STAFF REPORT

Enhancing the Foreign-Trade Zones Program

for Small and Medium-Sized Manufacturers

May 2004

 Andrew J. McGilvray

 Foreign-Trade Zones Board Staff
EXECUTIVE SUMMARY

Pursuant to the Department of Commerce’s report "Manufacturing in America: A

Comprehensive Strategy to Address the Challenges to U.S. Manufacturers," the Foreign-Trade

Zones (FTZ) Board staff has conducted an analysis to benchmark the FTZ program with similar

programs abroad. The focus of the analysis was to determine whether there are features that

could be implemented to reduce the FTZ program’s costs for small and medium-sized

manufacturers (SMMs), thereby helping to enhance SMMs' international competitiveness. This

report conveys the findings and recommendations of the FTZ Board staff.

Benchmarking the FTZ program revealed two key features to reduce the program’s costs for

SMM users: providing quicker access and simplifying the application process. Based on an

analysis of how those features could be implemented within the FTZ program’s statutory and

regulatory framework, the FTZ Board staff drafted two proposals. The first proposal involves a

procedural change to expedite the processing of simple manufacturing requests for existing FTZ

sites through the delegation of the FTZ Board’s decision-making on those cases. The second

proposal includes simplified application guidelines/formats for SMMs and enhancements to the

FTZ Board's pre-application counseling procedures.

The FTZ Board published a Federal Register notice seeking public comment on the two

proposals and received comments from 18 different entities. Commenters, including FTZ

grantees, manufacturers, consulting groups, and the National Association of Foreign Trade

Zones, universally favored adoption of the proposals. At the same time, the commenters

strongly emphasized the need for clear guidelines to be used in implementing the proposals.

Taking into account the commenters’ requests for clear guidelines, the FTZ Board staff analyzed

many aspects relating to the implementation of the proposals. That analysis is described in the

"Analysis and Discussion" section of this report – the resulting specific recommendations appear

in the "Key Recommendations" section. Through careful implementation of the proposals, the

FTZ Board should be able to enhance the FTZ program’s usefulness to businesses in improving

their international competitiveness, while at the same time maintaining the FTZ program’s

traditional safeguards against adverse effects on domestic industries.
1

 See "Manufacturing in America" at 79.

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INTRODUCTION

The U.S. Department of Commerce’s January 2004 "Manufacturing in America" report

recommended a benchmark analysis comparing the U.S. foreign-trade zone program with similar

programs abroad to determine whether there are features of those programs to consider

implementing, particularly to lower the cost of the U.S. program for small and medium-sized

manufacturers in the United States.1 That recommendation dovetailed with ongoing initiatives of

the Foreign-Trade Zones Board staff to enhance and simplify access to foreign-trade zone

procedures for small and medium-sized manufacturers (SMMs). This report examines factors

relevant to the benchmark analysis and makes recommendations for implementation.

BACKGROUND

I. GENERAL

In much of the world, trade-focused countries have created "free trade zones" – defined physical

areas within a country’s borders that are treated, for customs purposes, as if they are outside

those borders. Free trade zones enable companies to conduct one or more types of economic

activity (e.g., storage, manufacturing, etc.) using imported goods without having to pay import

duties on those goods. The goods (or downstream products into which they have been

incorporated) can then be re-exported free of duty payments. In some zones, the goods can also

be imported into the host country if relevant import duties are paid.

The range of benefits that can be available through free trade zone-type programs includes:

! Duty Exemption - No duty is paid on goods imported into and then re-exported from a

free trade zone. The exemption can also apply to goods that are consumed, scrapped, or

destroyed within the zone. (Exemption of duties on re-exported merchandise generally

eliminates companies’ need to use "duty drawback" programs.)

! Duty Deferral - Cash flow savings result from payment of customs duties only when

goods "enter" a country’s customs territory, rather than when they are "admitted" into the

country’s free trade zone.

! Logistical Benefits - Companies using free trade zones may have access to streamlined

customs procedures and other related savings.

! Inverted Tariff Savings - Manufacturers may be allowed to pay a lower finished-product

duty rate (rather than the individual duty rates applicable to imported components used in
2

 The FTZ Board is currently comprised of the Secretary of Commerce and the Secretary of the Treasury. 

The U.S. Bureau of Customs and Border Protection fulfills the same Board role as it did prior to its recent move

from Treasury (where it was the U.S. Customs Service) to the Department of Homeland Security, i.e., providing a

position during the FTZ Board voting process with respect to customs security, control, and resource matters.

3

 Though earlier concerns persisted regarding potential negative impact on domestic industry, the

legislative history indicates that the FTZ Board was expected to balance the opposing interests that might arise in

specific situations involving FTZ manufacturing.

4

 In 2002, there were 150 active FTZ projects and 237 subzones in operation.

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the manufacturing process) when they enter the finished product into the country’s

customs territory.

! Tax Savings - Merchandise and activity in free trade zones may be exempt from a range

of taxes.

II. THE U.S. "FOREIGN-TRADE ZONES" PROGRAM

The Foreign Trade Zones Act of 1934 established the concept of "foreign-trade zones" (FTZs) in

the United States, with a stated purpose to "expedite and encourage foreign commerce." Each

U.S. port of entry was thus entitled to one FTZ, at which storage of foreign merchandise could

take place exempt from customs duties but with all other U.S. laws remaining applicable. The

FTZ Act also created the FTZ Board,2 with a mission to license and regulate U.S. FTZs. 

Application for FTZ authority and administration of the resulting FTZs was left to local –

primarily public – entities. Finally, the U.S. Customs Service was given responsibility for

operational oversight of FTZs.

Concerns about possible adverse impact on domestic industry led to a specific prohibition on

manufacturing in the 1934 FTZ Act. Limited early use of the FTZ program helped to spur the

Congress in 1950 to amend the law to permit manufacturing within FTZs.3

 Manufacturing

activity was further encouraged by the FTZ Board’s creation, in 1952, of the concept of

"subzones." A subzone is defined as a special-purpose site, sponsored by an existing FTZ, at a

company’s own facility. Such a subzone could be authorized only if the company’s activity

could not reasonably be accommodated within the sponsoring FTZ’s "general-purpose" facility

and the FTZ Board later added requirements making approval of a subzone contingent on

findings that the approval would be in the public interest and would involve a significant public

benefit.

Use of both general-purpose FTZs and subzones grew at a slow pace after the 1950 changes to

the FTZ Act – use of FTZs finally began to grow, apace with international trade, starting in the

1970s and accelerating in the 1980s.4

 However, as manufacturing grew within the FTZ program

(largely in subzones) during the 1980s, so did concerns about its potential adverse impact on

domestic industries. The FTZ Board addressed those concerns by developing safeguards,

including public comment periods on manufacturing proposals and a balanced analytical
5

 The FTZ Board staff also obtained information about the free trade zone programs operating in 14

additional countries. However, that information was not sufficiently detailed to merit inclusion in Appendix I.

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approach that approves manufacturing requests only when the net economic effect for the United

States is positive.

Among the types of potential benefits listed above for free trade zone programs worldwide, the

major benefits to U.S. FTZ users are duty exemption on exports, duty deferral, inverted tariff

savings, and logistical benefits. A key additional feature of the U.S. program is the flexibility

that can be granted to a manufacturing applicant for election, on an input-by-input basis, of

either the input duty rate or the finished product duty rate. Further, duties are only paid on the

value of foreign production inputs, not on U.S. value added. U.S. FTZ users also may benefit

from duty exemption on goods that are scrapped or destroyed within a zone and, in certain states,

FTZ users can take advantage of exemption from state or local inventory taxes.

Applications for grants of FTZ authority are handled by the FTZ Board’s staff, located within the

U.S. Department of Commerce. The regulatory timeframe for processing an application for a

new zone, subzone, or expansion of existing authority is 10 to 12 months. This timeframe takes

into account the requirement for a public comment period and the time needed for detailed

analysis and interagency concurrence before a case can be approved.

III. MAJOR EXAMPLES OF PROGRAMS ABROAD

For its benchmark analysis, the FTZ Board staff conducted extensive research on free trade zone

programs world-wide. That research included print and internet-based resources, as well as

information requested from U.S. Commercial Service and State Department offices in many

countries. The FTZ Board staff compiled a matrix of data for more than sixty countries’ free

trade zone programs (see Appendix I of this report).5

 The following examples summarize

information from the staff’s research:

A. Canada

Under the Canada Customs Act of 1996, the Canada Revenue Agency (CRA) and Canada

Border Services Agency (CBSA) administer several programs that relate to the free trade zone

concept:

Canada’s Export Distribution Centers (EDCs), referred to synonymously as free trade zones,

provide multi-user, tax-free transhipment areas that are generally located near ports of entry. 

EDCs allow for storage, repacking, and refurbishing of domestic and foreign goods for ultimate

exportation – manufacturing is not allowed. The EDC program, administered by the Tax

Services Offices of CRA, provides exemption from the Harmonized Sales Tax (HST), Goods

and Services Tax (GST), customs duties, and quotas but has performance requirements: 90

percent of revenue must be from export activity and value added in EDCs cannot exceed 20

percent of the foreign material cost.
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Canada's Duty Deferral Program (similar to U.S. bonded warehouses) has a Duties Relief Option

that allows for manufacturing/processing at any private facilities of foreign and domestic goods

for export and the Canadian market. In 2001, Canada modified this program to allow for

multiple operators and to simplify the application process. Benefits of the program include: 

1) exemption from the HST, the GST, customs duties, and quotas for merchandise that is

exported; 2) no security or bonding requirements for low risk goods; 3) duty deferral on

merchandise bound for the Canadian market; and 4) streamlined customs compliance

requirements. To use the Duties Relief Option, a company must file a Form K90-Duties Relief

Application at a local CBSA office.

Canada also has its Exporter of Processing Services (EOPS) program, which is administered by

CRA as a tax incentive program designed for contract processors, third-party logistic providers,

and consignees to process foreign goods destined for re-export. EOPS can be established at any

location and provides exemption from HST and GST for up to three years. To participate, an

applicant must file the above-referenced Form K90 at a local CBSA office.

B. The European Union

In 2002, there were 31 free trade zones in 10 of the member states of the European Union (EU). 

The EU's regulations on free trade zones allow for relief from excise taxes, local duties and other

taxes, pursuant to the laws of the member states. Changes to the regulations in 2003 -- removing

the requirement that a fence be placed along the perimeter of a zone but requiring submission of

a customs declaration at the time goods are placed in a zone -- recognized the evolving nature of

zones in the EU, including that most merchandise in those zones was classified as of EU origin.

Beyond the EU's actual free trade zones are "Customs Procedures with Economic Impact",

which include "processing under customs control" (PCC). PCC was intended to create or

maintain processing activities in the EU by allowing imported goods to be processed into

products that are then subject to a lower duty rate before being "entered" (for customs purposes)

into the EU. Approval for PCC at a company's facilities takes approximately two months and

processing operations are subject to an economic test to establish whether the use of PCC will

enable activity to be created or maintained in the EU without harming community interests. 

Applicants must also demonstrate that the proposed imported production inputs are not available

from EU sources. In 2001, the PCC application procedure was simplified for non-sensitive

goods, with guidelines containing a list of goods and processes that qualify.

C. Australia

Australia had one free trade zone, located in Darwin, to focus on developing trade with nearby

Asian countries. The zone, regulated by the Department of Industry, Science and Resources

(DISR), could provide benefits tailored to a specific project, as well as establishment or

relocation subsidies to companies using the zone. Several manufacturing and processing

activities had taken place in the zone but, in 2003, the legislation allowing the zone was repealed

and the zone ceased to exist. According to the U.S. Commercial Service office in Melbourne,

the zone legislation was repealed because the Darwin project did not appear to be drawing export
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manufacturing activity to Australia from Asia and could not compete with other Asian FTZs,

primarily in China and Indonesia.

In 1997, Australia created a system called Manufacturing in Bond (MIB), reportedly modeled on

U.S. special-purpose subzones. Companies can apply for MIB authority through DISR and must

demonstrate a clear intention to generate exports. After approval, the company must meet the

customs requirements for a warehouse license to begin manufacturing. A company can use both

foreign and domestic merchandise in its operations. If the finished product is exported, no

customs duty or Goods and Services Tax is owed; if the finished product is ultimately entered for

domestic consumption, the duty and tax is paid at the time of entry. The only active MIB

operation currently is the Steel River Facility in Newcastle.

D. Japan

Japan's version of free trade zones is its 22 designated "Foreign Access Zones," most of which

appear to be inactive -- more specific information about the exact activity levels and reasons for

them could not be obtained. The zones were created near harbors and international airports as

trade centers to promote imports, although processing is also permitted. The zones fall under the

supervision of the Ministry of Finance and are run by quasi-public entities. Federal grants and

loan guarantees are available to companies in the zones and special depreciation rates and local

property tax exemption can also apply within the zones. Any other benefits would be

determined by regional authorities.

Separately, there is a free trade zone in Okinawa. This zone provides the standard free trade

zone benefits of duty-free admission into the zone and duty-free re-export and also allows

manufacturing. Goods manufactured in the zone can be entered into Japan's customs territory,

with the company choosing whether to pay the duty rate on the finished goods or the inputs. The

zone also offers an income tax exemption for 10 years and a 50 percent reduction in permit fees.

E. Mexico

The Mexican free trade zone program was established in 1946 at a small number of sites. The

program's benefits include duty deferral, reduction of VAT and temporary taxes, exemption from

customs duties on capital equipment and on imported goods that are re-exported, and exemptions

from import licenses. The program expanded in 1961 to include the Border Zone -- a free trade

zone running along the entire U.S.-Mexican border from Matamoros to Tijuana.

Mexico's subsequent "maquiladora" program allowed duty-free processing of foreign-origin

components for export, primarily to the United States – this was encouraged by favorable U.S.

customs procedures on U.S. goods exported, processed abroad, and then re-imported. Unlike

Mexico's free trade zones, plants located anywhere in the country could operate as a
6

 See the July 2003 report (03-891) by the United States General Accounting Office - the full source

reference appears on the "Mexico" page in Appendix I.

