Free Trade Zones

Controlling the Zone: Balancing facilitation and control to combat illicit trade in the world’s Free Trade Zones (2013)

This BASCAP report calls for increased regulation and better management of Free Trade Zones (FTZs) which, without proper oversight, can be vulnerable to counterfeiting and piracy, it includes recommendations to enhance intellectual property enforcement in these areas.

The BASCAP report was presented at the 2013 World Customs Organization IT Conference and Exhibition in Dubai.

What’s at risk?

FTZs provide significant opportunities for legitimate business and play a critical role in global trade. However, the by-product of their proliferation brings increased vulnerability for abuses by criminal actors who take advantage of relaxed oversight, softened Customs controls and lack of transparency. Free Trade Zone management, in some instances, fails to enforce intellectual property rights (IPRs), therby enabling laundering, distribution of counterfeit goods and consumer purchases of potentially unsafe products.

Key recommendations

Drawing on international agreements, lessons learned from effective national legislation, the experience of IP rights holders, and international best practices, this report includes a set of policy and legislative recommendations on how to preserve and expand the benefits of FTZs for legitimate traders. At the same time they serve to protect the public and honest business from predatory practice.

  • Review and implement national IPR legislation and include language that makes legislation applicable to all goods in the national territory, in all Customs regimes, including transit, in-transit, and free-zone regimes. Further state that the discovery of prohibited goods may result in civil and criminal penalities.
  • Empower Customs with authority over goods in all territories, including FTZs, SEZs and free ports.
  • Clarify that FTZs (or SEZs or free ports, etc.) are under the jurisdiction of the national Customs authority; that national Customs has unrestricted rights to enter and observe operation, to audit the books and records of companies in the zone, and to validate goods status and conformance with tariff and nontariff measures under the national Customs mandate.
  • Grant Customs ex-officio power to detain goods suspected of infringing on IPR, including goods in FTZs, SEZs, free ports, and the like.
  • Enable cooperation between national Customs authorities and the special authorities of FTZs or free ports to ensure efficient enforcement of anti-counterfeiting criminal and civil laws to regulate the offenses of trafficking in counterfeit goods.
  • Include provisions to simplify the process for notifying trademark holders of infringement and enable them to initiate enforcement action; institute a simple procedure for destroying infringing goods from changing destination to evade enforcement.