Free trade zone is an area in a country where goods can be imported without paying customs duties (import taxes). Foreign traders may store, exhibit, assemble, or process products in these zones before shipping them elsewhere for sale or use. Free trade zones are often near such transportation centers as seaports and airports. A free trade zone differs from a free port, which is an entire city or territory where no customs duties are collected.
Free trade zones encourage foreign trade by enabling merchants to conduct their trade more cheaply than would otherwise be possible. If goods are imported directly from a free trade zone, traders pay duties only to the country where the goods will be sold or used. No duty is paid to the country in which the zone is located. The zone also enables traders to exhibit their goods at a site near the intended market without paying duties before the items are sold.
There are hundreds of free trade zones in the world. In the United States, such zones are called foreign trade zones (see Foreign trade zone ). In 1934, Congress established the Foreign-Trade Zones Board to authorize and administer the zones. The board is an agency of the U.S. Department of Commerce.
