zone Aurora Special Economic Zone

[edit] Poland

There are 14 Special Economic Zones in Poland [1] :

Kamiennogórska SSE Katowice Special Economic Zone Kostrzyńsko-Słubicka SSE Krakowski Park Technologiczny Legnicka SSE Łódzka SSE SSE EURO-PARK MIELEC Słupska SSE SSE Starachowice Suwalska SSE Pomorska SSE (Pomeranian Special Economic Zone) Tarnobrzeska SSE Wałbrzych Special Economic Zone "INVEST-PARK" Warmińsko-Mazurska SSE

[edit] Republic of Korea (South Korea)

The Daegu-Gyeongbuk Free Economic Zone (DGFEZ) is located in the Southeastern part of South Korea. As the name suggests, DGFEZ encompasses parts of Daegu Metropolitan City and parts of North Gyeongsang (Gyeongbuk) Province (Gumi, Pohang, Gyeongsan, and Yeongcheon cities). In total there are 11 specialized districts spanning 39.54 km2. DGFEZ is a Knowledge-Creative Free Economic Zone with 7 of the districts specialized on knowledge-based service industries and 4 for knowledge-based manufacturing industries.

[edit] Russia

[edit] Technical/Innovational Zones

Dubna Zelenograd Neudorf (Russian: Нойдорф) - industrial and business park in special economic

zone in Strelna near Saint Petersburg, Russia Novo-Orlovskoye (Russian: Ново-Орловское) - SEZ territory in Saint Petersburg,

Russia Tomsk

[edit] Industrial/developmental Zones

“Alabuga” (special economic zone) Lipetsk

[edit] Tourist Zones

Krasnodar Krai

Stavropol Krai Kaliningrad Oblast (Yantar, Kaliningrad Special Economic Zone) Altai Krai Altai Republic Irkutsk Oblast Buryatia

[edit] Ukraine

Special Economic Zones existed in Ukraine until March 31, 2005. The first created was the Nouth-Crimean Experimental Economic Zone Syvash (since 1996). From 1998 to 2000 11 new zones were created.

Name Location Area Established Time limit*

NCEEZ Syvash Autonomous Republic of Crimea 1996 5 years

Slavutych Slavutych, Kiev Oblast 2,000 ha 30.06.1998till 01.01.2020

Azov Mariupol, Donetsk Oblast 315 ha 21.07.1998 60 years

Donetsk Donetsk, Donetsk Oblast 466 ha 21.07.1998 60 years

ZakarpattiaUzhhorodskyi Raion and Mukachivskyi Raion, Zakarpattia Oblast

737 ha 09.01.1999 30 years

Yavoriv Yavorivskyi Raion, Lviv Oblast116,000 ha

17.02.1999till 01.01.2020

Interport Kovel Kovel, Volyn Oblast 57 ha 01.01.2000 20 years

Kurortopolis Truskavets

Truskavets, Lviv Oblast 774 ha 01.01.2000 20 years

MykolaivMykolaiv, Mykolaiv Oblast, shipyard territory, and adjoining area

865 ha 01.01.2000 30 years

Port KrymKerch, Autonomous Republic of Crimea

27 ha 01.01.2000 30 years

Porto-FrancoOdessa, part of Odessa Trade Sea Port's territory

32 ha 01.01.2000 25 years

Reni Reni, Odessa Oblast 94 ha 17.05.2000 30 years

* Initially planned time of operation given. All zones were shut down on March 31, 2005.

NCEEZ — Nouth-Crimean Experimental Economic Zone.

Sources: [3] [4] [5] and Пехник А.В., Іноземні інвестиції в економіку України. Навчальний посібник, Вид. «Знання», Київ 2007, pages: 49, 310–319

[edit] U.S.S.R.

As for Finland and Yugoslavia, the reason for their rapid economic growth was the Soviet Union’s policy of treating those states as special economic zones, through which it gained access to technologies and the know-how of the West. Export of such products to the USSR was often prohibited due to their dual purpose. (U.S.S.R. Special Economic Zones)

[edit] References

1. ̂ http://www.mg.gov.pl/Specjalne+strefy+ekonomiczne/Wykaz+SSE/

Chee Kian Leong, 2007, A Tale of Two Countries: Openness and Growth in China and India [6], Dynamics, Economic Growth, and International Trade (DEGIT) Conference Paper.

Introduction 

India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports, with Asia's first EPZ set up in Kandla in 1965. With a view to overcome the shortcomings experienced on account of the multiplicity of controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime and with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000.

