This year, INTA has launched a series of workshops titled “Free Trade Zones: Commerce vs. Counterfeits.” Balancing the positive economic impact of free trade zones (FTZs) with the proliferation of counterfeit goods in FTZs remains an ongoing struggle. INTA’s one-day FTZ workshops are designed to bring together key stakeholders to discuss their FTZ experiences and share best practices, in an effort to work together toward a solution to effectively combat counterfeit products. Want to attend an upcoming workshop, but don’t know a lot about FTZs? We’re here to help!
What are free trade zones? FTZs take a variety of forms and can include international airports, major ports, national frontiers, or any other designated area that allows for the duty-free import of raw materials, components, sub-assemblies, semi-finished goods, or finished goods. Such items can be stored, displayed, assembled, or processed for re-export or entry into the general market of the importing country (after paying the required duties). FTZs are also called foreign trade zones or free zones.
How many FTZs exist? The number of FTZs has increased dramatically over the last four decades and is growing rapidly. In 1975, there were only 79 FTZs worldwide, employing roughly 800,000 people. Today, there are an estimated 3,000 FTZs in 135 countries, accounting for 68 million jobs and USD 500 billion in direct trade‒related value.
Why are FTZs beneficial? FTZs attract employers, stimulate the regional economy, and promote economic growth for the host country by increasing foreign investment, employment, innovation, and technological development. Governments are increasingly promoting international trade by creating FTZs as free trading areas within their borders in regions where a minimum level of oversight occurs.
FTZs offer a number of incentives to attract business and trade, including non-discriminatory access, streamlined customs procedures, import and export duty exemptions, and liberal foreign exchange policies. Given the considerable economic benefits, FTZs have become indispensable tools for global business.
Why are there problems with FTZs? Along with the recent global proliferation of FTZs has come increasing vulnerability to a wide range of abuses by criminal actors who have taken advantage of relaxed oversight, softened Customs controls and the lack of transparency in these zones. For example, the 2010 OECD/FATF report titled Money Laundering Vulnerabilities of Free Trade Zones delineates abuses in FTZs, including: “participation in an organized criminal group and racketeering, illicit trafficking in narcotics, fraud, smuggling and counterfeiting and piracy of products.” The very reason that FTZs are so popular—the relaxation in regulations and the loosening of the overseeing of operations—has enabled criminal networks to use the transit or transshipment of goods, through multiple, geographically diverse FTZs, for no other purpose than to disguise the nature of illicit products.
This hijacking of FTZs not only impairs their primary function—to facilitate legitimate trade, but also creates an enormous drain on the global economy. Billions of dollars (USD) in legitimate economic activity are being crowded out, facilitating “underground economies” that deprive governments of tariffs.
What is INTA’s rationale behind organizing FTZ workshops? The movement of counterfeit goods through FTZs remains a key concern for the Association. While criminals today are choosing to sell their counterfeits online, they still need to get the goods to consumers. Although we’re seeing an increase of counterfeiters using express courier services for small consignments, the use of large shipping containers continues to play a significant role in moving counterfeit goods.
Governments, including customs departments and the courts, need support and guidance. To address this issue, all stakeholders from across the international community must work together as an anticounterfeiting network. These FTZ workshops are designed to provide a forum for brand owners, FTZ authorities, government officials, and other key stakeholders to share their concerns and best practices, and to work together toward solutions to combat the ongoing threat of counterfeiting in FTZs.
As an association, INTA is continuing to try and work to protect FTZs from illicit trade. The Anticounterfeiting Committee (ACC) is the largest committee within the Association, with 270 members worldwide. The ACC is instrumental in helping to organize member events and in drafting anticounterfeiting resources for members, as follows:
With a successful event previously held in Hong Kong, INTA is eager to present the upcoming FTZ workshops. Join us for the following Free Trade Zone: Commerce vs. Counterfeits Workshops to learn more:
For more information about Free Trade Zones, read ICC’s Business Action to Stop Counterfeiting and Piracy (BASCAP) report titled Controlling the Zone: Balancing facilitation and control to combat illicit trade in the world’s Free Trade Zones and watch INTA’s video on the expansion of the Panama Canal.