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maquiladora. As of 2003, 98 percent of maquiladoras' production was destined for the U.S.

market.6

Under the 1993 North American Free Trade Agreement (NAFTA), maquiladoras were allowed

duty-free processing for export to non-NAFTA countries and the U.S. market if specific "rules of

origin" were met. However, in 2001, a NAFTA provision went into effect restricting

intra-NAFTA duty deferral/drawback programs (including the maquiladora program), thus

requiring duty payments on components coming from non-NAFTA countries. To offset the

effects of that restriction, Mexico created the Sectoral Promotion Program ("PROSEC"),

allowing targeted and reversible duty reductions on non-NAFTA production inputs for 22 of

Mexico's industry sectors. PROSEC's duty-reduction benefits are available to factories

anywhere in Mexico, thereby eliminating a key reason for plants to operate under the

maquiladora program.

F. Brazil

Although Brazil has eight free trade zones in "frontier" regions, the Manaus zone -- where

manufacturing is permitted subject to specific approval -- is the only active zone project. More

than 400 companies operate in the zone, which allows for duty-free admission and re-export of

goods; domestic shipments benefit from a reduction in import duty, which is payable on the

value of the finished product at 88 percent of the otherwise applicable rate. There is also a 75

percent reduction in business income tax, an exemption on the tax for industrialized products

(IPI), and a reduction or exemption on the in-country sales tax (ICMS). Companies that

manufacture in the Manaus zone must comply with Brazil's Basic Productive Process (PPB)

regime, which has requirements for re-investing some profit in the area and investing 5 percent

of annual sales value in research and development. The process to receive approval to

participate in the PPB regime takes up to six months but, although PPB applications are

company- and product-specific, a foreign company can operate under a Brazilian partner

company's pre-existing PPB approval.

There are also 19 export processing zones located in less developed regions of Brazil but none

are active. In addition to duty deferral and duty exemption on exports and on production

equipment used in the zones, the export processing zones allow manufacturing using foreign and

domestic components. Manufacturing activities must be approved before the operations can

begin and production of goods subject to export quotas is not allowed. Only 10 percent of

production from export processing zones can be entered domestically, with duty paid at a

reduced rate (75 percent of the otherwise applicable rate) on the final price of the goods less the

cost of imported parts.
7

 See Appendix II (Memorandum from Carole Showers, Director, Subsidies Enforcement Office).

8

 For example, some free trade zone programs abroad offer benefits or incentives that are made available in

the United States through state or local "enterprise zones" or similar concepts. This distinction reflects the federal

nature of the U.S. system, where targeting of specific incentives is often left to levels of government closer to the

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ANALYSIS AND DISCUSSION

I. PRELIMINARY ANALYSIS

In examining zone programs world wide, several key distinctions emerge. The first distinction is

between the operational focus of zones in developing countries and in developed countries. 

Developing countries’ zones are frequently structured along the "export processing zone" model,

which tends to reflect economies with small internal markets that require external investment to

spur basic economic development. Export processing zone programs often have small numbers

of sites, thereby allowing the host countries to target their infrastructure expenditures where they

can yield the greatest returns in attracting foreign investment.

Developed countries with zone programs are essentially divided into two groups – one group

consists of the United States and the European Union, while the other group encompasses the

rest of the developed world. Specifically, the size and wealth of the U.S. and EU markets lead

both internal and external manufacturers to focus on selling to those markets. Consequently, the

U.S. and EU have developed zone (or similar) programs that resemble each other most closely

and reflect a different model from economies whose domestic manufacturers are largely

export-focused.

A serious concern about developing countries’ "export processing zone" programs and some

developed countries' export-oriented programs is incompatibility with World Trade Organization

(WTO) subsidy disciplines. In fact, the Subsidies Enforcement Office of the U.S. Department of

Commerce states that,

the United States has investigated Free Trade Zone programs in several countries... Of

particular concern are programs that contain prohibited export or import substitution

elements, e.g., programs that require companies in Free Trade Zones to export a certain

percentage of their production or use a certain amount of domestic content in their

production.7

The Subsidies Enforcement Office has also made clear that the U.S. government is increasingly

focused on ensuring that trading partners live up to their commitments under the WTO

Agreements.

After taking into account the limitations tied to WTO-related considerations, along with the fact

that certain features of foreign zone programs reflect differences in the structures of their

national systems,8

 two main features emerge from benchmarking the U.S. FTZ program with
actual site(s) in question.

9

 In this regard, the EU can be seen as having traded off flexibility and customs-evaluation features (see

"European Union" section above) in order to enhance timing and simplicity for potential users.

10 Timing and complexity affect costs to users because, among other factors, a longer and more

burdensome application process will require expending more man-hours to apply for and obtain approval to begin

using the program in question.

11 See Appendix III.

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similar programs abroad. Specifically, certain programs overseas provide faster access and use

simpler or more user-friendly application processes. The EU’s PCC program, in particular,

currently appears to be superior to the U.S. program on those two factors,9

 which can have a

significant impact on both a program’s costs10 and its usefulness to domestic manufacturers. 

However, any proposals to improve the speed and simplicity of the U.S. FTZ program’s

application process must take into account the FTZ Board’s balanced evaluation of applications,

which safeguards against approval of activity that would have a negative impact on domestic

industry.

II. PROPOSALS

Based on the considerations outlined above, the FTZ Board staff drafted two proposals to

enhance SMMs’ access to the U.S. FTZ program. The first proposal involves a procedural

change whereby the FTZ Board would delegate authority to the FTZ Board’s Executive

Secretary for decision-making on simple requests for manufacturing authority. The second

proposal includes streamlined application guidelines/formats and enhancements to

pre-application counseling for SMMs. The FTZ Board’s April 5, 2004, Federal Register notice11

requesting public comment described the proposals as follows:

First Proposal: Delegation by the FTZ Board to the Board’s Executive Secretary of

Authority to Approve Temporary or Interim Manufacturing Authority within Existing

Zone Space for Non-Complex, Non-Controversial Cases.

"The proposed delegation of authority would only authorize the Board’s Executive Secretary to

grant temporary or interim authority for zone manufacturing. Permanent authority would

continue to require full Board review. The consideration of all proposals for temporary or

interim manufacturing (T/IM) authority would take into account the Board’s existing criteria for

manufacturing (see 15 CFR § 400.31(b)). Prior to making a decision on an application for T/IM

authority, the Board’s Executive Secretary would publish a Federal Register notice seeking

public comment and could also contact Department of Commerce industry specialists for an
12 In cases where T/IM authority is denied, or that are ineligible for T/IM consideration, the applicant may

opt to request manufacturing authority through the FTZ Board’s standard procedures (i.e., evaluation of the proposal

by the full Board).

13 See footnote [12].

14 Generally expressed in terms of the number of inverted tariffs (i.e., instances of imported inputs with

higher duty rates than the resulting finished products proposed for manufacturing under FTZ procedures). After

consultations with stakeholders, the Board’s Executive Secretary would publish guidelines clarifying the criteria for

consideration of T/IM applications.

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assessment of the application. The Board’s Executive Secretary would retain the discretion to

deny any T/IM application12 if opposition or any other complicating issues or concerns arise.

"Several threshold criteria would need to be met to qualify for consideration for T/IM

authority.13 T/IM applications would be limited to manufacturing operations within pre-existing

FTZ space (i.e., within the boundaries of FTZ sites already approved by the Board at the time of

the T/IM application's submission to the Board), and proposals would need to be consistent with

government policy and prior Board actions and 1) non-complex14 in nature and clearly presenting

no new, complex, or controversial issues or 2) for export only. T/IM authority could only be

granted for a period of up to two years, although circumstances might lead the Board’s Executive

Secretary to impose a stricter time limit on a particular proposal. Finally, the Board’s Executive

Secretary and the FTZ Board would have the authority to revisit any approval of T/IM authority

should it be warranted by policy considerations, including subsequent industry opposition or a

determination that the activity results in a negative net economic effect for the United States."

Second Proposal: Significant Enhancements of the Pre-Application Process for Small to

Medium-Sized Manufacturers.

"The proposed enhancements to the pre-application process for small and medium-sized

manufacturers include: (1) expanded pre-application counseling by the FTZ Board staff; (2)

availability of completed sample applications to help guide potential applicants; and (3)

simplified guidelines/formats for small and medium-sized manufacturers applying to the FTZ

Board to conduct non-complex activity."

III. ANALYSIS OF COMMENTS

Pursuant to the April 5, 2004, Federal Register notice, 11 zone grantees (or groups of grantees),

three potential FTZ-using manufacturers, two consulting groups, and the National Association of

Foreign Trade Zones (NAFTZ) submitted comments. The FTZ Board's Executive Secretary

subsequently consulted with representatives of the user community regarding approaches to

implementation of the proposals. The following are descriptions and analyses of parties'

principal comments regarding the proposals:
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Comment # 1: Both of the FTZ Board's proposals are likely to help enhance FTZ program

access for SMMs.

The initiatives outlined in the Federal Register notice are broadly supported by commenters,

many of whom wrote at length about the T/IM proposal. Zone grantees and potential users are

unanimous in their view that the proposed T/IM procedure would aid SMMs. Potential users

Newell Rubbermaid, Sanford North America, and First Choice Packaging state that the

availability of a T/IM procedure could be critical in maintaining U.S. production for these

companies. Also, the grantee of the Vicksburg-Jackson (Mississippi) Foreign-Trade Zone,

which has recently seen a surge in activity due to the newly opened Nissan plant nearby,

indicates that the proposed T/IM delegation "may significantly lower the threshold for Nissan

suppliers to utilize the U.S. Foreign-Trade Zones program to enhance their international

competitiveness" among Nissan's worldwide group of suppliers.

Comment # 2: The delegation of T/IM authority does not require a revision to the FTZ Board’s

regulations.

Analysis of the FTZ Act and the FTZ Board's regulations and practice indicates that the NAFTZ

is correct in arguing that the FTZ Board has the authority to delegate T/IM authority to the FTZ

Board’s Executive Secretary without new regulations. Specifically, the FTZ Act allows

manufacturing in FTZs without a case-by-case review. The FTZ Board first instituted

case-by-case reviews of manufacturing requests by Board Order and later codified this practice

during a general revision of its regulations. While it may ultimately prove desirable for the FTZ

Board to codify the delegation of T/IM approval authority through regulations, implementation

of the T/IM delegation should be given time to evolve through practical experience before the

FTZ Board seeks to codify it.

Comment # 3: For the T/IM proposal, the FTZ Board should provide clearer guidance on what

constitutes "new, complex, or controversial issues" and "opposition or any other complicating

issues or concerns." Failure to provide adequate guidance on this would result in a lack of

predictability in the process.

This commonly expressed concern is particularly relevant because of the nature of the T/IM

proposal (i.e., focused on aiding SMMs through quick approval of relatively simple, noncontroversial operations). Small and medium-sized firms inherently have fewer resources than

larger firms to devote to pre-application research and preparation. Therefore, the FTZ Board

should create both clear eligibility guidelines and a simple application form that reflects those

guidelines (see detailed discussion below under "Guidelines and Formats").

Comment # 4: The T/IM proposal should not be limited to general-purpose FTZs.

The NAFTZ's submitted letter states, "[t]his proposal needs to incorporate a procedure for small

and medium sized manufacturers that are situated outside the boundaries of a general purpose

foreign-trade zone that confront the same economic circumstance as those manufacturers located

inside the boundaries of a general purpose foreign-trade zone." The NAFTZ's submission
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included a position paper (also submitted by multiple individual commenters) that amplifies the

point in stating, "[t]he only adverse feature of this proposal is the absence of any provision to

extend this authority to manufacturers not within general purpose zone boundary lines... The

Board should extend this proposal to subzones. The economic circumstances that compel

approval under this expedited procedure are not changed by location, inside or outside of a

general purpose foreign-trade zone."

The language of the Federal Register notice announcing the proposals may not have been clear

enough when stating that, "T/IM applications would be limited to manufacturing operations

within pre-existing FTZ space (i.e., within the boundaries of FTZ sites already approved by the

Board at the time of the T/IM application's submission to the Board)..." The notice specifically

avoided the use of the words "general purpose" because the intent was for the T/IM proposal to

apply to all pre-existing FTZ sites. Subzone sites are a category of FTZ sites – thus, any

manufacturer operating within an existing general-purpose FTZ or subzone site would be able to

react quickly to new opportunities by applying for T/IM authority (pursuant to the guidelines

formulated for T/IM applications).

Comment # 5: The T/IM proposal should not be limited to existing zone sites.

In addition to the above-cited comment about making T/IM authority available for FTZ space

outside of general-purpose zones, the NAFTZ's position paper makes a separate point: "The

Board can, or should truncate current subzone application procedures for evaluating a subzone

request when the request includes the limitations the proposal adopts..." This comment

highlights the issue of potential disparity in treatment between manufacturers located in preexisting general-purpose zone or subzone space versus their competitors located outside of

zones/subzones. The companies that already operate in zone/subzone space would have quicker

access via the T/IM procedure to certain new FTZ manufacturing authority, thereby potentially

deriving a competitive advantage.

The NAFTZ's proposed solution to the type of disparity described above involves accelerated

approval of new subzones. However, there are two key constraints limiting the expansion of

FTZ procedures to new sites. The first constraint is the FTZ Act, which states that, "[a]ny

expansion of the area of an established zone shall be made and approved in the same manner as

an original application." 19 U.S.C. 81f. Thus, applications involving expansion of FTZ

procedures to new sites can only be approved through the full process used for all new FTZ and

subzone cases. That process cannot be completed within the 75-day time frame generally

envisioned for evaluating T/IM applications (see "Guidelines and Formats" section below).

The second constraint is the impact on the Department of Homeland Security's U.S. Bureau of

Customs and Border Protection (CBP). Additional FTZ sites can increase the burden on CBP 's

resources in a way that would have a negative effect on CBP’s primary focus: security. 