This policy intended to make SEZs an engine for economic growth supported by quality

infrastructure complemented by an attractive fiscal package, both at the Centre and the State

level, with the minimum possible regulations. SEZs in India functioned from 1.11.2000 to

09.02.2006 under the provisions of the Foreign Trade Policy and fiscal incentives were made

effective through the provisions of relevant statutes. 

To instill confidence in investors and signal the Government's commitment to a stable SEZ

policy regime and with a view to impart stability to the SEZ regime thereby generating

greater economic activity and employment through the establishment of SEZs, a

comprehensive draft SEZ Bill prepared after extensive discussions with the stakeholders. A

number of meetings were held in various parts of the country both by the Minister for

Commerce and Industry as well as senior officials for this purpose. The Special Economic

Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent

on the 23rd of June, 2005. The draft SEZ Rules were widely discussed and put on the website

of the Department of Commerce offering suggestions/comments. Around 800 suggestions

were received on the draft rules. After extensive consultations, the SEZ Act, 2005, supported

by SEZ Rules, came into effect on 10th February, 2006, providing for drastic simplification of

procedures and for single window clearance on matters relating to central as well as state

governments. The main objectives of the SEZ Act are:

(a) generation of additional economic activity

(b) promotion of exports of goods and services;

(c) promotion of investment from domestic and foreign sources;

(d) creation of employment opportunities;

(e) development of infrastructure facilities;

It is expected that this will trigger a large flow of foreign and domestic investment in SEZs, in

infrastructure and productive capacity, leading to generation of additional economic activity

and creation of employment opportunities.

The SEZ Act 2005 envisages key role for the State Governments in Export Promotion and

creation of related infrastructure. A Single Window SEZ approval mechanism has been

provided through a 19 member inter-ministerial SEZ Board of Approval (BoA). The

applications duly recommended by the respective State Governments/UT Administration are

considered by this BoA periodically. All decisions of the Board of approvals are with

consensus.

The SEZ Rules provide for different minimum land requirement for different class of SEZs.

Every SEZ is divided into a processing area where alone the SEZ units would come up and

the non-processing area where the supporting infrastructure is to be created.

The SEZ Rules provide for:

" Simplified procedures for development, operation, and maintenance of the Special

Economic Zones and for setting up units and conducting business in SEZs;

Single window clearance for setting up of an SEZ;

Single window clearance for setting up a unit in a Special Economic Zone;

Single Window clearance on matters relating to Central as well as State

Governments;

Simplified compliance procedures and documentation with an emphasis on self

certification

Approval mechanism and Administrative set up of SEZs

Approval mechanism

The developer submits the proposal for establishment of SEZ to the concerned State

Government. The State Government has to forward the proposal with its recommendation

within 45 days from the date of receipt of such proposal to the Board of Approval. The

applicant also has the option to submit the proposal directly to the Board of Approval.

The Board of Approval has been constituted by the Central Government in exercise of the powers conferred under the SEZ Act. All the decisions are taken in the Board of Approval by consensus. The Board of Approval has 19 Members. Its constitution is as follows:

(1) Secretary, Department of Commerce Chairman

(2) Member, CBEC Member

(3) Member, IT, CBDT Member

(4) Joint Secretary (Banking Division), Department of Economic Affairs, Ministry of Finance

 

(5) Joint Secretary (SEZ), Department of Commerce Member

(6) Joint Secretary, DIPP Member

(7) Joint Secretary, Ministry of Science and Technology Member

(8) Joint Secretary, Ministry of Small Scale Industries and Agro and Rural Industries

Member

(9) Joint Secretary, Ministry of Home Affairs Member

(10)

Joint Secretary, Ministry of Defence Member

(11)

Joint Secretary, Ministry of Environment and Forests Member

(12)

Joint Secretary, Ministry of Law and Justice Member

(13)

Joint Secretary, Ministry of Overseas Indian Affairs Member

(14)

Joint Secretary, Ministry of Urban Development Member

(15)

A nominee of the State Government concerned Member

(16)

Director General of Foreign Trade or his nominee Member

(17)

Development Commissioner concerned Member

(18)

A professor in the Indian Institute of Management or the Indian Institute of Foreign Trade

Member

(19)

Director or Deputy Sectary, Ministry of Commerce and Industry, Department of Commerce

Member Secretary

Administrative set up

The functioning of the SEZs is governed by a three tier administrative set up. The Board of

Approval is the apex body and is headed by the Secretary, Department of Commerce. The

Approval Committee at the Zone level deals with approval of units in the SEZs and other

related issues. Each Zone is headed by a Development Commissioner, who is ex-officio

chairperson of the Approval Committee.

