Paying customs duties and taxes is an additional burden that most importers have to bear when bringing raw materials or finished goods from one country to another. As a merchant, it is natural to look for ways to evade these so that you can save your money and invest it for your business growth. Thanks to the free trade zones, businesses can now save costs by deferring customs duties and taxes.
What is a Free Trade Zone?
A free trade zone (FTZ), also referred to as a foreign trade zone (or free port), is a type of SEZ (special economic zone) where goods can be imported, handles, stored, reconfigured, and re-exported under specific regulations of customs and aren’t subject to any taxes and customs duties. The goods/raw materials can be kept in the FTZ warehouses with least customs authorities’ intervention.
The Terms of Free Trade Areas Include the Following:
– Imported Goods: These are the products manufactured in a foreign land and brought (imported) into another territory and consumed by the natives.
– Exported Goods: These are the goods manufactured locally in a country and sold to buyers in another country
FTZ Versus Single Market Versus Customs Union
FTZ and customs union deal with trading and tariffs but they aren’t the same. There exist many differences between the two. A free trade area (FTZ) is concerned with tariffs and regulations’ removal applied to the member countries that are involved in mutual trade. Members decide upon a common set of rules and policies that govern trade terms, quotas, and tariffs.
A customs union is similar to a foreign trade area (or FTZ) and it too removes the tariffs among its members while setting up a common external-tariff to non-FTZ members on imported-exported goods. The key difference between a customs union and an FTZ/FTA is that high compliance is involved under the transaction of the free trade area.
A single market, on the other hand, runs deeper in comparison to a customs union as it encourages frictionless trading. All members recognize that each product manufactured by the members in the group is worthy of being sold, distributed, and consumed by all members.
Benefits of Free Trade Zones
Some of the amazing benefits of free trade zones include:
- – Deferment of Customs Duties and Taxes
- – Higher Confidentiality
- – Improved efficiency
- – Efficient utilization of resources
- – Maximization of profits
- – More Working Capital in Hand
- – Enhanced Value Addition
To know more visit at FTWZ – The Force That’ll Boom Indian Economy