Free economic zone

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Free economic zones (FEZ), free economic territories (FETs) or free zones (FZ) are a class of special economic zone (SEZ) designated by the trade and commerce administrations of various countries. The term is used to designate areas in which companies are taxed very lightly or not at all to encourage economic activity. The taxation rules are determined by each country. The World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures (SCM) has content on the conditions and benefits of free zones. [1]

Contents

Some special economic zones are called free ports. Sometimes they have historically been endowed with favorable customs regulations such as the free port of Trieste. As Britain was proposing the creation of ten free ports after leaving the European Union in early 2020, the EU was clamping down on 82 free zones after finding that their special status had aided the financing of terrorism, money laundering and organised crime. [2]

Definition

According to the 1999 Revised Kyoto Convention, a "'free zone' means a part of the territory of a contracting party where any goods introduced are generally regarded, insofar as import duties and taxes are concerned, as being outside the customs territory." [3]

History

An early type of special economic zone was free ports, these historically were endowed with favorable customs regulations. In modern times free port has come to mean a specific type of special economic zone, for example LADOL.

All "free ports" in the world were permitted by the respective states, save the Free Port of Trieste that with the signing of the 16th Resolution of the Security Council of the United Nations [4] (10 January 1947) and the signing of the Treaty of Peace with Italy [5] (10 February 1947, ratified 15 September 1947) were put territorially under the sovereignty of the United Nations itself. As cited on Annex VIII, Article 3 paragraph 2: "The establishment of special zones in the Free Port under the exclusive jurisdiction of any State is incompatible with the status of the Free Territory and of the Free Port". For example, it was not possible to apply the "Italian Law on Ports" in the extraterritorial free zones of the UN Free Port of Trieste with the effect that all actual territorial concessions were null and void.

In 1954 the Free Territory of Trieste was dissolved and given to its neighbours, Italy and Yugoslavia.

Criminal use

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. [2] The free port system has been accused of facilitating international art crime, allowing stolen artworks to remain undetected in storage for decades. [6]

List of free economic zones by country

See also

Related Research Articles

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A special economic zone (SEZ) is an area in which the business and trade laws are different from the rest of the country. SEZs are located within a country's national borders, and their aims include increasing trade balance, employment, increased investment, job creation and effective administration. To encourage businesses to set up in the zone, financial policies are introduced. These policies typically encompass investing, taxation, trading, quotas, customs and labour regulations. Additionally, companies may be offered tax holidays, where upon establishing themselves in a zone, they are granted a period of lower taxation.

Free Territory of Trieste Former country in Europe between Italy and Yugoslavia

The Free Territory of Trieste was an independent territory situated in Central Europe between northern Italy and Yugoslavia, facing the north part of the Adriatic Sea, under direct responsibility of the United Nations Security Council in the aftermath of World War II. For a period of seven years, it acted essentially as a free city.

World Customs Organization Intergovernmental organization

The World Customs Organization (WCO) is an intergovernmental organization headquartered in Brussels, Belgium. The WCO is noted for its work in areas covering the development of international conventions, instruments, and tools on topics such as commodity classification, valuation, rules of origin, collection of customs revenue, supply chain security, international trade facilitation, customs enforcement activities, combating counterfeiting in support of Intellectual Property Rights (IPR), drugs enforcement, illegal weapons trading, integrity promotion, and delivering sustainable capacity building to assist with customs reforms and modernization. The WCO maintains the international Harmonized System (HS) goods nomenclature, and administers the technical aspects of the World Trade Organization (WTO) Agreements on Customs Valuation and Rules of Origin.

Trade agreement

A trade agreement is a wide-ranging taxes, tariff and trade treaty that often includes investment guarantees. It exists when two or more countries agree on terms that help them trade with each other. The most common trade agreements are of the preferential and free trade types, which are concluded in order to reduce tariffs, quotas and other trade restrictions on items traded between the signatories.

A free-trade zone (FTZ) is a class of special economic zone. It is a geographic area where goods may be imported, 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.

Index of international trade articles

This is a list of international trade topics.

Special economic zones of China

Special economic zones (SEZs) in mainland China are granted more free market-oriented economic policies and flexible governmental measures by the government of China, compared to the planned economy elsewhere. This allows SEZs to utilize economic management which is more attractive to foreign and domestic businesses. In SEZs, "...foreign and domestic trade and investment are conducted without the authorization of the Chinese central government in Beijing" with "tax and business incentives to attract foreign investment and technology".

Liepaja Special Economic Zone – is the only special economic zone in Baltics consisting of seaport, industrial area and international airport. Liepāja Special Economic zone was established in 1997 to develop port operations, cargo handling, logistics, manufacturing and air transportation. The goal of the Liepāja SEZ is to attract investments for the development of the port and manufacturing and creation of new working places.

Rules of origin Rules to attribute a country of origin to a product

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Financial crime

Financial crime is crime committed against property, involving the unlawful conversion of the ownership of property to one's own personal use and benefit. Financial crimes may involve fraud ; theft; scams or confidence tricks; tax evasion; bribery; sedition; embezzlement; identity theft; money laundering; and forgery and counterfeiting, including the production of counterfeit money and consumer goods.

European Union Customs Union Customs union

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International Commercial Law is a body of legal rules, conventions, treaties, domestic legislation and commercial customs or usages, that governs international commercial or business transactions. A transaction will qualify to be international if elements of more than one country are involved.

Alabuga Special Economic Zone

Alabuga is a special economic zone of an industrial and production type located in a 20 km² area in the Yelabuzhsky District of the Republic of Tatarstan in the Kama Innovative Territorial Production Cluster 10 km from Yelabuga, 25 km from Naberezhnye Chelny, 40 km from Nizhnekamsk and 210 km from the regional center — Kazan. The shareholders of the management company of the SEZ "Alabuga" are the Russian Federation through the JSC "Special Economic Zones" with 100% state participation (66%) and the Ministry of Land and Property of the Republic of Tatarstan (34%).

The United States imposes tariffs on imports of goods. The duty is levied at the time of import and is paid by the importer of record. Customs duties vary by country of origin and product. Goods from many countries are exempt from duty under various trade agreements. Certain types of goods are exempt from duty regardless of source. Customs rules differ from other import restrictions. Failure to properly comply with customs rules can result in seizure of goods and criminal penalties against involved parties. The United States Customs and Border Protection (CBP) enforces customs rules.

Golden Triangle Special Economic Zone

The Golden Triangle Special Economic Zone is located along the Mekong River in the Ton Pheung District of Bokeo Province in Laos. The zone has an area about 3,000 hectares and was created in 2007 by the Lao Government together with the Chinese-owned Hong Kong registered company Kings Romans Group with the hope of generating economic development.

References

  1. "WTO Subsidies and Countervailing Measures: overview. Agreement on Subsidies and Countervailing Measures ("SCM Agreement")". www.wto.org. World Trade Organization. Archived from the original on 13 January 2021.
  2. 1 2 Daniel Boffey (10 February 2020). "EU clamps down on free ports over crime and terrorism links". The Guardian.
  3. Revised Kyoto Convention 1999.
  4. "S/Res/16(1947) - e - S/Res/16(1947)".
  5. http://treaties.un.org/doc/Publication/UNTS/Volume%2049/v49.pdf
  6. Rachel Corbett; Julia Halperin; Richelle Simon (30 June 2015). "Experts identify top six scandals amid boom in art crime". The Art Newspaper.

Bibliography