Once an SEZ has been approved by the Board of Approval and Central Government has

notified the area of the SEZ, units are allowed to be set up in the SEZ. All the proposals for

setting up of units in the SEZ are approved at the Zone level by the Approval Committee

consisting of Development Commissioner, Customs Authorities and representatives of State

Government. All post approval clearances including grant of importer-exporter code number,

change in the name of the company or implementing agency, broad banding diversification,

etc. are given at the Zone level by the Development Commissioner. The performance of the

SEZ units are periodically monitored by the Approval Committee and units are liable for penal

action under the provision of Foreign Trade (Development and Regulation) Act, in case of

violation of the conditions of the approval.

Facilities and Incentives 

Incentives and facilities offered to the SEZs

 The incentives and facilities offered to the units in SEZs for attracting investments

into the SEZs, including foreign investment include:-

Duty free import/domestic procurement of goods for development, operation and

maintenance of SEZ units

100% Income Tax exemption on export income for SEZ units under Section 10AA of

the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed

back export profit for next 5 years.

Exemption from minimum alternate tax under section 115JB of the Income Tax Act.

External commercial borrowing by SEZ units upto US $ 500 million in a year without

any maturity restriction through recognized banking channels.

Exemption from Central Sales Tax.

Exemption from Service Tax.

Single window clearance for Central and State level approvals.

Exemption from State sales tax and other levies as extended by the respective State

Governments.  

The major incentives and facilities available to SEZ developers include:-

Exemption from customs/excise duties for development of SEZs for authorized

operations approved by the BOA.

Income Tax exemption on income derived from the business of development of the

SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act.

Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act.

Exemption from dividend distribution tax under Section 115O of the Income Tax Act.

Exemption from Central Sales Tax (CST).

Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Act).

Export Performances 

Exports from the functioning SEZs during the last three years are as under:

Year Value (Rs. Crore) Growth Rate ( over previous year )

2003-2004 13,854 39%

2004-2005 18,314 32%

2005-2006 22 840 25%

2006-20007 34,615 52%

2007-2008 66,638 93%

2008-2009 99,689 50%

For Export Counseling by phone Contact the Trade Information Center at

1-800-USA-TRADE Ask the TIC

FOREIGN TRADE ZONES June 2000

By Ian MacLeodTrade Information Center, Trade Development

What is a Foreign Trade Zone?

Foreign Trade Zones (FTZs) were created in the United States to provide special customs procedures to U.S. plants engaged in international trade-related activities. Duty-free treatment is accorded items that are processed in FTZs and then reexported, and duty payment is deferred on items until they are brought out of the FTZ for sale in the U.S. market. This helps to offset customs advantages available to overseas producers who compete with domestic industry. The Foreign-Trade Zones (FTZ) Board (composed of representatives from the U.S. Departments of Commerce and Treasury) has its operational staff in the International Trade Administration's Import Administration.

How can companies benefit from using FTZs?

FTZs are considered to be outside of U.S. Customs Territory for the purpose of customs duty payment. Therefore, goods entering FTZs are not subject to customs tariffs until the goods leave the zone and are formally entered into U.S. Customs Territory. Merchandise that is shipped to foreign countries from FTZs is exempt from duty payments. This provision is especially useful to firms that import components in order to manufacture finished products for export.There is no time limit on goods stored inside a FTZ and certain foreign and domestic merchandise held in FTZs may be exempted from state and local inventory taxes. This allows firms to minimize their costs while their products are waiting to be shipped. In addition, quota restrictions are in some cases waived for items entering an FTZ; however, the restrictions would apply if the items were to enter the U.S. market. A variety of activities can be conducted in a zone, including assembling, packaging, destroying, storing, cleaning, exhibiting, re-packing, distributing, sorting, grading, testing, labeling, repairing, combining with foreign or domestic content, or processing. Manufacturing and processing require specific FTZ Board approval, however.

Can Foreign Trade Zones hurt domestic producers?

FTZ activity must not conflict with U.S. trade policy or harm domestic industry or other domestic plants outside of zones. The FTZ Board requires that zone manufacturing activity result in a significant public benefit and a net positive economic effect. In addition, the U.S. Customs Service supervises all zone activity and ensures that all customs and FTZ Board requirements are observed.

What are the different types of FTZs?

FTZs are divided into general-purpose zones and subzones. The Foreign-Trade Zones Board accepts and reviews applications for both. State or local governments, port authorities, nonprofit organizations, or economic development agencies typically sponsor general-purpose zones. General-purpose zones involve public facilities that can be used by more than one firm, and are most commonly ports or industrial parks used by small to medium sized businesses for warehousing/distribution and some processing/assembly. Subzones, on the other hand, are sponsored by general-purpose zones, but typically involve a single firm's site which is used for more extensive manufacturing/processing or warehousing/distribution that cannot easily be accomplished in a general-purpose zone.

