Free Zone Focus: free zones and the OECD join forces

The OECD, the World Customs Organisation (WCO) and the World Free Zones Organisation (WFZO) met in Paris on March 26, 2019, to define the future of free zones and special economic zones in the coming decades.

First, the OECD recognised the importance of free-trade zones (FTZs) with regards to the structure of global value chains as they provide neutral spaces free of taxes on international trade with simplified procedures. It is in these zones where almost 40% of all international trade is carried out in more than 160 countries , generating more than 80 million direct jobs.

The OECD also expressed its concerns that some FTZs have been wrongly used for illicit trade practices and counterfeiting, and expressed a desire to design effective instruments to confront such practices in the future.

This led to the WFZO, in coordination with the WCO, releasing the Safe and Secure Free Zones programme, where an independent third party will certify the integrity and transparent record of FTZ operators and users and the traceability of their IT programmes and procedures. 

In addition, these organisations proposed the modernisation of international rules for FTZs (annex D2 of the revised Kyoto Convention of 2006) to include new topics such as crossborder e-commerce, blockchain technology, process digitalisation and the possibility that customs and sanitary and phytosanitary authorities verify the legality of stored merchandise in FTZs.

Currently, the Kyoto Convention, which was revised nearly two decades ago, does not have any provisions regarding the certifications that an FTZ operator and its users should have as 'authorised economic operators', or about connecting FTZs to the international certifications chain.

The fact that merchandise produced or stored in FTZs has a suspension on international trade taxes does not mean in any way that FTZs are outside the laws that guarantee international best practices, or the enforcement of sanitary rules for food or pharmaceuticals and intellectual property.

More than 1000 FTZs operate in nearly 40 country members of the OECD, and the other 2000 are located in 140 countries that, even though not OECD members, can become platforms for industrial, logistic and services projects. Soon all of these FTZs will be covered under the new Safe and Secure Free Zones programme that will guarantee more transparent and legal trade practices.

The OECD and the WFZO have identical purposes: to promote economic development, competitiveness and welfare. Therefore, rewriting the history of FTZs together is something remarkable.

Martín Ibarra Pardo is vice-chairman of the World Free Zones Organisation and chairman of Araujo Ibarra & Asociados, a law firm based in Bogotá, Colombia.