The Meaning & Benefits of Free Trade Zones

Free Trade Zones take up a unique space in the geography of the world, which we at NHFS are acutely aware of. As the planet becomes increasingly globalized, competition has become rife between countries and cities. This has meant that there is an exponential growth in terms of trade wars.

Why Free Trade Zones are Relevant

That is what lead to those destinations offering a variety of incentives that encouraged any potential investors or businesses to build bases within set boundaries. While these incentives can come in the form of tax breaks and waivers or a more streamlined process for buying property, this blog discusses the alternative option of the establishment of a Free Trade Zone.

What is a Free Trade Zone?

The meaning & benefits of free trade zones are very clear. However, many people are still unaware of what exactly a Free Trade Zone (FTZ) is.

“An FTZ is a geographical location where goods can be traded without the involvement of customs authorities.”

Additionally, an FTZ can also apply to a set location where trade barriers can be removed, allowing for a smooth bureaucratic process. Often, this means that the definition of an FTZ is as a labour-intensive manufacturing hub that imports either components or raw materials and exports produced goods. That means that the main benefit of FTZs is that companies can land, handle, manufacture, and re-export without having to file reams of paperwork with customs authorities. Only when goods are delivered to the country where the consumer will be, do the goods then become subject to any of the localized customs duties.

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Locational Benefits

The reason that FTZs are so beneficial for companies is that they are generally located in places that are an advantage for trading. International airports and the surrounding areas are often turned into FTZs, as are seaports. These special economic zones are not subject to the usual immigration laws and the restrictions that are in place to prevent foreign investment. Countries often agree to a Free Trade Zone development to eradicate barriers to trade. With fewer tax considerations and less dependence on customs duties, businesses can streamline their shipping and manufacturing.

Operational Benefits

Free Trade Zones come with a variety of additional benefits that make them very attractive to business owners. Many FTZs come complete with indefinite storage, in-house security, and structured insurance coverage. Because FTZs are dependant on the businesses that use them, most will also have state of the art facilities as well.

Economic Benefits

The purpose of Free Trade Zones is economic development. They create job opportunities and provide businesses with more options. Due to the prevailing manufacturing element of FTZs, the supply of raw materials and well-trained skilled labour is vital. Overall, businesses benefit greatly from Free Trade Zones, because they can speed up their work processes and achieve a faster rate of turnaround for the import or export of vital goods and materials.

Maximise Profits by Partnering with a Professional Logistics Firm like NHFS

The point of national and international Free Trade Zones is to ensure the smoother development of cross-border trade. When these are impaired by customs regulations, then a business is slowed down. With the cost-effectiveness allowed by FTZ for both importers and exporters, Free Trade Zones are a vital component of the modern world. Get in touch with NHFS to find out more about us.

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