Consequently, any new FTZ site must have concurrence from both the local CBP "port" office

and CBP headquarters – this type of concurrence, by its nature, adds significantly to the amount

of time required to process an application. For this reason, applications involving additional
15 While the T/IM proposal for manufacturing within existing FTZ sites should have a much smaller impact

on CBP’s resources than a proposal that would involve new sites, new activity within existing FTZs may still have a

significant impact on CBP field staff. Therefore, it is advisable to ask potential T/IM applicants to consult with their

local CBP personnel and to submit with their application evidence of local CBP concurrence for the proposed

activity.

16 Manufacturing within pre-existing FTZ space can also allow SMMs the benefit – for CBP’s purposes –

of being able to conduct their manufacturing activities using an existing "operator" at a given FTZ, thereby avoiding

the additional hurdle of CBP’s security-related requirements for FTZ operators.

17 The standard application for expansion of subzone authority follows the same basic timeline – up to 12

months for processing – as initial subzone applications. A T/IM application to expand an existing subzone

manufacturer’s authority normally would be processed in 75 days.

18 This type of expediting has only occurred in exceptional circumstances in the past because the diversion

of FTZ Board staff resources involved in such expedited approvals may have a negative impact on the processing of

other cases on the docket.

-12-

FTZ sites could not be processed on the accelerated time line envisioned in the T/IM proposal

for existing sites.

The constraints outlined above demonstrate the marked distinction between approval of activity

within existing sites and approval of new sites for activity. The combination of those two

constraints clearly presents an obstacle that, for practical purposes, is insurmountable. This is

particularly true because the need to take into account CBP’s resources is unlikely to change in

the foreseeable future.15

Finally, with regard to disparity between companies that are easily able to relocate to FTZ space

and those that are less able to do so, it is important to remember that the particular focus of the

recommendation in the "Manufacturing in America" report was SMMs. SMMs are more likely

than large manufacturers to be able to relocate their operations into pre-existing FTZ space16 and

implementation of the T/IM proposal could sometimes result in different treatment between

SMMs and larger companies. At the same time, the ability to apply for T/IM authority is also

likely to prove useful to the existing – primarily large – FTZ manufacturers (including those

manufacturing within their own FTZ subzone sites). The T/IM proposal will provide a new tool

that they can use to react quickly17 to changing marketplace conditions.

Based on past experience with manufacturing applications, the FTZ Board staff anticipates

relatively few situations arising involving competitive disadvantage attributable to differences in

direct competitors’ ability to take advantage of T/IM procedures. If the issue does arise, it can

be addressed within the constraints governing the FTZ Board's actions. Although the normal

time frame for a standard subzone manufacturing case is up to 12 months, the FTZ Board has

been able to approve some subzone cases in as little as five to six months.18 Therefore, the FTZ

Board can also allow for expedited processing of subzone applications in instances where a

company demonstrates that a competitor has derived advantage from T/IM approval for the same

production activity. While expediting of subzone cases in those circumstances cannot entirely
19 The only practical alternatives would be to extend the time line for processing T/IM applications or not

to implement the T/IM proposal at all – no commenter has suggested either of those approaches.

20 Eligibility for T/IM authority is not limited by the size of the company but rather by the complexity of

analysis that will be required before approval can be granted for the requested activity.

-13-

eliminate the difference in processing times, it can narrow that difference to no more than a few

months.19

Comment # 6: The two-year limit on T/IM authority, along with the uncertainty that a T/IM user

may be approved later for permanent FTZ manufacturing, may be a deterrent to use of the

proposed T/IM provision. Given that the FTZ Board already has authority to conduct a review

of approved FTZ operations, T/IM authority should instead be made permanent unless adverse

effects are experienced.

Only the comments submitted by First Choice Packaging raised this concern. Uncertainty

should indeed be minimized so that companies are able to make the best decisions about the

efficient use of their resources. At the same time, the proposed two-year limit is an important

safeguard. As stated in comments submitted by the Campbell Trade Group, "[t]he Foreign-Trade

Zones Program is a trade program, and not just a Customs program such as bonded warehouses. 

The proposed safeguards will ensure that the Foreign-Trade Zones Program remains a program

that passes the test of serving the public interest." In that context, full FTZ Board review is still

the best way to maintain the balance that the program already strikes between potentially

conflicting interests. Therefore, the FTZ Board’s review is appropriate to maintain when

considering granting authority on a permanent basis.

Making T/IM eligibility contingent on prior approval of similar activity (as described in the

"Guidelines and Formats" section below) should help provide increased predictability about the

prospects for approval of all types of applications for such activity. In addition, the FTZ Board

staff should create a single application form that a company can use to apply for both T/IM and

permanent authority – the use of the same information for the evaluations for T/IM and

permanent authority should help to minimize uncertainty for applicants. However, the outcomes

of the application processes can never be entirely predictable when factors affecting U.S.

industries and international trade are constantly shifting and when a key element of the approval

process is the solicitation and consideration of public comments.

Comment # 7: In implementing its proposals, the FTZ Board should provide precise guidance

regarding what constitutes a small or medium-sized manufacturer.

This concern was raised by multiple commenters. As with the issue of which FTZ sites would

be eligible for T/IM authority, this concern may derive largely from a lack of clarity in the April 5,

2004, Federal Register notice. More specifically, the intent of the two proposals is to create

procedures that will particularly enhance the FTZ program's usefulness for SMMs. However,

there is no intent to limit to SMMs the use of most elements of the two proposals (T/IM

authority,20 simplified guidelines/formats, and availability of sample completed applications). 
21 Specific to company size, another issue for the FTZ Board's Executive Secretary to consider is

encouraging zone grantees to offer reduced fees to SMMs. While the T/IM proposal can help SMMs that are able to

locate in general-purpose zones, reduced subzone fees for SMMs would aid other small- to medium-sized

manufacturing operations and would be an additional way for grantees to enhance their communities' economic

vitality by facilitating extension of the FTZ program's benefits to previously excluded companies.

22 Whether a given T/IM application is approved (as opposed to deemed eligible for consideration) is a

separate matter. Such approval would take into account additional factors such as input from U.S. government

industry experts and public comments received in response to a Federal Register notice announcing the application.

23 The 75-day time frame is based on estimates of the time needed for publication of a Federal Register

notice (incorporating information from the simple forms that applicants will use for all T/IM applications –

applicants' use of these forms will be essential to enable the FTZ Board staff to quickly and accurately analyze an

applicant's proposed activity), a 30-day public comment period during which the FTZ Board staff can also consult

with industry experts, and only limited additional pre-decisional analysis (made possible because only applications

which are demonstrably "consistent with government policy and prior Board actions and 1) non-complex in nature

and clearly presenting no new, complex, or controversial issues or 2) for export only" will even be eligible for

consideration).

24 Only prior subzone- or FTZ-manufacturing (not T/IM) cases approved by the FTZ Board, which contain

their own detailed analyses, could be relied upon as sources for precedent in this context.

-14-

These elements enhance the FTZ program, in general, and should be available to all

manufacturers, regardless of size.

In the context of the two published proposals, the only real restriction specific to the size of the

company should be on eligibility for increased pre-application counseling. This reflects the logic

of targeting the limited staff resources available for increased pre-application counseling at the

most underserved segment of potential FTZ manufacturers, namely small and medium-sized

firms.21 That target group should be defined using the International Trade Administration’s

standard measure for SMMs (i.e., companies with less than 500 employees); however, it makes

sense for the 500-employee limit to be a general guideline rather than an inflexible cut-off point.

IV. GUIDELINES AND FORMATS

A. Implementation of the T/IM Proposal

Implementation of the T/IM proposal will require guidelines that stress applicants' need to meet

several threshold criteria to be eligible for consideration for T/IM authority.22 Strict eligibility

standards are necessary because the FTZ Board staff’s goal is normally to process the application

within 75 days from "filing" (i.e., official docketing by the FTZ Board).23 That 75-day time

frame does not allow for complex or demanding analysis, so eligible applications would need to

rely on analysis performed by the FTZ Board’s staff in prior standard cases.24

As stated in the proposal, applications "would need to be consistent with government policy and

prior Board actions and 1) non-complex in nature and clearly presenting no new, complex, or

controversial issues or 2) for export only" to be eligible for T/IM consideration. The phrase "for
25 i.e., the same input and finished-product categories at the four-digit level within the Harmonized Tariff

Schedule of the United States (HTSUS).

26 The 20-input limitation would apply to foreign inputs to be introduced into the production process in

foreign status. Any manufacturer with T/IM authority could import without specific approval more than 20 inputs

into a FTZ in foreign status for pre-manufacturing storage, but all foreign-origin inputs beyond the 20 identified in

the application would need to be placed in domestic status prior to introduction into the manufacturing process.

27 Even within the context of the proposed "20-10-5" rule, there is the issue of how many digits of HTSUS

specificity to apply. The FTZ Board's long-standing practice in its application guidelines is to ask applicants to use

six-digit HTSUS categories – that standard should be applied for the "20-10-5" rule, as well.

-15-

export only" is self-explanatory. Each remaining element of the requirements for consideration

should be implemented through straightforward, easily understood standards:

< Requirement: "consistent with government policy and prior Board actions"

A reasonable standard for this requirement is previous FTZ Board approval of the same general

categories of inputs and finished products25 in the same industry.

< Requirement: "non-complex in nature"

In the above-cited Federal Register notice, the footnote to the phrase "non-complex" indicates

that the number of inverted tariffs is a key indicator of complexity. However, there are

additional determinants – the number of inputs and the number of finished products also

contribute to a case's analytical demands on the FTZ Board and its staff. Further, SMM

applicants should not be required to conduct extensive research and craft legalistic explanations

in order to address the issue of complexity. In this context, a numerically based standard

(limiting the numbers of inputs, inverted tariffs, and finished products in an application) is the

best way to indicate whether a proposal is "non-complex."

Given the nature of the proposal, including the focus on SMMs and the limited time frame for

processing a given application (including analysis), the institution of a "20-10-5" rule is

reasonable – the rule would limit authority sought through a given T/IM application to 20

production inputs,26 10 inputs subject to inverted tariffs (where applicable), and 5 finished

products.27 If a T/IM applicant has more than the specific number of inputs, inverted tariffs, or

finished products, the applicant will be able to set priorities and focus its application on the

specific duty relationships that will have the greatest immediate impact on its bottom line. A

fuller range of products and inputs could be covered in a standard application for manufacturing

authority, which could be submitted concurrent with the T/IM application, if desired.

< Requirement: "clearly presenting no new, complex, or controversial issues"

The issue of whether proposed activity presents "new, complex, or controversial issues" hinges

on more than a simple enumeration like the "20-10-5" rule can provide. The FTZ Board needs to

institute a mechanism addressing whether particular types of activity, and especially particular
28 Because some applications contained extensive lists of HTSUS categories – only a portion of which

were the focus of the application or the FTZ Board staff's analysis – the FTZ Board staff should limit the database to

those products and inputs which: 1) had detailed product classification information (i.e., six-digit or greater HTSUS

specificity) provided in the application; 2) were published for public comment in the Federal Register; and 3) were a

focus of the FTZ Board staff's analysis in the cases in question.

29 Older FTZ manufacturing approvals are less likely to be relevant in this context because of shifts in

duty-rate relationships, as well as other factors affecting industries, over time.

30 As mentioned in the analysis of Comment # 6 above, creation of a single application form that a

company could use to apply for both T/IM and permanent authority would also "provide some increased

predictability for applicants."

-16-

inverted tariffs, have been approved previously by the FTZ Board (i.e., are less likely to be

controversial). At the same time, as discussed above, any mechanism should be as simple and

straightforward as possible.

Based on the considerations outlined above, the FTZ Board should limit T/IM applications to

previously approved combinations of production inputs and finished products contained in an

internet-accessible, "user-friendly" database.28 Applicants would use the database with four-digit

HTSUS specificity to address the requirement for consistency "with government policy and prior

Board actions" and would use the database with six-digit HTSUS specificity to address the

requirement for "clearly presenting no new, complex, or controversial issues." The FTZ Board

staff would create the database using approvals from the past five years29 – however, the FTZ

Board's Executive Secretary should retain ultimate discretion with regard to which categories

and combinations are appropriate to include in the database.

B. Other Guidelines and Simplified Formats/Forms

The second staff proposal (outlined above) envisions "simplified guidelines/formats" targeted to

SMM users. Such guidelines and formats would enhance SMMs' access to the full range of FTZ

procedures. As such, the FTZ Board staff should undertake a revision of the guidelines for all

types of applications (e.g., manufacturing/subzone, expansion of scope of authority) in order to

make them as user-friendly to SMMs as possible. However, the simplicity of a "fill-in-theblank" form is even more user-friendly than any type of guideline. Therefore, the creation of

fill-in-the-blank forms should be the staff's ultimate goal.

As noted in the preceding discussion of the T/IM proposal, a simple application form will be a

key element for successful implementation of that proposal. A further consideration requiring

attention is the interplay between the form for T/IM and forms for other FTZ procedures. For

example, a SMM may seek to apply for T/IM authority (using the form for T/IM applications)

and, at the same time, apply for permanent FTZ manufacturing authority (using a form created

for that purpose). However, requiring an applicant to submit two separate forms for T/IM versus

permanent authority could run contrary to the goal of enhancing access for SMMs. Therefore, it

is essential that the FTZ Board staff create forms that complement each other in providing access

to both new (T/IM) and existing FTZ procedures while minimizing duplication of effort for

SMM applicants.30 Finally, as explained in the analysis of Comment # 7 above, the FTZ Board
-17-

staff's implementation of these types of forms, although targeted at SMMs, should not

discriminate against non-SMM users.

V. SUMMARY

Based on the comments received on the draft proposals published in the Federal Register, it is

clear that both proposals will help to address the needs of heretofore under-served SMMs. As

noted above, the two largest issues for commenters are the need for clarity in implementation

and the concern about potential disparity in treatment between manufacturers based on whether

they are able to relocate their operations to pre-existing FTZ space. The FTZ Board staff has

developed approaches that address both of these concerns. Those approaches, which are based

on the analyses detailed above, are reflected in the "Key Recommendations" section below.