How can I locate a FTZ near me and who do I contact to begin doing business with it?

In order to take advantage of FTZ procedures, you should contact a local FTZ. A geographic list of all FTZs and their telephone numbers is available on the FTZ Board website, http://ia.ita.doc.gov/ftzpage/. Each FTZ has its own requirements for firms that wish to do business with them, but there is a general process that is followed by all. Many FTZs will counsel prospective clients to determine how they can best use the FTZ. Additionally, many FTZs will discuss with their local U.S. Customs Service offices the qualifications of the prospective clients for the zone. If you are interested in finding out more information on zones, you may contact the nearest zone in your state, visit the FTZ website, or call the FTZ staff at 202-482-2862.

Are there FTZs abroad that can help me as an exporter?

Many other countries operate similar special customs zones, such as export processing zones

and free trade zones. Interested parties should contact the embassy or customs officials of that country for information and documentation requirements. Contact information for foreign embassies is available by calling 1-800-USA-TRAD(E). Many U.S. freight forwarders also have established contacts with many of these foreign zones and can provide information on the appropriate documentation needed to ship goods through them.

Foreign-Trade Zone Consultants

About The Foreign-Trade Zone CorporationAnd The People Behind The Company

 

The Foreign-Trade Zone Corporation is the only nationally recognized consulting firm limiting its practice to Foreign-Trade Zone consulting. The firm is recognized for its extensive record of successful zone projects. The FTZ Corporation aggressively and tirelessly works to ensure success for every one of its clients. The FTZ Corporation continues to grow due to its extraordinary track record. This growth is in great part due to the FTZ Corporation’s commitment to assembling a team of FTZ Experts who have demonstrated the highest level of professional performance in a real-world FTZ environment.

In addition to a wide range of consulting work from Foreign-Trade Zones Board applications to activations with Customs, the firm operates 9 foreign-trade zone projects. Its management of these projects is in keeping with the Foreign-Trade Zone Corporation's philosophy that there is no substitute for hands-on-experience.

Foreign-Trade Zone Consultants

What Is A Foreign-Trade Zone?

 

A Foreign-Trade Zone is a specially designated area, in or adjacent to a U.S. Customs Port Of Entry, which is considered to be outside the Customs Territory of the U.S.

The following is a partial list of the many benefits you can attain when using Foreign-Trade Zones or Foreign-Trade Zone Subzone:

No Duty Is Ever Paid On Re-Exported Merchandise from a Foreign-Trade Zone

If The Merchandise Is Sold Domestically, No Duty Is Paid Until It Leaves The Zone Or Zones

Generally, No Duty Is Paid On Waste Or Yield Loss in a Foreign-Trade Zone or Subzone

Duty On Scrap Is Eliminated Or Reduced in a Foreign-Trade Zone

Generally, If Foreign Merchandise Is Manufactured within a Foreign-Trade Zone or Subzone Into A Product With A Lower Duty Rate, Then The Lower Duty Rate Applies On The Foreign Content When Duty Is Paid

Merchandise In A Foreign-Trade Zone May Be Stored, Repackaged, Manipulated,  Manufactured, Destroyed Or Otherwise Altered or Change

Foreign-Trade Zone Consultants

$$ Benefits of Foreign Trade Zones$$

A Few Of The Ways Foreign-Trade Zones Can Save Your Company Money

DUTY EXEMPTION ON RE-EXPORTS: If merchandise is re-exported after being placed in a FTZ or shipped to another FTZ and then re-exported then no duty is ever paid.

RELIEF FROM INVERTED TARIFFS: Generally, if foreign merchandise is brought into a Foreign-Trade Zone or Subzone and manufactured into a product that carries a lower duty rate, then the lower rate applies.

FOR EXAMPLE: A Foreign-Trade Zone user imports a motor (which carries a 5.3% duty rate) and uses it in the manufacture of a vacuum cleaner (which has a 1.4% duty rate). When the vacuum cleaner leaves the FTZ and enters the commerce of the U.S., the duty owed on the

motor drops from the 5.3% motor rate to the 1.4% vacuum cleaner rate.

DUTY ELIMINATION ON WASTE AND SCRAP: No duty is charged on most waste and scrap from production in Foreign-Trade Zones.

