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.
[7] An export-processing zone (EPZ) is a specific type of FTZ usually set up in developing countries by their governments to promote industrial and commercial exports.
[8] Most FTZs are located in developing countries; Brazil, Colombia, India, Indonesia, El Salvador, China, the Philippines, Malaysia, Bangladesh, Nigeria, Pakistan, Mexico, the Dominican Republic, Costa Rica, Honduras, Guatemala, Kenya, Sri Lanka, Mauritius, and Madagascar all have EPZ programs.
[14] The World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures (SCM) has content on the conditions and benefits of free zones.
Corporations setting up in a zone may be given a number of regulatory and fiscal incentives, such as the right to establish a business, the right to import parts and equipment without duty, the right to keep and use foreign exchange earnings, and sometimes income or property tax breaks.
Special economic zones (SEZs) have been established in many countries as testing grounds for the implementation of liberal market economy principles.
The basic objectives of economic zones are to enhance foreign exchange earnings, develop export-oriented industries, and generate employment opportunities.
The ASF may be an appropriate option for certain Foreign-Trade Zone projects, but the decision of whether to adopt the new framework and what the configuration of the sites should be requires careful analysis and planning.
Regardless of the choice to expand the FTZ project, the sites should be selected and the application drafted in such a manner as to receive swift approval while maximizing benefit to those that locate in the Zone.
Successful zone projects are generally the result of a plan developed and implemented by individuals who understand all aspects of the FTZ program.
The application submitted by its grantee, the Greater Miami Foreign Trade Zone was approved and officially ordered by the FTZB on January 8, 2013.
[26] Aberdeen Group research published in 2013 noted that best-in-class companies make strategic use of free-trade zones as a means of reducing inbound trade costs, shortening import timescales, and optimising the balance of their corporate sourcing and operational activities.
[27] The European Union, in 2020, introduced new stricter rules to identify and report suspicious activities at free ports and zones in response to the "high incidence of corruption, tax evasion, and criminal activity", with a further review to take place in the following year, The European Parliament suggested that increasing demand for free ports could be partly a response to global crackdowns on tax evasion.
The European Commission in a report said that free ports were popular for the storage of art, precious stones, antiques, gold, and wine as alternative assets to cash, and posed an emerging threat in multiple ways: allowing counterfeiters to land consignments and tamper with loads and paperwork, then re-export the products without customs formalities, disguising the actual origin and nature of the goods and their supplier.
The commission said they were also used for narcotics trafficking, the illegal ivory trade, people smuggling, VAT fraud, corruption and money laundering.
"Legal businesses owned by criminals remain key to money-laundering activities... free ports are perceived as facilities that protect their clients'' identity and financial dealings, much as private banks used to."
As an example, the commission cited Swiss authorities' 2016 seizure of cultural relics looted from the Middle East being stored in Geneva's free ports.
[28][29] The free port system has been accused of facilitating international art crime, allowing stolen artworks to remain undetected in storage for decades.
[31] 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.
[32] Political writer Naomi Klein has also criticized the transient nature of FTZs, noting the factory closures connected to the 1997 Asian financial crisis.