Free Trade Zone: 7 Attributes You Probably Don’t Know

Free trade zone, FTZ
Lekki Free Trade zone

The competition between nations and cities has increased to exponential levels due to globalisation, increasing trade and human travel. It is now common practice to establish a free trade zone in a city or country so as to encourage investors and businesses within the territory.


According to a report by ‘Site Selection Magazine’, there were well over 5,000 free trade zones in the world as at 2018. Popular Free trade zones in Nigeria include: Calabar Free Trade Zone, Kano Free Trade Zone, Ladol Logistics Free Zone, Lekki Free Trade Zone, Ogun Guandong Free Trade Zone, Oil and Gas Free Zone Onne and the Snake Island Integrated Free Zone.

However, as popular as the expression sounds to Nigerians, many still don’t know what can be achieved or done at FTZs.

Below are seven (7) things you probably don’t know about Free Trade Zones.


Help Reduce / eliminate certain duties

Free Trade Zones allow the most duty deferral of any kind of Customs program. Companies can bring goods into the FTZ without duties or most fees, including exemption from inventory tax. Asides that, there is duty exemption for a company importing components or raw material into the FTZ.

There is also relief from inverted tariffs:

In some cases, tariffs on some countries’ component items or raw materials have a higher duty rate than the finished product, putting a manufacturer at a cost disadvantage when compared to an importer. However, in FTZ, the manufacturer pays the lower duty. In fact, in many cases, there is no tariff on manufactured goods in the Free Trade Zone.

FTZs encourage cross-border trade

According to Charles Akinpelu, a Real Estate analyst: “the main idea behind the creation of Free Trade Zones is to facilitate cross-border trade by removing obstacles imposed by customs regulations”. Akinpelu stated further that, Free Trade Zones ensure faster turnaround of planes and ships by lowering custom related formalities.

Give room for global competitiveness

Free Trade Zones are tools that companies use to increase their global competitiveness and play an important role in providing a level playing field when investment and production decisions are made.

FTZ encourages weekly entry savings.

Instead of filing an entry every time a shipment enters the country, an importer operating in a Free Trade Zone only needs to file one Customs entry a week, reducing bureaucratic headaches and costs associated with entry filings. Weekly entries also save on customs brokerage fees.

FTZ helps in inventory tracking and quality control

Free Trade Zones allow companies to closely track their inventories. By bringing goods into an FTZ warehouse that you control, you can identify and classify goods at the warehouse instead of at the port at a Customs control location.

Allows for Indefinite storage of goods

At a free trade zone, companies can hold their goods indefinitely until a port opens up, or if there are quotas on a good, until they can enter into the city or nation’s commerce without falling under quota restrictions.

Help waive customs duties on zone-to-zone transfers.

According to the ‘Economy Watch Magazine’, FTZs can be used to manage trans-shipping operations. What this means is that, manufacturers in FTZs can transfer or ship goods to other FTZs without paying custom duties. Eventually, this would save these companies some operational costs.


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