KEY RECOMMENDATIONS

1. The FTZ Board should implement the two proposals that it published in the Federal

Register on April 5, 2004.

2. The FTZ Board staff should develop both clear, detailed guidelines and simple

application forms that applicants will use for the new procedures implemented pursuant

to the adoption of the two proposals.

3. The guidelines should clarify that, for the reasons explained at length above, T/IM

applications must be limited to pre-existing FTZ sites.

4. Guidelines created for the T/IM proposal should address the distinction between T/IM

"eligibility" and T/IM "approval" and should further emphasize that only cases for which

the applicant has made an initial showing of eligibility through application of the

standards detailed in this report can even be considered for T/IM authority (i.e., officially

"filed" by the FTZ Board staff so that processing of the case may begin).

5. The FTZ Board staff should create an internet-accessible database of HTSUS numbers

and descriptions for relevant combinations of inputs and finished products approved for

manufacturing within the past five years. Potential applicants would need to use the

database to demonstrate consistency with prior Board actions and the non-complex, noncontroversial nature of their proposals, as outlined above.

6. Potential T/IM applicants should be required to consult with their local CBP personnel

and, at the time they submit their applications to the FTZ Board, provide evidence of

local CBP concurrence for the proposed activity.

7. For eligibility for enhanced pre-application counseling, the FTZ Board should adopt the

International Trade Administration’s standard definition of small and medium-sized
-18-

Foreign-Trade Zones Board Staff Team for Manufacturing Report

 Project Leader: Andrew J. McGilvray

 Country Research Leads: Pierre V. Duy

 Elizabeth K. Whiteman

 Additional Research: Kathleen A. Boyce

 Diane L. Finver

firms, i.e., companies with under 500 employees. However, the 500-employee limit

should be a general guideline rather than a specific cut-off point.

8. Implementation of the proposals should be given time to evolve through practical

experience before the FTZ Board considers seeking to codify any aspects through

specific new regulations.

CONCLUSION

The proposals and recommendations described above are likely to significantly reduce the cost

of access to the U.S. FTZ program for small and medium-sized manufacturers. Although

manufacturing within the FTZ program currently tends to be dominated by large firms, the

program has great potential to help many under-served companies and industries to improve

their international competitiveness. By adopting the draft proposals, along with the

recommendations outlined above, the FTZ Board can enhance speed and ease of access for many

potential users, continue to make available the program’s traditional flexibility to address a

broad range of needs and situations, and maintain the world-class security implemented by the

Department of Homeland Security’s U.S. Bureau of Customs and Border Protection.
APPENDIX I

This appendix contains information on zone programs in 63 countries. In total, the FTZ 

Board staff researched programs in 77 countries; this list contains the countries for which the

most complete information was available. A key to abbreviations used appears at the end.
APPENDIX I

Type of Zone Foreign trade zone

Agency Ministry of Economy

Location Port areas (each of 24 provinces has or is establishing an FTZ)

Company facilities? No

Outside of Customs? Yes

Government Operated? By concessionary (grantee, public or public/private)

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Export only

Must manufacturing be approved Must obtain authorization to operate in zone

Can use foreign & domestic Yes

Can it be entered for consumption Not if manufactured

Is duty paid when entered Yes (on goods stored in zone)

Is duty paid on entire value Yes

Duty owed on component or product N/A

Tax Exemptions

VAT Yes

Income tax No

Real Property tax Usually (decided locally)

Other Usually exempt from local taxes inlcuding sales and stamp taxes. No 

tax on utilities. No export tax.

Financial Incentives

Leases/rents No

Loans No

Grants No

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only Yes

Export certain percent All product manufactured.

Domestic content No

% domestic investment No

Misc.

No duty on production equipment or materials (including food) 

consumed in zone. Storage in zone for 5 yrs. Exception to export only 

for manufacturing if it can be proven that the product is not produced 

domestically.

FTAA

State

www.business.com

www.sanluis.gov.ar

Argentina

Sources
APPENDIX I

Type of Zone Manufacturing in bond (MIB) 

Agency Department of Industry, Science and Resources; Customs

Number 1 MIB (in Newcastle) 

Location Anywhere

Company facilities? Yes

Outside of Customs? No

Ownership Private

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Taxes Deferred in zone

Financial Incentives

Grants New exporters - grant of 85% for incurring market development costs.

Regulatory exemptions None

Restrictions

Manufacturing for export only No

Export certain percent No, but the activity must be export oriented

Domestic content No

% domestic investment No

TPR

FCS

www.singaporeabroad.org.sg

www.customs.gov.au

Australia

Sources
APPENDIX I

Type of Zone Free trade zones

Number 4

Size 175,000 to 1.8 million square feet

Location Vienna, Graz, Linz and Solbad Hall

Company facilities? Yes

Outside of Customs? Yes

Ownership Limited partnerships (govt provinces, chamber of commerce, 

business)

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Is duty paid on entire value No

Tax Exemptions

Excise tax Yes

Income tax Yes (interest, dividends)

Financial Incentives

Leases/rents Rent reductions

Loans Loan guarantees

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc. Provinces offer interest subsidies. Chrysler assembles jeeps, 

minivans in Graz w/ US FTZ components.

Sources Diamond

Austria
APPENDIX I

Type of Zone Export processing zones

Agency Bangladesh Export Processing Zone Authority (BEPZA)

Number 6, with 26 companies (2 zones very active)

Size Varies, 142-658 acres

Location Near major cities and ports (Chittagong, Dhaka, Comilla, Mongla, 

Ishwardi and Uttara)

Company facilities? No

Outside of Customs? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Generally no, 10% to local markets allowed under certain conditions.

Tax Exemptions

Income tax Exempt - 10 yrs

Other Dividend tax, expats exempt from income tax for 3 yrs.

Financial Incentives

Leases/rents Infrastructure provided

Grants Water, gas and telecommunication provided.

Regulatory exemptions

Labor BEPZA administers labor matters, workers represented by Workers 

Welfare Committee

Restrictions

Manufacturing for export only Yes

Export certain percent Yes- usually 100%, but 90% under certain conditions

Domestic content No

% domestic investment No

Misc.

Duty free import of 3 vehicles. 100% foreign ownership allowed, 

full repatriation of capital. No import restrictions. Customs 

clearance at factory site. No duty on production equipment.

BEPZA

Diamond

Bangladesh

Sources
APPENDIX I

Type of Zone Export processing zone

Number 4 General, 26 Special

Location General are multi factory sites, Special EPZs are single factory sites

Company facilities? Yes

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Tax Exemptions

VAT Yes

Excise tax Yes

Income tax 20 yr exemption guaranteed, with option to extend

Real Property tax Yes

Other Capital gains tax, sales and consumption tax, trade turnover, foreign 

exchange tax and transfer tax, dividend tax

Misc.

No duty on production equipment (including office furniture and 

service vehicles). Can sell, lease or transfer goods within an EPZ. 

Can open foreign currency bank account. Expedited customs 

(located at zone). No quotas or import restrictions. Up to 20% of 

workforce can be foreign.

Sources State

Belize
APPENDIX I

Type of Zone Free trade zone Export processing zone

Agency Ministry of Development, Industry and 

Foreign Trade

Ministry of Development, Industry and 

Foreign Trade

Number 8 (manufacturing only allowed in 

Manaus) 19 but none active

Location frontier regions Less developed regions

Outside of Customs No

Benefits

Duty free admission Yes Yes

Duty free export Yes Yes

Manufacturing Yes (only in Manaus zone) Yes

Must manufacturing be approved Yes Yes

Can use foreign & domestic Yes Yes

Can it be entered for consumption Yes Yes, but only 10%

Is duty paid when entered Yes Yes

Is duty paid on entire value Duty paid at reduced rate (88% reduced) Duty paid at reduced rate (75%)

Duty owed on component or product Entire value of finished product Final price, minus cost of imported parts

Tax Exemptions

Income tax Paid at 75% reduced rate N

Other

Exemption on tax for industrialized 

products (IPI) and in-country sales 

(ICMS), ICMS at reduced rate when 

entered for consumption.

Financial Incentives None

Leases/rents Manaus: reduced land prices

Regulatory exemptions

Environmental None None

Restrictions

Manufacturing for export only No No

Export certain percent No Yes- 90%

Domestic content No

% domestic investment Must re-invest some profit in area No

Misc.

Only wheat and petroleum are not subject 

to quota in Manaus zone. No duty on 

capital assets. No benefits on arms, 

tobacco, alcohol and most passenger 

vehicles.

No duty on production equipment. May 

not produce goods subject to export 

quotas.

FTAA FTAA 

FCS MAC

MAC

www.suframa.gov.br

Sources

Brazil
APPENDIX I

Type of Zone Free zones

Agency Ministries of Foreign Trade and Finance

Number 6

Location Ports/industrial parks

Company facilities? No

Outside of Customs? Yes but controlled entrance and exit

Government Operated? Purposeset or state owned co.

Benefits

Duty free admission Yes (except alcohol & tobacco)

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Dom: processing only for export

Tax Exemptions

VAT Yes

Other Exempt from profit tax on exports

Financial Incentives

Leases/rents land/infrastructure provided

Restrictions

Domestic content Dom: only processing if for export

% domestic investment Only for foreign cos or Bulgarian with at least 1% for ownership

Diamond

MAC

CCG

www.bfia.org

Bulgaria

Sources
APPENDIX I

Type of Zone Export distribution centers (EDC), Customs free zones (CFZ)

Agency Canada Border Services Agency (CBSA), provincial agencies

Number CFZ: 2; EDC: unknown

Size up to 2,000 acres

Location Stephenville, Newfoundland, Sydney Harbor, Nova Scotia

Company facilities? Yes

Outside of Customs? Yes

Ownership Private

Government Operated? Yes

Benefits No duties on re-exports. No general sales tax (GST) on Canadian 

goods processed for export.

Duty free admission Yes

Duty free export Yes

Manufacturing EDC: no; CFZ: export only

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption EDC: no; CFZ: yes

Is duty paid when entered Yes

Is duty paid on entire value Only foreign content

Duty owed on component or product

Tax Exemptions

VAT Yes

Inventory tax Yes

Excise tax Yes

Income tax Reduced

Real Property tax Reduced

Other job training expense deduction, goods can be transferred to other 

EDCs

Financial Incentives

Leases/rents Yes

Loans subsidized

Grants Yes

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only Yes, but no transformation

Export certain percent Yes

Domestic content Yes - less than 20%

% domestic investment No

Misc. Free Customs Consulting Service by CBSA. EDC's designed to 

promote logistics export platforming

http://www.cbsa-asfc.gc.ca/import/duty_deferral/tab-e.html

Sources

Canada
APPENDIX I

Type of Zone Free zones

Agency Consortium of local and federal agencies, mayor is chair

Number 1

Size 2 sites, 300,000 square meters

Location port and industrial areas

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Is duty paid on entire value No (only on foreign components)

Duty owed on component or product Finished product

Tax Exemptions

VAT Yes

Excise tax Yes

Other APIC (production and import tax). Investments may qualify for 

corporate tax reductions and tax credits. Local tax exemptions.

Financial Incentives

Grants Reserve for the investment in the Canaries. Exporters receive a grant 

to make products more competitive.

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc. Simplified customs administrative procedures. Manufacturing not 

subject to EU requirement to prove it will not harm other producers.

Sources www.zonafranca.org www.camaralaspalmas.com

Canary Islands
APPENDIX I

Type of Zone Free zones

Agency National Customs Service (Ministry of the Treasury)

Number 2

Location Close to a port or airport

Company facilities? No

Outside of Customs? Yes

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Modification permitted

Must manufacturing be approved All sites approved by ministry

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Tax Exemptions

VAT Yes

Income tax Some exemptions

Other Corporate tax

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

FTAA

MAC

www.tdctrade.com

www.zofri.cl

Sources

Chile
APPENDIX I

Hong Kong Mainland

Type of Zone Free port - no duties Special economic zones; Export processing 

zones

Agency Port of Hong Kong State Council

Number 1 15 SPZs; 15 EPZs

Size Encompasses Hong Kong Varies, mostly acres

Location Hong Kong Major cities, near waterways, but no limits

Outside of Customs? No Outside customs territory

Ownership Government owned

Government Operated? By administrative branches of local gov't

Benefits

Duty free admission Yes Yes

Duty free export Yes Yes

Manufacturing Yes Yes (EPZs must manufacture)

Must manufacturing be approved No Yes

Can use foreign & domestic Yes Yes

Can it be entered for consumption Yes Yes - SPZs (with approval), No- EPZs

Is duty paid when entered NA Yes

Is duty paid on entire value NA Yes

Duty owed on component or product NA Finished product

Tax Exemptions

VAT Yes

Excise tax No

Income tax Local portion usually refunded

Other Accelerated depreciation Consumption tax exemption, lower royalty tax

Financial Incentives Given national status

Leases/rents Some zones provide cheap land/utilities for large 

investment

Loans Some zones act as liaison with local banks

Grants Financing for R&D and technology upgrades Some zones source low cost labor for cos.

Regulatory exemptions None None

Restrictions

Manufacturing for export only No Yes (EPZs), SPZs mostly export

Domestic content No No

% domestic investment No No

Misc. No exchange controls

New EPZs can only be in existing Economic and 

Tech Zones. All foreign investment requires 

approval, EPZ speeds process. No duty/tax on 

production equipment. A special agent with 

foreign trade rights will have to be retained to 

import products from the SPZ into the domestic 

market. 

