Free Trade Zone

A free-trade zone (FTZ) is a specific class of special economic zone. It is a geographic area where goods may be landed, stored, handled, manufactured, or reconfigured, and re-exported under specific customs regulation and generally not subject to customs duty. Free trade zones are generally organized around major seaports, international airports, and national frontiers—areas with many geographic advantages for trade.

The World Bank defines free trade zones as "small, fenced-in, duty-free areas, offering warehousing, storage, and distribution facilities for trade, transshipment, and re-export operations." Free-trade zones can also be defined as labor-intensive manufacturing centers that involve the import of raw materials or components and the export of factory products, but this is a dated definition as more and more free zones focus on service industries such as software, back-office operations, research, and financial services.

Free-trade zones are referred to as "foreign-trade zones" in the United States (Foreign Trade Zones Act of 1934). In the United States, FTZs provide Customs-related advantages as well as exemptions from state and local inventory taxes. In other countries, they have been called "duty free export processing zones," "export free zones," "export processing zones," "free export zones," "free zones," "industrial free zones," "investment promotion zones," "maquiladores," and "special economic zones." Some were previously called "free ports". Free zones range from specific-purpose manufacturing facilities to areas where legal systems and economic regulation vary from the normal provisions of the country concerned. Free zones may reduce taxes, customs duties, and regulatory requirements for registration of business. Zones around the world often provide special exemptions from normal immigration procedures and foreign investment restrictions as well as other features. Free zones are intended to foster economic activity and employment that could occur elsewhere.

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