NO DUTY ON REJECTED OR DEFECTIVE PARTS: Merchandise found to be defective or faulty, may be returned to the country of origin for repair or simply destroyed. Whichever choice is taken, no duty is paid. Many companies suffer from the "double duty crunch." That is, they pay duty on imported merchandise, find it to be faulty and return it to the country of origin for repair, and then pay duty again when the merchandise reenters the United States. If you are a Foreign-Trade Zone user or Subzone, the "double duty crunch" is never a problem, because your merchandise never enters the commerce of the United States.

DUTY DEFERRAL: No duty is ever charged on merchandise while it is in a Foreign Trade Zone, and there is no limit on the length of time merchandise may be kept in a Foreign-Trade Zone. By deferring the duty, capital is freed for more important needs.

NO DUTY ON DOMESTIC CONTENT OR VALUE ADDED: The "value added" to a product in a FTZ (including manufacture using domestic parts, cost of labor, overhead, and profit) is not included in its dutiable value when the final product leaves the Zone. Final duties are assessed on foreign content only.

RELIEF FROM LOCAL AD VALOREM TAXES: Foreign merchandise stored in  Foreign-Trade Zones, or merchandise held in a zone for export, is not subject to any state or local ad valorem taxes.

NO DUTY ON SALES TO THE U.S. MILITARY OR NASA: No duty is charged on merchandise sold from a Foreign-Trade Zone to the U.S. Military or NASA, returned to the country of origin for repair or simply destroyed. Whichever choice is taken, no duty is paid.

To learn more about Foreign-Trade Zones, visit the FTZ Resource Center by Clicking on the Banner Below

A free trade zone (FTZ) or export processing zone (EPZ) is an area of a country where some normal trade barriers such as tariffs and quotas are eliminated and bureaucratic requirements are lowered in hopes of attracting new business and foreign investments. It is a region where a group of countries has agreed to reduce or eliminate trade barriers.[1] Free trade zones can be defined as labor intensive manufacturing centers that involve the import of raw materials or components and the export of factory products.

Most FTZs are located in developing countries: Brazil, China, the Philippines, Malaysia, Pakistan, Mexico, Costa Rica, Honduras, and Madagascar have EPZ programs.[2] In 1997, 93 countries had set up export processing zones (EPZs) employing 22.5 million people, and five years later, in 2003, EPZs in 116 countries employed 43 million people.[2]

Corporations setting up in a zone may be given tax breaks as an incentive. Usually, these zones are set up in underdeveloped parts of the host country; the rationale is that the zones will attract employers and thus reduce poverty and unemployment, and stimulate the area's economy. These zones are often used by multinational corporations to set up factories to produce goods (such as clothing or shoes).

Free trade zones in Latin America date back to the early decades of the 20th century. The first free trade regulations in this region were enacted in Argentina and Uruguay in the 1920s. However, the rapid development of free trade zones across the region dates from the late 1960s and the early 1970s.

Free Trade Zones are also known as Special Economic Zones in some countries. Special Economic Zones (SEZs) have been established in many countries as testing grounds for the implementation of liberal market economy principles. SEZs are viewed as instruments to enhance the acceptability and the credibility of the transformation policies and to attract domestic and foreign investment.

In 1999, there were 43 million people working in about 3000 FTZs spanning 116 countries producing clothes, shoes, sneakers, electronics, and toys. The basic objectives of EPZs are to enhance foreign exchange earnings, develop export-oriented industries and to generate employment opportunities.

Contents

[hide] 1 Criticism 2 List of Free Trade Zones 3 See also

4 References

[edit] Criticism

Free trade zones are domestically criticized for encouraging businesses to set up operations under the influence of other governments, and for giving foreign corporations more economic liberty than is given indigenous employers who face large and sometimes insurmountable "regulatory" hurdles in developing nations. However, many countries are increasingly allowing local entrepreneurs to locate inside FTZs in order to access export-based incentives. Because the multinational corporation is able to choose between a wide range of underdeveloped or depressed nations in setting up overseas factories, and most

of these countries do not have limited governments, bidding wars (or 'races to the bottom') sometimes erupt between competing governments.

Sometimes the domestic government pays part of the initial cost of factory setup, loosens environmental protections and rules regarding negligence and the treatment of workers, and promises not to ask payment of taxes for the next few years. When the taxation-free years are over, the corporation that set up the factory without fully assuming its costs is often able to set up operations elsewhere for less expense than the taxes to be paid, giving it leverage to take the host government to the bargaining table with more demands, but parent companies in the United States are rarely held accountable.[3]

The widespread use of free trade zones by companies such as Nike has received criticism from numerous writers such as Naomi Klein in her book No Logo.