TPR Diamond

Diamond State

www.zhfreetradezone.org

www.kpmg.com.cn

Sources

China

Encyclopedia4U.com

The Greater China Advisor (U. Of Ottawa and CATA Alliance)

Asia in Extenso, March 2003, U. Of Poitiers, France - The Role of Special Economic Zones in China’s 

Economic Development as Compared with Asian Export Processing Zones: 1979-1995
APPENDIX I

Type of Zone Free zones

Agency DIAN

Outside of Customs? Yes (but controlled)

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Is duty paid on entire value Yes

Duty owed on component or product Product

Tax Exemptions

Income tax Yes for operators, Yes for users on export income

Restrictions

Manufacturing for export only No

Export certain percent No but focus on exports

Domestic content No

% domestic investment No

Misc. No duty on production equipment, fuel, food and cleaning materials 

used in zone.

FTAA

MAC

www.coinvertir.org

Colombia

Sources
APPENDIX I

Type of Zone Free zone regime

Agency Free Zone Corporation under the Ministry of Foreign Trade

Number 9 (with 234 cos.)

Location Industrial parks/company facilities (incentives for rural areas)

Company facilities? Yes

Outside of Customs? No - controlled by customs

Ownership Private

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes - Use of domestic priority if available

Can it be entered for consumption Yes (processing cos up to 25%, services up to 50%, non-processing must 

export all)

Is duty paid when entered Yes

Is duty paid on entire value Yes

Duty owed on component or product Product

Tax Exemptions Processing cos: exemptions thru 2008; Services: 8 yr exempt then reduced 

rate

Excise tax Yes

Income tax Yes

Real Property tax Yes - 10 yrs

Other

sales tax, consumption tax (inc water, electricity, telephone). 10 yr 

exemption on capital and assets tax, municipal tax and real estate transfer 

tax

Financial Incentives

Grants Training, with salaries paid during training. Salary rebates during first 5 

years.

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent Yes 75%

Domestic content Priority to domestic components

% domestic investment $150,000 initial investment minimum in park, $2 million minimum at 

company facilities

Misc.

No duty on production equipment. No duty on fuel or oil used in operation. 

For new investment. Permit process takes from 3 months to 2 years 

depending on level of complexity and whether or not it is within existing 

free zone space.

FTAA

State

MAC

www.cinde.or.cr

http://azofras.com

Costa Rica

Sources
APPENDIX I

Type of Zone Free trade zone

Agency Ministry of Commerce, Industry and Tourism

Number 2

Location Lamarca, Limassol

Outside of Customs? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes with permission

Is duty paid when entered Yes

Tax Exemptions

Income tax Yes (10 years)

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc.

No duty on production equipment. No noxious and polluting ind. 

Ministry considers public interest of zone activity and if it is 

occurring outside of zone.

MAC

Diamond

Cyprus

Sources
APPENDIX I

Type of Zone Free port

Agency Customs agency

Number 1

Size 161 acres

Location Copenhagen port

Government Operated? Operated by Port of Copenhagen

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Tax Exemptions No

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc. Manufacturing only when special reasons can be shown why facility 

must be in freeport. 2001, merged with freeport in Sweden (Malmo)

Sources MAC

Diamond

Denmark
APPENDIX I

Type of Zone Free trade zones

Agency National Free Zones Council

Number 54 Free Zone Industrial Parks, 549 Free Zone Enterprises

Location Anywhere

Company facilities? Yes

Outside of Customs? Yes (but subject to control)

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes (either up to 20% of processed goods or 100% stored goods or 

goods with 25% local content, but must prepay duties/tax)

Is duty paid when entered Yes

Is duty paid on entire value No

Duty owed on component or product Finished product rate, but the duty is calculated by "excluding the 

imposable base of components and national added values"

Tax Exemptions

Inventory tax Yes

Income tax Yes for 15 yrs

Other

Municipal tax, real estate transfer tax, construction tax, tax on loan 

agreements, tax on the formation of corporations and the increase in 

their capital, and consular charges

Financial Incentives

Leases/rents

Loans

Grants

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent Yes

Domestic content No

% domestic investment No

Misc. No duty on production equipment. Approval process takes 1 month.

FTAA

MAC

FCS

www.cnzfe.gov.do

Sources

Subsidized rent, preferential interest rates and loans for zones within 

3 miles of the border.

Dominican Republic
APPENDIX I

Type of Zone Free zones

Agency Ministry of Economy, General Authority for Investment and Free 

Zones (GAFI)

Number 7 (Public); 150 (private)

Size From 84 to 630 hectares

Location Alexandria, Port Said, Cairo (Nasr City), Suez, Ismailia, Damietta, 

Media Production City; and at individual plant sites 

Company facilities? Yes

Outside of Customs? Yes

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes (bYes GAFI)

Can use foreign & domestic Yes

Can it be entered for consumption Yes (private zones of existing facilities up to 50%)

Is duty paid when entered Yes (duty rate plus 1% of CIF)

Is duty paid on entire value value of foreign components

Duty owed on component or product rate reduced by 50% if Egypt content is at least 40%

Tax Exemptions

VAT Yes

Inventory tax Yes, reduced

Excise tax Yes

Income tax Yes (5-20 yrs)

Real Property tax Yes, reduced

Other Sales and other taxes

Regulatory exemptions

Environmental No

Labor

"Labor laws tailored to encourage foreign investment" "What 

business wants when it wants it" Activities illegal in rest of Egypt 

allowed in zone.

Restrictions Must hire at least 75% locals

Manufacturing for export only No

Export certain percent Private zones at existing facilities must export 50%

Domestic content No

% domestic investment No

Misc.

Smuggling through Port Said zone was a problem up to 1994. 

Banking allowed. Not controlled by customs. Private zones are for 

company facilities. No duty on production equipment. Storage of 

goods in a zone "should be with the objective of re-export." Private 

zone approval granted in one week.

www.gafi.gov.eg

GAFI

State

Egypt

Sources
APPENDIX I

Type of Zone Free trade zones

Agency Ministry of Economy (approves applications), Ministry of Finance 

and Customs (supervises and controls zones)

Number 16

Location Anywhere

Company facilities? Yes (companies can receive benefits outside formal zone areas)

Outside of Customs? Zones cannot operate without tax and customs officials present

Ownership Private

Government Operated? Privately administered

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes (license required to operate in zone)

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes (duty for Cent. Amer sale also)

Duty owed on component or product Product

Tax Exemptions

VAT Yes

Income tax Yes - developers 15 yrs, users 10yrs

Other Municipal taxes (up to 10 year exemption), Property transfer taxes

Financial Incentives None

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc. No duty on production equipment. License approved in 7 days.

State 

MAC

Committee of Zones of the Americas

www.proesa.com.sv

www.elpedregalsal.com

El Salvador

Sources
APPENDIX I

Type of Zone Processing under customs control (PCC)

Agency Customs of each member state

Location Anywhere

Company facilities? Yes

Outside of Customs? No

Ownership Private

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Duty owed on component or product Product

Tax Exemptions Deferred in zone

Financial Incentives

Leases/rents No

Loans No

Grants No

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc.

Standard application time is 2 months, faster for "non-sensitive" 

products. Subject to an economic test, must show the activity will 

harm producers of similar goods.

www.eurotradeconcept.nl

www.europa.eu.int

www.buyusa.gov

www.turkpulse.com

www.hmce.gov.uk

European Union

Sources
APPENDIX I

Type of Zone Free trade zones

Agency Customs

Number 1 (not operational)

Location Bordeaux

Outside of Customs? No

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Is duty paid on entire value No, only on foreign component

Duty owed on component or product Product

Tax Exemptions

VAT Yes

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc. No duty on production equipment.

Diamond

FCS

France

Sources
APPENDIX I

Type of Zone Free zones

Agency The Gambia Investment Promotion and Free Zones Agency

Location Can be stand alone/single factory

Company facilities? Possibly

Ownership Private

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes (up to 30%)

Is duty paid when entered Yes

Tax Exemptions

Excise tax Yes

Income tax Yes -10yrs exempt then reduced rate

Other Sales and municipal taxes

Regulatory exemptions

Environmental No

Restrictions

Manufacturing for export only No

Export certain percent Yes (70%)

Domestic content No

% domestic investment No

Misc. Must generate employment and train nationals. No duty on capital 

equipment. Licenses processed in 7 days.

Sources www.investinginthegambia.gm

The Gambia
APPENDIX I

Type of Zone Free ports

Number 6

Size 1.7 acres to 3,600 acres

Location Ports (Hamburg, Bremen, Bremerhaven, Cuxhaven, Emden, Kiel)

Outside of Customs? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Tax Exemptions

VAT Yes

Excise tax Yes

Other Export credit guarantees on new production facilities

Financial Incentives

Grants Yes (for new and expanded production)

Regulatory exemptions

Environmental Yes (no health & safety docs)

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc. No proof of origin docs

MAC

Diamond

www.hafen-hamburg.de

Germany

Sources
APPENDIX I

Type of Zone Free zone

Agency Ghana Free Zones Board

Location Ports or company facilities, any area of land or building

Company facilities? Yes

Ownership Private

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes (up to 30%)

Is duty paid when entered Yes

Duty owed on component or product Product

Tax Exemptions

Income tax Yes-10 yrs exempt then reduced 

Other 10 year corporate tax exemption

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent Yes- 70%

Domestic content No

% domestic investment No

Misc.

The Board may attach to a license conditions as appropriate 

concerning employment skills, job opportunities and degree of 

export orientation. Licenses issued in 28 days. Cannot compete with 

govt in certain industries (steel, arms, communications...). Board 

offers "one stop approval service".

CCG

www.ghanaclassifieds.com

Ghana

Sources
APPENDIX I

Type of Zone Free trade zones

Agency Ministry of Economy/Customs

Number 20 authorized, 14 operating

Location Anywhere

Outside of Customs? Yes

Government Operated? Private

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes (but only 20%)

Is duty paid when entered Yes

Is duty paid on entire value Yes

Duty owed on component or product Finished product

Tax Exemptions

VAT Yes

Income tax Yes - 10 yrs

Real Property tax Yes - Unique tax on real estate

Other 5 yr exemption on tariffs on fuel oil, bunker gas, butane and propane 

for energy generation

Financial Incentives None

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent Yes - 80%

Domestic content No

% domestic investment No

Misc.

No duty on production equipment. Approval process takes 3 weeks, 

only done once, not needed for each manufacturing activity. Entry 

(up to 20%) requires specific authorization. 

State

FTAA 

Guatemala

Sources
APPENDIX I

Type of Zone Free trade zones and export processing zones

Agency Ministry of Industry and Trade

Number 32 zones with 95 customs points and 252 companies

Location Anywhere

Outside of Customs? Yes (enclaves outside country)

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes (up to 5%)

Is duty paid when entered Yes

Duty owed on component or product Product

Tax Exemptions

Excise tax Yes

Income tax Yes for free zone and Yes but 20yrs for industrial parks

Real Property tax No

Other Sales tax, municipal taxes, repatriation of capital and profit taxes, tax 

on profit, net asset tax

Financial Incentives

Leases/rents No

Loans No

Grants No

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent Yes (95%)

Domestic content No

% domestic investment No

Misc.

No duty on production equipment. License granted in 15 days with 

payment of $111,203 fee. 90% of labor force must be Honduran and 

85% of payroll to Hondurans.

FTAA

State

MAC

Honduras

Sources
APPENDIX I

Type of Zone Special economic zones 

Agency Department of Commerce in the Ministry of Commerce and Industry

Number 21

Size Min. size 1000 hectares, but no min. on product specific or port 

SEZs

Location Designated areas

Outside of Customs? No (but expeditious customs treatment and no routine examinations)

Ownership No

Government Operated? Public, private or state gov't

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved All users must apply

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Is duty paid on entire value Yes

Duty owed on component or product Product

Tax Exemptions

Excise tax Yes

Income tax Yes (for investors) 10 yrs for developers

Other Service tax, sales tax

Financial Incentives

Leases/rents Land provided

Regulatory exemptions

Environmental No

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content

% domestic investment No

Misc. No performance requirements, but must be net foreign exchange 

earner.

TPR

MAC

www.sezindia.nic.in

www.ciionline.org

www.dipp.nic.in

India

Sources
APPENDIX I

Type of Zone Free trade zones

Agency Federal government

Number 15

Location No limits, but most near ports

Outside of Customs? No

Government Operated? Private or local governments

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Must apply to locate in zone

Can use foreign & domestic Yes

Can it be entered for consumption Yes, up to 50%

Is duty paid when entered Yes

Is duty paid on entire value No- only on imported components

Duty owed on component or product Product

Tax Exemptions

VAT Yes

Excise tax Yes

Income tax Yes (reductions)

Other Sales tax, luxury tax, 

Financial Incentives None

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent 50% of value

Domestic content No

% domestic investment Full foreign equity allowed for 5 years if export only

Misc. No duty on production equipment. Application process takes 4 

weeks.

MAC

State

TPR

www.bkpm.go.id

Indonesia

Sources
APPENDIX I

Type of Zone Free zones

Agency Ministry of Finance (Customs & Excise)

Number 1

Size app. 1000 acres

Location Ports (Shannon)

Outside of Customs? Customs controlled

Government Operated? Shannon Development - gov't affiliated agency

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved License required in zone, but this may be repealed soon

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Is duty paid on entire value owed on non-EU sourced components

Duty owed on component or product Landed value of product

Tax Exemptions

VAT Yes

Excise tax Yes

Income tax Reduced until 2005, then reg rate (to comply with EU)

Financial Incentives

Grants Yes (for capital investment, R&D, employment and training)

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc.

Production equipment: case by case determination on whether duty is 

owed. Recent changes to do away with special incentives to comply 

with EU free zone laws. 

Diamond

FCS

www.shannondev.ie

www.shannonireland.com

Ireland

Sources
APPENDIX I

Type of Zone Free ports, Free processing zones

Agency Israeli Port Authority

Number 3 -- Free Ports, 1 -- Free Processing Zone 

Size Haifa: 6,000 sq.m under roof/75 acres. Eilat: 40 acres outdoors. 

