WCO releases research paper on Free Zones

30 September 2019

The latest research paper produced by the WCO has been released today. Entitled “Extraterritorality of Free Zones: the Necessity for Customs Involvement”, it examines the current situation regarding Customs procedures and controls related to Free Zones.

The benefits and risks associated with Free Zones have been widely documented. Free Zones serve as “growth poles” for national and regional economies, in particular by offering less regulation and governmental “red tape”. However, as already outlined in many other research papers, Free Zones are not only utilized by legitimate actors for legal economic activities, but also occasionally misused for illicit activities.

Free Zones are a highly topical subject of discussion at many WCO meetings. As a result, the Secretariat has focused more sharply on this issue. Existing literature was reviewed, and throughout 2018 and early 2019, a series of regional workshops were held to encourage discussions between WCO Members. In parallel, fieldwork was undertaken in 11 countries. Using the knowledge gained through these activities, the paper provides an analysis of the current situation surrounding Free Zones.

The first section of this paper outlines, from a Customs perspective, the definitions and characteristics of Free Zones as well as the economic benefits offered by them. The second section addresses the risks posed by Free Zones, while the third section offers an analysis of the situation where Customs’ involvement and authority related to Free Zones tend to be at a low level, behind which prevails the perceived misconception of ‘Extraterritoriality’ of Free Zones.