Free Trade Zones & Bonded Warehouses

929 words - 4 pages

Free Trade Zone (FTZ):Definition:A Free Trade Zone is an area of a country, a federation of countries or parts of them, where tariffs, trade barriers or quotas are eliminated and bureaucratic requirements are lowered in order to attract (foreign) companies by raising the incentives for doing business here, such as tariff preferences, cheap labour force, completed infrastructure, tax exemption and the political stability of a FTZ.Often laws like environmental laws or labour laws are suspended as well.Most FTZs are located in developing countries. China is here one of the pre-dominant examples. They are special zones where (some) normal trade barriers such as import or export tariffs do not apply, bureaucracy is typically minimized by outsourcing it to the FTZ operator and corporations setting up in the zone may be given tax breaks as an additional incentive. Usually, these zones are set up in underdeveloped parts of the host country, the rationale being 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).Because there ar no taxes as long as you stay inside the zone, a FTZ can be a good place to store goods temporarily in between shipments. It can also be a good place especially if those products to manufacture products such as toys or clothing, are made from raw materials that come from many different places.In a FTZ as a federation, in contrast to a tariff union, each member keeps different tariffs towards third-party-nations. Goods from those countries must also be declared if shifted between member-countries. Therefore border controls are still necessary.Examples of FTZ:•AFTA - ASEAN Free Trade Area•CARICOM - Caribbean Community and Common Market•CER - Closer Economic Relations•COMESA - Common Market for Eastern and Southern Africa•DIC - Dubai Internet City•EFTA - European Free Trade Association•EU - European Union,•EEA - European Economic Area,•FTAA - Free Trade Area of the Americas•JAFZ - Jebel Ali Free Zone in Dubai•MCCA - Mercado Común Centroamericano•Mercosur - Mercado Común del Sur•NAFTA - North American Free Trade Agreement•SADC - Southern African Development Community•SAARC - South-Asian Association for Regional CooperationBonded Warehouse:A warehouse established by the state, or by private enterprise, in which goods liableto duty are stored until the duty upon them has been paid is called Bonded Warehouse.Previous to the establishment of bonded warehouses, in many countries the payment of duties on imported goods had to be made at the time of importation, or a bond with security for future payment given to the revenue authorities. There were many negative side effects in this system. It was not always possible for the importer to find sureties, and he had often to make...

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