Eilat/Shoqet FPZ: 700 acres 

Location Haifa Free Port, Eilat Free Port, Eilat/Shoqet FPZ

Company facilities? No; leased

Outside of Customs? Yes

Government Operated? Yes

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes (in the FPZ)

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes (10% max)

Is duty paid when entered Yes

Tax Exemptions

VAT Yes

Inventory tax Yes

Excise tax Yes

Income tax 20 year tax holiday

Real Property tax Yes

Other accelerated depreciation

Financial Incentives

Leases/rents Yes

Loans Yes

Grants Yes

Restrictions

Manufacturing for export only No

Export certain percent 90%

% domestic investment No, but JV's get preferential rates

Sources Diamond

Israel
APPENDIX I

Type of Zone Free port

Agency Ministry of the Economy and Finance

Number 2 (Trieste and Venice)

Size 1,765,000 square meters (Trieste)

Location Ports

Government Operated? Semi-public corporations

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Tax Exemptions

VAT Yes - deferral at reduced int. rate

Other turnover and other taxes: deferred at reduced interest rate

Regulatory exemptions

Environmental No

Labor Yes - if foreign workers used, laws of their nationality apply

Restrictions

Manufacturing for export only No

Export certain percent Focus on exports

Domestic content No

% domestic investment No

Misc.

Processing licenses dependent on final destination of goods, with 

license can transform goods free of any customs restraints. 5 yr time 

limit.

Diamond

MAC

www.porto.trieste.it

Italy

Sources
APPENDIX I

Type of Zone Foreign access zones Okinawa free trade zone

Agency Ministry of Finance

Number 22 1

Location At and around harbors and airports Okinawa

Outside of Customs? No

Government Operated? Regionally planned, quasi-public run

Benefits

Duty free admission Some zones Yes

Duty free export Yes

Manufacturing Yes Yes

Can use foreign & domestic Yes Yes

Can it be entered for consumption Yes Yes

Is duty paid when entered Yes Yes

Duty owed on component or product Company's choice

Tax Exemptions Done regionally

Income tax Reduced rate for 10 years

Other Special decpreciation rates and local real 

estate purchase tax exemptions Bonded area permit fees reduced by 50%

Financial Incentives

Loans Loan guaranty system. Reduced interest 

rate (regional)

Grants Guarantees from gov't funds

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No No

Export certain percent No No

Domestic content No No

% domestic investment No No

Misc. Designed to promote imports. Only some 

zones provide bonded facilities.

MAC www.okisankyo.org

TPR

www.meti.go.jp

www.jetro.go.jp

Sources

Japan
APPENDIX I

Type of Zone Free zones

Agency Free Zone Corporation (Ministry of Finance)

Outside of Customs? Under customs control

Ownership Public or private

Government Operated? Some

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Is duty paid on entire value No (only foreign components)

Tax Exemptions

Income tax Yes

Real Property tax Yes

Regulatory exemptions

Environmental No

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Sources www.free-zones.gov.jo

Jordan
APPENDIX I

Type of Zone Export processing zones and Manufacturing under bond (MUB)

Agency EPZ Authorityof Ministry of Finanace; MUB: Investment Promotion 

Center of Ministry of Trade and Industry

Number 37 EPZs with 71 companies; 40 MUB's

Location EPZs, also manufacturing under bond for zone benefits at company 

locations.

Outside of Customs? No but exemption from pre-shipment inspection and on site customs 

inspection

Government Operated? 21 public, 2 private

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption EPZ: 20% can be entered; MUB: all export

Is duty paid when entered Yes

Is duty paid on entire value Yes

Duty owed on component or product Final product

Tax Exemptions

VAT Refunded on imported inputs

Income tax 10 yr exemption

Other 10 year corporate tax exempt, then 25%; 10 year witholding tax 

exempt; stamp duty; investment deduction

Financial Incentives

Leases/rents No

Loans No

Grants No

Regulatory exemptions

Exemt from: Industrial Registration Act, Factories Act, Statistics 

Act, Trade Licensing Act, Imports, Exports & Essential Supplies 

Act, no work permits for non-Kenyan staff

Environmental No

Labor No

Restrictions

Manufacturing for export only EPZ- No; MUB-Yes

Export certain percent EPZ - 80%

Domestic content No

% domestic investment No

Misc. Licenses for both EPZ and MUB take app 2 weeks. No duty on 

production equipment. EPZs mainly used for textile exports to US.

State

www.epzakenya.com

Kenya

Sources
APPENDIX I

Type of Zone Free trade zones

Agency Minister of Commerce, Industry and Energy

Number 4 (Iksan, Kunsan, Daebul, Masan)

Location Industrial complex near air/sea ports, etc. 

Company facilities? No

Outside of Customs? Yes (the Customs Act is not applied)

Ownership Government owned and developed

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Is duty paid on entire value Not on domestic components

Tax Exemptions (exemptions only with certain level of investment)

VAT Yes

Income tax 100% exempt for 7 yrs, 50% for next three (also corporate tax)

Real Property tax 5 yrs exempt, then reduced

Other

Exemption on the traffic inducement fee for construction of facilities. 

5 yrs exempt then reduced: acquisition tax, real estate tax and 

registration tax.

Financial Incentives

Leases/rents land leased at 1/5 of market rate

Grants Support for construction of facilities, roads, water, sewage and cost 

of land

Regulatory exemptions

Labor Yes

Restrictions

Manufacturing for export only Main purpose for export

Export certain percent No

Domestic content No

% domestic investment Set amount to receive tax breaks

Misc.

To qualify for tax exemptions, FDI must be at least $30 million, with 

300 local employees. No duty on production equipment. Korea also 

has free economic zones and foreign investment zones which provide 

additional benefits to foreign investors.

MAC

State

www.kotra.or.kr

www.customs.go.kr

www.mocie.go.kr

Sources

Korea
APPENDIX I

Type of Zone Free zone

Agency Ministry of Commerce and Industry

Number 1

Size 1.7 million square meters

Location Shuwaikh port

Outside of Customs? Must file to admit and remove goods

Government Operated? No - National Real Estate Co. 

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Tax Exemptions

Income tax Yes

Regulatory exemptions

Labor No

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc. Industrial licenses can be granted in less than a week, not more than 

2 months. Valid for 1 yr, can be extended.

CCG

 http://portal.nrec.com.kw

Kuwait

Sources
APPENDIX I

Type of Zone Free economic zones

Number 3

Location Kaunas, Siauliai and Klaipada

Outside of Customs? No - separate

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes, by a simple questionnaire

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Tax Exemptions

VAT Yes

Excise tax Yes

Income tax Exempt or reduced

Real Property tax Yes

Other Exempt from dividend tax, road tax

Financial Incentives

Leases/rents 50% discount on land lease tax

Grants Employment grants, EU support funds

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc.

Tax exemptions are regarded as state aid for regional development, 

and therefor comply with European Union regulations. No duty on 

production, construction equip.

Diamond

MAC

www.fez.lt

www.lda.lt

Sources

Lithuania
APPENDIX I

Type of Zone Free industrial zones, free commercial zones and licensed 

manufacturing warehouses (LMW)

Agency Ministry of Finance

Number 13 FIZS AND 14 FCZS

Size Varies 223 acres to entire port

Location Any suitable location

Company facilities? Yes (LMWs)

Outside of Customs? Yes with minimal customs formalities

Government Operated? by designated federal, state or local gov't authority

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes for each activity

Can use foreign & domestic Yes

Can it be entered for consumption Yes, 20%

Is duty paid when entered Yes

Is duty paid on entire value Yes

Duty owed on component or product Product

Tax Exemptions

Excise tax Yes

Income tax 2-5 yr exemption for pioneer industries

Other sales and service tax

Financial Incentives

Leases/rents No

Loans No

Grants No

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent Yes - 80%

Domestic content No but encourage use of local products

% domestic investment No

Misc. No duty on production equipment. License takes 2-8 weeks.

Diamond

State

MAC

TPR

www.matrade.gov.my

Sources

Malaysia
APPENDIX I

Type of Zone Export enterprise scheme (EPZ) and free ports

Agency Export Processing Zones Development Authority

Location EPZs: anywhere; free ports only at designated locations

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can it be entered for consumption Yes, up to 20% with specific approval

Is duty paid when entered Yes

Duty owed on component or product product

Tax Exemptions

VAT Yes

Income tax Reduced 50% for 2 expat employees for 4 yrs

Other Corporate rate 15%, tax free dividends, no capital gains tax

Financial Incentives

Leases/rents exemption from payment of half the registration fee on purchases of 

land and buildings

Regulatory exemptions

Labor No

Restrictions

Manufacturing for export only No

Export certain percent Yes - 80%

Domestic content No

% domestic investment No

Misc. No duty on production equipment. Permit process: 5-9 weeks

MAC

State

www.boimauritius.com

Mauritius

Sources
APPENDIX I

Type of Zone Free trade zones/ports

Agency Office of Border Customs, Superintendent of Ports, local 

Administrator of Customs

Number 6, plus US-Mexico border zone (supporting maquiladoras

Size varies

Location Coatzacoalos, Salina Cruz, Baja Peninsula, Sanora, Quintana Roo, 

Chihuahua, Border Zone (i.e., maquiladoras)

Company facilities? No

Outside of Customs? Yes

Ownership Government

Government Operated? Yes

Benefits Reduction of VAT, temp taxes. Duty exemption on exports & cap 

equip.; duty deferral; exemption on import licenses

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Is duty paid on entire value No

Duty owed on component or product component

Tax Exemptions

VAT Yes

Inventory tax Yes

Excise tax Yes

Income tax Partial Reduction

Real Property tax Reduced

Other Export tax exemption on scrap, shrinkage. Export taxes still apply. 

22 PROSEC's allow reduced or no duties on foreign inputs 

Financial Incentives

Leases/rents reduced lease rates

Regulatory exemptions Maquiladoras can be located anywhere, but must be registered with 

federal government

Labor up to 10% may be foreign

Restrictions

Manufacturing for export only No

Export certain percent Yes

Domestic content Yes

Misc. Streamlined customs procedures for plant to plant transfers

(GAO Publication 03-891, "Mexico's Maquiladora Decline Affects 

U.S.-Mexico Border Communities and Trade; Recovery Depends in 

Part on Mexico' Actions," July 2003)

Diamond

www.visitmexico.com

Sources

Mexico
APPENDIX I

Type of Zone Free export zones (FEZ), free industrial zones (FIZ) & industrial 

warehouses (IW)

Agency Customs administration

Size FEZ:345 hectares

Location Near ports

Company facilities? public or private

Ownership Land privately owned

Government Operated? No (Consortium of private cos.)

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Can it be entered for consumption No

Is duty paid when entered N/A

Is duty paid on entire value N/A

Duty owed on component or product N/A

Tax Exemptions

VAT Yes

Income tax Yes (5 years, then lower rate)

Real Property tax Yes

Other stamp, registration, license (15 yrs), share yield and urban (15 yrs) 

tax

Financial Incentives

Grants Federal aid can subsidize the acquisition of plots and/or the 

construction of production units.

Regulatory exemptions exempt from registration

Restrictions

Manufacturing for export only Y

Export certain percent Y

Misc. Exempt from needing construction permit.

TPR 

www.tangerfreezone.com

Morocco

Sources
APPENDIX I

Type of Zone Industrial export zones

Agency National Commission of Free Zones

Number 62 (company facilities)

Location Stand alone zones can operate anywhere, no limitations

Company facilities? Yes

Outside of Customs? Yes

Ownership Private

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes (but only 20-40%)

Is duty paid when entered Yes

Is duty paid on entire value Yes

Duty owed on component or product Product

Tax Exemptions

VAT Refund

Excise tax Yes

Income tax Yes- administrator 15yrs, users 10 yrs

Real Property tax Yes

Other Municipal taxes, stamp tax, sales tax

Financial Incentives

Leases/rents No

Loans No

Grants No

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent Yes (60-80%)

Domestic content No

% domestic investment No

Misc. No duty on production equipment. The amount that can be sold 

locally is based on the amount of local value added and employment.

FTAA

State

MAC

http://www.pronicaragua.org/

Sources

Nicaragua
APPENDIX I

Type of Zone Export processing zones

Agency Nigerian Export Processing Zone Authority

Number 5 established, 2 functioning

Location Ports

Company facilities? No

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption 25%

Is duty paid when entered Yes

Tax Exemptions exemptions available

Financial Incentives

Leases/rents Land subsidies

Restrictions

Manufacturing for export only No

Export certain percent Yes - 75%

Misc. No duty on goods consumed within the zone. No pre-shipment 

inspection of goods (faster clearance). License approved in 5 days.

CCG

Onne Free Zone

Nigeria

Sources
APPENDIX I

Type of Zone Export processing zones

Agency Ministry of Industries and Production

Number 3 (but 12 more in the development phase)

Size 500+ acres

Location Karachi, Sialkot, Lahore

Outside of Customs? No

Government Operated? Yes

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes (subject to normal import rest.)

Is duty paid when entered Yes

Is duty paid on entire value Yes

Duty owed on component or product Duty owed on condition as it leaves the zone.

Tax Exemptions

Excise tax Yes

Income tax Yes (of foreign personnel)

Other Exemption from most federal/provincial taxes. No sales tax on inputs 

(inc. electricity and gas)

Regulatory exemptions

Labor Yes- unions and strikes prohibited

Restrictions

Manufacturing for export only Yes

Export certain percent No

Domestic content No

% domestic investment No

Misc. Exempt from import restrictions. No duty on production or 

construction equipment.

MAC

TPR

www.pakboi.gov.pk

www.epza.gov.pk

Sources

Pakistan
APPENDIX I

Type of Zone Free trade zones

Agency Customs Administration

Outside of Customs? Yes but controlled

Ownership Private

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Tax Exemptions

VAT Yes

Other

Certain activity exempt from all domestic, departmental and 

municipal taxes. Do pay Free Trade Zone tax, .5% of export gross 

income.

Restrictions

Manufacturing for export only No

Export certain percent No but tax break for 90% exports

Domestic content No

% domestic investment No

Misc. No duty on capital goods.

Sources FTAA

Paraguay
APPENDIX I

Type of Zone Special economic zones (ecozones) (Ecozones divided into export 

processing zones and free trade zones)

Agency Philippine Economic Zone Authority

Number App.40, plus 4 just EPZs

Size Varies, some quite large

Location Anywhere

Company facilities? Yes

Outside of Customs? Separate customs territory

Ownership 4 EPZs:Government, rest private

Government Operated? Some

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved To use zone, must register with PEZA

Can use foreign & domestic Yes

Can it be entered for consumption Yes, up to 30%

Is duty paid when entered Yes

Is duty paid on entire value Yes

Duty owed on component or product Product

Tax Exemptions

Income tax lower rate (5%)

Real Property tax No

Other Wharfage dues & export tax. Deductions for labor expense.

Regulatory exemptions Shipments into a zone exempt from the selective preshipment 

advance classification scheme.

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent Yes - 70%

Domestic content No

% domestic investment No

Misc.

Employment of foreign nationals can not exceed 5%. Exports from 

zones account for more than 20% of shipments from the country. No 

duty on capital equipment. PEZA Board meets twice a week to 

review applications, approval takes days.

Diamond

State

MAC

www.philea.com.ph

www.peza.gov.ph

Sources

Philippines
APPENDIX I

Type of Zone Free zones and warehouses

Agency Ministry of Finance

Number 7 zones, 5 warehouses

Location Ports/airports 

Outside of Customs? No

Government Operated? State or local

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Tax Exemptions

VAT Yes

Income tax Yes (3 yrs)

Restrictions

Manufacturing for export only No 

Export certain percent No 

Domestic content No 

% domestic investment No 

Misc.

Customs authority may prohibit or restrict activities in a free zone or 

customs warehouse with respect to a type of goods or availability of 

customs supervision. No retail.

Diamond

MAC

www.mf.gov.pl

www.paiz.gov.pl

Sources

Poland
APPENDIX I

Type of Zone Industrial free trade zone

Agency Madeira: Sociedade de Desenvolvimento da Madeira, S.A. (SDM)

Number 2

Size Madeira: 296 acres

Location Industrial Parks: Madeira and Santa Maria Island

Outside of Customs? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes - licenses for min. 5 yrs

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes - but possible exemptions

Is duty paid on entire value Duty owed on non-EU component value

Duty owed on component or product component

Tax Exemptions

VAT Reduced rate

Income tax from profits and dividends until 2011

Real Property tax

Other Exempt from Capital Transfer Tax, Stamp Tax, Limited exemptions 

from social security deductions

Financial Incentives

Leases/rents Infrastructure provided

Grants grants of up to 100% of employee training costs and up to 50% of 

the costof energy-saving changes in production measures

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc.

Must not be a threat to national security or public health. Exemption 

from quotas on exports to the EU of goods produced in the zone. 

Madeira: service industries receive benefits anywhere on island, do 

not need to be within the physical boundaries of the zone. License 

process takes 30 days. No duty on production equipment.

Diamond

State

MAC

www.lowtax.net

Portugal

Sources
APPENDIX I

Type of Zone Free trade zones

Agency Free Zones Agency, within the Ministry of Transport, Constructions 

and Tourism

Number 6

Location Constanta Sud-Agigea, Sulina, Galati, Braila, Giurgiu and CurticiArad

Company facilities? No

Outside of Customs? Controlled by Customs

Operated By Local administration established by Free Zones Agency

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Tax Exemptions

VAT Yes

Excise tax Yes

Other Profit tax deferred until June 30, 2007 for companies who had 

invested $1million in the free zone by July 1, 2002.

Financial Incentives

Leases/rents No

Loans No

Grants

Under proposed legislation, development aid could pay 50% of the 

eligible costs of investments carried out by large companies and 65% 

for SMMs. 

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc.

Approval for manufacturing granted in one day by local zone 

administration. Goods used in construction, repair and maintenance 

are exempt from customs duties.

Sources FCS

Romania
APPENDIX I

Type of Zone Free trade zones

Agency Federal Ministry in charge of financial operations and Federal 

Customs Administration

Number 12, plus additional subzones

Location Near river ports/international roadways, sub-zones are physically 

separate sites

Company facilities? Yes

Ownership private (by investor)

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes (up to 70%)

Is duty paid when entered Yes

Is duty paid on entire value No on foreign components

Duty owed on component or product product

Tax Exemptions

Other Sales tax

Regulatory exemptions

Environmental No

Restrictions

Manufacturing for export only No

Export certain percent Yes 30%

Domestic content No

% domestic investment Initially must be 51%

Misc.

Activities that endanger national security or the environment are not

allowed. No duty on production equipment. Reduced customs and

administrative procedures. Application processed within 30 days,

lapses in 2 yrs with no activity. If the amount exported is less than

50% for 3 years, the zone will be terminated.

MAC 

Free Zone Novi Sad

www.szns.co.yu

www.siepa.sr.gov.yu

Serbia

Sources
APPENDIX I

Type of Zone Free trade zone (free port)

Number 7

Size 1000+ acres, Varies

Location Seaport/airport

Outside of Customs? No, but no customs doc. until entered for most goods

Government Operated? Port Authorities

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing No

Must manufacturing be approved Repackaging/Sorting needs approval

Can it be entered for consumption Yes

Is duty paid when entered Yes (but few duties exist)

Is duty paid on entire value N/A

Duty owed on component or product N/A

Restrictions

Manufacturing for export only N/A

Export certain percent No

Domestic content N/A

% domestic investment No

Misc.

72 hours of free storage for conventional cargo and 1 day of free 

storage for re-export cargo. Can not store liquor and cigarettes. No 

manufacturing in zones, but local industries using dutiable raw 

materials can apply for duty exemptions.

Diamond 

MAC

www.asiatradehub.com

www.customs.gov.sg

Sources

Singapore
APPENDIX I

Type of Zone Customs free zones

Agency Ministry of Finance considers applications, Customs provides 

supervision

Number 4

Location Can be anywhere, currently: Zilina, Banska Bystrica, Trencin, 

Kosice

Outside of Customs? Customs controls flow of goods, goods in the zone are outside 

customs control

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes (by Customs)

Can it be entered for consumption Yes

Is duty paid when entered Yes (plus interest)

Is duty paid on entire value Yes

Duty owed on component or product On condition as it is entered

Tax Exemptions Exempt while in zone

Restrictions

Manufacturing for export only No

Export certain percent No

Misc. Only Slovak citizens are eligible to apply for a zone.

TPR

State

Slovak Republic

Sources
APPENDIX I

Type of Zone Free trade zone (Zona franca)

Agency Customs (Ministry of Finance)

Number 3 (Barcelona, Cadiz, Vigo)

Location Ports, but bonded warehouses at individual facilities serve as 

extension of zone

Company facilities? Yes - possibly

Outside of Customs? No - Customs presence within zone

Ownership Public or private

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Tax Exemptions

VAT Yes

Inventory tax Yes

Excise tax Yes

Income tax Yes

Real Property tax Yes

Other Internal taxes deferred

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc. Not subject to measures under commercial policy while in zone

Diamond

MAC

www.czfa.org

Spain

Sources
APPENDIX I

Type of Zone Industrial development zones

Agency Department of Trade and Industry

Number 4

Location Purpose built industrial estates linked to an international port or 

airport

Outside of Customs? Customs Secured Area

Government Operated? Gov't licenses operators to develop and run zone

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Duty owed on component or product Finished product

Tax Exemptions

VAT Yes (on South African exports)

Other Reduced taxation and exemptions for some activities/products

Financial Incentives

Grants Critical Infrastructure Fund, Export Markrting and Investment 

Assistance, Strategic Investment Programme

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc.

Machinery and assets exempt from duties and VAT. For export 

driven industries. Infrastructure provided. New London 

infrastructure to be completed in August, would be 1st active zone.

MAC

CCG

www.dti.gov.za

South Africa

Sources
APPENDIX I

Type of Zone Export processing zones

Agency Board of Investment of Sri Lanka (BOI) (Gov't agency)

Number 14

Size 300 acres to 200 sq. miles

Location No geographic limit, mainly airports and seaports

Company facilities? No

Ownership Owned by BOI

Government Operated? Operated by BOI

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes (all users must apply through BOI)

Can use foreign & domestic Yes

Can it be entered for consumption Yes - Up to 20%

Is duty paid when entered Yes 

Duty owed on component or product Finished product

Tax Exemptions

Income tax Yes- initially, then reduced rate

Financial Incentives

Leases/rents No

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent Yes - 80%

Domestic content No

% domestic investment Must meet minimum investment criteria set by BOI

Misc. Exempt from exchange control legislation.

Diamond

State

www.boi.lk

Sri Lanka

Sources
APPENDIX I

Type of Zone Free ports

Agency Royal Board of Customs

Number 4

Location Ports

Outside of Customs? Customs clearance required for storage

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Tax Exemptions No

Regulatory exemptions

Labor No

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc. No retail trade. Goods may not be consumed in the zone.

Sources Diamond

MAC

Sweden
APPENDIX I

Type of Zone Export processing zones

Agency Ministry of Economic Affairs

Number 3

Size 62-472 acres

Location Near major cities

Outside of Customs? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Tax Exemptions

Other 5 yr corporate tax exemption

Restrictions

Manufacturing for export only No

Export certain percent No

Misc.

Bonded factories may be established anywhere in Taiwan. Bonded 

factory companies produce primarily for export markets and may 

import their manufacturing components and raw materials duty free. 

However, the authorities will not extend duty-free treatment to items 

whose duty rate is already considered minimal, materials known to 

pollute the environment, and items for which a domestic source is 

readily available.

Diamond 

www.iesingapore.ie.gov

Taiwan

Sources
APPENDIX I

Type of Zone Industrial estates (10 are export processing zones)

Agency Industrial Estate Authority of Ministry of Industry and Thai Customs 

Number 30

Size 67-270 acres

Location Generally at industrial estates or other industrial parks. Can not be 

established for one user.

Company facilities? No

Outside of Customs? Yes territory but Customs onsite

Ownership 10 belong to IEAT, remaining are joint investments with private 

sector

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved project and users approved

Can use foreign & domestic Yes

Can it be entered for consumption Yes (except EPZs)

Is duty paid when entered Yes

Is duty paid on entire value only foreign portion

Duty owed on component or product finished product

Tax Exemptions

VAT Yes

Excise tax Yes

Other Alcohol stamp and tax

Financial Incentives

Leases/rents No

Loans No but zone companies seen as stronger so easier to receive loan

Grants No

Regulatory exemptions

Environmental No

Labor May use foreign specialists and technicians (difficult if out of zone)

Restrictions

Manufacturing for export only No (except EPZs)

Export certain percent No

Domestic content No

% domestic investment No

Misc.

No duty on production equipment. Exemption from 

standards/quality control requirements if goods exported. Three 

licenses required for opreration (for land, construction and 

operation), takes app 3 months for approval. 

Diamond

State

MAC

www.boi.go.th

www.customs.go.th

Sources

Thailand
APPENDIX I

Type of Zone Free zones of transformation for export

Agency Free Zone of Transformation for Export Administration Company 

(under supervision of the Ministry of Industry)

Location Port. Can be established anywhere to accommodate export 

companies.

Company facilities? Yes

Outside of Customs? No

Ownership State owned

Government Operated? public or private

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption No

Is duty paid when entered N/A

Is duty paid on entire value N/A

Duty owed on component or product N/A

Tax Exemptions

Income tax Exempt for 10 years, then 15%

Other Dividend tax (10 yrs), payroll tax reduced to 2%

Restrictions

Manufacturing for export only Yes

Export certain percent Yes 100%

Misc.

Must allow Togolese first choice of permanent jobs. Reduced utility 

costs. Approval granted in 2 days. No duty on production 

equipment. Under exceptional circumstances, companies can apply 

to the Minister of Finance to enter 20% for domestic consumption 

with the payment of duties.

Sources Free Zone of Transformation for Export Administration Company 

Togo
APPENDIX I

Type of Zone Free trade zones

Agency Council of Ministers/ Directorate General of Free Zones

Number 21

Outside of Customs? Yes but controlled by customs

Ownership Private

Government Operated? by public institutions, agencies, legal entities or residents

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved By license, with time limit

Can use foreign & domestic Yes

Can it be entered for consumption Yes (.5% transaction fee)

Is duty paid when entered Yes

Is duty paid on entire value Owed on value added if 3rd party component is involved, if entirely 

consists of 3rd party inputs then paid on entire value.

Duty owed on component or product Product

Tax Exemptions

VAT Yes

Income tax No (recent change, existing zones grandfathered for duration of 

licence)

Other

Earnings that taxpayers engaged in manufacturing in the zone from 

the sale of products are exempt from corporate tax until the end of 

the year in which Turkey becomes a full member of the EU. Still 

exempt from private consumption tax.

Financial Incentives

Leases/rents No

Loans No

Grants No

Regulatory exemptions Municipality Law, Passport Law, Encouragement of Foreign 

Investment Law

Labor No strikes or lockouts

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content No

% domestic investment No

Misc.

Application is evaluated in 5-7 days. Recent changes due to EU 

laws, also to eliminate a source of unfair competition and reduce 

benefits from public concern that zones were doing more to 

encourage imports than exports.

State

www.foreigntrade.gov.tr 

www.mfa.gov.tr

www.turkpulse.com

Sources

Turkey

Size/Location Size and location determined by Council of Ministers.
APPENDIX I

Type of Zone Free zones

Agency Independent free zone authorities in each emirate.

Number 16

Location Industrial parks

Government Operated? No

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes (must be export oriented)

Is duty paid when entered Yes

Tax Exemptions

VAT Yes

Inventory tax Yes

Excise tax Yes

Income tax Yes

Other No corporate profit tax

Financial Incentives 100% profit repatriation

Loans No

Regulatory exemptions

Environmental No

Restrictions

Manufacturing for export only No but export focused

Export certain percent No

Domestic content No

% domestic investment No

Misc.

Must have capital of at least Dh 1 million. License involves review 

of feasability and environmental impact. Can receive provisional 

authority. 100% foreign ownership allowed.

www.rakiftz.com 

www.dafza.gov.ae

www.jafza.co.ae

www.dpa.co.ae

www.hamriyahfz.com

Sources

United Arab Emirates
APPENDIX I

Type of Zone Free zones

Number 5

Location No geographic limitations

Company facilities? Yes

Outside of Customs? No

Government Operated? Port or freight forwarder manages zone

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing No

Must manufacturing be approved N/A

Can use foreign & domestic N/A

Can it be entered for consumption Yes

Is duty paid when entered Yes

Is duty paid on entire value N/A

Duty owed on component or product N/A

Tax Exemptions

Other No exemptions, only deferral.

Financial Incentives

Leases/rents No

Loans No

Grants No

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only N/A

Export certain percent No

Domestic content No

% domestic investment No

Misc.

No value added, strictly for cargo storage and consolidation. 

Processing/manufacturing must be under EU's PCC or Inward 

Processing Relief 

Diamond 

CCG Sources

United Kingdom
APPENDIX I

Type of Zone Free trade zones

Agency Free Trade Zone Department of the General Commerce Authority

Number 9

Outside of Customs? Yes customs has no jurisdiction within zones, controls entrance and 

exits

Ownership public or private

Government Operated? Public or private administrator

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can use foreign & domestic Yes

Can it be entered for consumption Yes

Is duty paid when entered Yes

Is duty paid on entire value Yes

Duty owed on component or product Product

Tax Exemptions all local taxes

VAT Yes

Excise tax Yes

Other COFIS and telecommunications tax, gains tax, equity tax, 

Financial Incentives

Leases/rents Land provided

Restrictions

Manufacturing for export only No

Export certain percent No

Domestic content Yes- 60% of MERCOSUR origin

% domestic investment Must employ 75% Uruguayan

Misc. No duty on production equipment. Retail sale not permitted. 

Manufacture of weapons not permitted.

State

FTAA

MAC

ZONAMERICA - The ABC of Free Trade Zones in Uruguay

Sources

Uruguay
APPENDIX I

Type of Zone Export processing zone

Agency Ministry of Finance - Export Processing Zone Authority

Number App. 7 parks

Location Designated area or company facility

Company facilities? Yes

Ownership No

Government Operated? Developers for industrial parks

Benefits

Duty free admission Yes

Duty free export Yes

Manufacturing Yes

Must manufacturing be approved Yes

Can it be entered for consumption Yes- but only 20%

Tax Exemptions

Income tax Yes for 5 yrs, then reduced rate

Other

Sales tax refundable, exempt from capital gains tax, shareholder's 

taxes, non-resident's taxes on interest fees, royalties and remittances. 

Exempt from fringe benefit tax for emp.

Regulatory exemptions

Environmental No

Labor No

Restrictions

Manufacturing for export only No

Export certain percent Yes - 80%

Misc. Infrastructure provided in industrial parks. No duty on production or 

construction equipment. Must be new investment.

MAC 

www.zic.co.zw

www.epz.co.zw

Sources

Zimbabwe
SOURCE ABBREVIATIONS

The tables in Appendix I contain several abbreviations for frequently used sources. The 

abbreviations and full descriptions are available below.

Abbreviation Source

CCG Country Commercial Guides, U.S. and Foreign Commercial 

Service, U.S. Department of Commerce

Diamond Tax Free Trade Zones of the World, 1998 ed., Walter Diamond

FCS Information provided by the US and Foreign Commercial Service, 

U.S. Department of Commerce

FTAA FTAA Negotiating Group on Market Access, Tripartite Committee, 

Systemization of Information on Special Regimes

MAC Information provided by Market Access and Compliance, U.S. 

Department of Commerce

State Information provided by cable from U.S. embassies abroad

TPR Trade Policy Reviews, World Trade Organization 
APPENDIX II
UNITED STATES DEPARTMENT OF COMMERCE

International Trade Administration

Washington, D.C. 20230

May 7, 2004

MEMORANDUM FOR Dennis Puccinelli

Director, Office of Foreign Trade Zones

From: Carole Showers 

Director, Subsidies Enforcement Office

Subject: Subsidy Issues with Respect to Free Trade Zone Programs

The purpose of this memo is to provide an explanation of (1) the types of subsidy issues

that arise in the context of foreign trade zone programs, or similar programs, and (2) subsidy

disciplines with respect to these types of programs in developing countries.

Subsidy Issues

In the course of countervailing duty proceedings, the Department has investigated foreign

trade zone programs, or similar types of programs, in several countries. In general, such

programs are found to be countervailable when a government provides subsidies that are limited

to industries or enterprises that are located in such zones. Of particular concern are programs

that contain prohibited export or import substitution elements, e.g., programs that require

companies in the zones to export a certain percentage of their production or use a certain amount

of domestic content in their production, as well as programs that provide tax holidays,

exemptions or rebates that are contingent upon export or the use of local content. 

The Foreign Trade Zone (FTZ) program in the United States is an example of a program

that complies with WTO commitments made by the United States with regard to subsidies. The

U.S. FTZ program is seen by other countries as a program to emulate as they try to establish

similar programs or bring existing ones into compliance.

An important aspect of our future work together, will be to ensure that the U.S. FTZ

program remains consistent with any new subsidy disciplines that are agreed to in the context of

the Doha Round. As you are aware, one of the Administration’s goals in this Round is to

negotiate stronger subsidy disciplines, especially in the area of prohibited subsidies. Therefore,

we will need to evaluate the current program, as well as any suggested changes, based on those

new disciplines. 

Export Subsidies - Explanation of Developing Country Disciplines

Under the WTO Subsidies Agreement, most developing countries were obligated to

eliminate their export subsidies by December 31, 2002. Article 27.4 of the Agreement allows for
an extension of this deadline provided consultations were entered into with the Subsidies

Committee by December 31, 2001. The WTO Subsidies Committee has the authority to decide

whether an extension is justified by considering the “economic, financial and development

needs” of the developing-country Member. If the Committee grants an extension, annual

consultations with the Committee must be held to determine the necessity of maintaining the

subsidies. If the Committee does not affirmatively sanction a continuation, the export subsidies

must be phased out within two years.

In an attempt to try and address the concerns of small exporting developing countries, a

special procedure within the context of Article 27.4 of the Agreement was adopted at the Fourth

Ministerial Conference, under which countries whose share of world exports was not more than

0.10 percent and whose Gross National Income was not greater than $20 billion could be granted

a limited extension for particular types of export subsidy programs subject to rigorous

transparency and standstill provisions. Members meeting all the qualifications for the agreed

upon special procedures are eligible for a five-year extension of the transition period, in addition

to the two years referred to under Article 27.4.

Altogether, the Committee conducted a detailed review of more than 70 export subsidy

programs for which extensions were requested. Many of these were foreign trade zone-like

programs. Throughout the review and approval process, the United States took a leadership role

to define as narrowly as possible the scope of the extensions and to ensure that the conditions

imposed on the extensions will strengthen the ability of the developing countries involved to

come into compliance with their obligations upon expiration of the extension.

cc Ronald Lorentzen
APPENDIX III
Federal Register / Vol. 69, No. 65 / Monday, April 5, 2004 / Notices 17643 

1 In cases where T/IM authority is denied, or that 

are ineligible for T/IM consideration, the applicant 

may opt to request manufacturing authority through 

the FTZ Board’s standard procedures (i.e., 

evaluation of the proposal by the full Board). 

2See footnote 1. 

3 Generally expressed in terms of the number of 

inverted tariffs (i.e., instances of imported inputs 

with higher duty rates than the resulting finished 

products proposed for manufacturing under FTZ 

procedures). After consultations with stakeholders, 

the Board’s Executive Secretary would publish 

guidelines clarifying the criteria for consideration of 

T/IM applications. 

DEPARTMENT OF COMMERCE 

Foreign-Trade Zones Board 

Proposals to Facilitate the Use of 

Foreign-Trade Zones by Small and 

Medium-Sized Manufacturers 

As part of the Department of 

Commerce’s manufacturing initiative, 

the Foreign-Trade Zones (FTZ) Board 

(the Board) has analyzed foreign zone 

programs to determine whether there 

are features that the Board can 

implement in the U.S. FTZ program to 

enhance access and reduce the 

program’s costs for small and mediumsized manufacturers, thereby helping to 

improve such companies’ international 

competitiveness. Based on this analysis, 

the Board is inviting public comment on 

two proposals. The first proposal 

involves a procedural change whereby 

the Board would delegate authority to 

the Board’s Executive Secretary for 

decision-making on certain requests for 

manufacturing authority. The second 

proposal includes enhancements to the 

Board’s pre-application counseling 

procedures and application guidelines 

for small and medium-sized 

manufacturers. 

The proposed delegation of authority 

would only authorize the Board’s 

Executive Secretary to grant temporary 

or interim authority for zone 

manufacturing. Permanent authority 

would continue to require full Board 

review. The consideration of all 

proposals for temporary or interim 

manufacturing (T/IM) authority would 

take into account the Board’s existing 

criteria for manufacturing (see 15 CFR 

400.31(b)). Prior to making a decision on 

an application for T/IM authority, the 

Board’s Executive Secretary would 

publish a Federal Register notice 

seeking public comment, and could also 

contact Department of Commerce 

industry specialists for an assessment of 

the application. The Board’s Executive 

Secretary would retain the discretion to 

deny any T/IM application 1 if 

opposition or any other complicating 

issues or concerns arise. 

Several threshold criteria would need 

to be met to qualify for consideration for 

T/IM authority 2. T/IM applications 

would be limited to manufacturing 

operations within pre-existing FTZ 

space (i.e., within the boundaries of FTZ 

sites already approved by the Board at 

the time of the T/IM application’s 

submission to the Board), and proposals 

would need to be consistent with 

government policy and prior Board 

actions and (1) non-complex 3 in nature 

and clearly presenting no new, complex, 

or controversial issues or (2) for export 

only. T/IM authority could only be 

granted for a period of up to two years, 

although circumstances might lead the 

Board’s Executive Secretary to impose a 

stricter time limit on a particular 

proposal. Finally, the Board’s Executive 

Secretary and the FTZ Board would 

have the authority to revisit any 

approval of T/IM authority should it be 

warranted by policy considerations, 

including subsequent industry 

opposition or a determination that the 

activity results in a negative net 

economic effect for the United States. 

The proposed enhancements to the 

pre-application process for small and 

medium-sized manufacturers include: 

(1) Expanded pre-application 

counseling by the FTZ Board staff; (2) 

availability of completed sample 

applications to help guide potential 

applicants; and (3) simplified 

guidelines/formats for small and 

medium-sized manufacturers applying 

to the FTZ Board to conduct noncomplex activity. 

Public comment on this proposal is 

invited from interested parties. We ask 

that parties fax a copy of their 

comments, addressed to the Board’s 

Executive Secretary, to (202) 482–0002. 

We also ask that parties submit the 

original of their comments to the 

Board’s Executive Secretary at one of 

the following addresses: 

1. Submissions Via Express/Package 

Delivery Services: Foreign-Trade-Zones 

Board, U.S. Department of Commerce, 

Franklin Court Building—Suite 4100W, 

1099 14th St. NW., Washington, DC 

20005; or 

2. Submissions Via the U.S. Postal 

Service: Foreign-Trade-ZonesBoard, 

U.S. Department of Commerce, FCB—

Suite 4100W, 1401 Constitution Ave. 

NW., Washington, DC 20230. 

The closing period for the receipt of 

public comments is April 30, 2004. Any 

questions about this request for 

comments may be directed to the FTZ 

Board staff at (202) 482–2862. 

Dated: March 29, 2004. 

Dennis Puccinelli, 

Executive Secretary. 

[FR Doc. 04–7530 Filed 4–2–04; 8:45 am] 

BILLING CODE 3510–DS–P 

DEPARTMENT OF COMMERCE 

International Trade Administration 

A–427–009, A–428–803, A–580–805, A–588–

812, A–570–802, and A–412–803 

Industrial Nitrocellulose from France, 

Germany, Korea, Japan, the People’s 

Republic of China, and the United 

Kingdom: Notice of Initiation of 

Changed Circumstances Reviews and 

Consideration of Revocation of the 

Antidumping Duty Orders 

AGENCY: Import Administration, 

International Trade Administration, 

Department of Commerce. 

ACTION: Notice of initiation of changed 

circumstances reviews. 

SUMMARY: On February 12, 2004, in 

accordance with 19 CFR 351.216(b), 

Wolff Cellulosics GmbH (Wolff), a 

German manufacturer of industrial 

nitrocellulose (INC), filed a request for 

a changed circumstances review of the 

antidumping duty order on INC from 

Germany. On March 9, 2004, the 

Valspar Corporation (Valspar), an 

importer of INC and an interested party 

in multiple proceedings, filed requests 

for changed circumstances reviews of 

the antidumping duty orders on INC 

from France, Germany, Korea, Japan, the 

People’s Republic of China (PRC), and 

the United Kingdom (UK), as described 

below. In response to these requests, the 

Department of Commerce (the 

Department) is initiating changed 

circumstances reviews of the 

antidumping duty orders on INC from 

France, Germany, Korea, Japan, the PRC, 

and the UK. 

EFFECTIVE DATE: April 5, 2004. 

FOR FURTHER INFORMATION CONTACT: Ron 

Trentham or Tom Futtner, Office of AD/ 

CVD Enforcement 4, Group II, Import 

Administration, International Trade 

Administration, U.S. Department of 

Commerce, 14th Street and Constitution 

Avenue, N.W., Washington, DC 20230; 

telephone (202) 482–6320 or (202) 482–

3814, respectively. 

SUPPLEMENTARY INFORMATION: 

Background 

On August 10, 1983, the Department 

published in the Federal Register the 

antidumping duty order on INC from 

France. See 48 FR 36303 (August 10, 

1983). On July 10, 1990, the Department