The Organisation for Economic Co-operation and Development (OECD) has drawn up recommendations on free trade zones (FTZs) in a bid to stop them being used for illicit trade.
The new guidance – published towards the end of last month – recognises the importance FTZs can play in facilitating globalised trade and stimulating economic growth, but also that they can make life easier for “increasingly sophisticated traffickers dealing in a range of prohibited goods and services including counterfeits.”
One problems with many FTZs is that they are operated by licensed private companies – or sometimes public-private partnerships – which can sometime lead to a disconnect between FTZ internal policies and the laws and regulations laid down by the governments in whose jurisdiction they operate.
The OECD notes also that some with some FTZ the authorities struggle to get physical access to the premises, while obtaining information on the activities of organisation operating within – such as the ownership of goods in transit – can be a challenge.
The result? Some economic operators may “take advantage of inadequate oversight, control and the lack of transparency in FTZ to commit trade fraud, intellectual property rights (IPR) infringement, smuggle contraband, facilitate the proliferation of weapons and launder the proceeds of crime.”
The agency’s recommendations reaffirm the need for law enforcement and other competent authorities to have direct supervision of trade through FTZs, which includes the right to demand access to information related to the production and movement of goods and carry out inspections.
Authorities must also ensure that the organisations operating FTZs are aware of their legal obligations to counter illicit trade.
It has also developed a voluntary Code of Conduct for Clean Free Trade Zone operators, including “strict control of consignments arriving from, or for which there is evidence of having transited through, FTZs that do not implement the code.”
“While FTZs produce economic benefits to their local economies, there is strong evidence that illicit trade (e.g. counterfeits, wildlife and arms) flows through them,” says the OECD.
There is “a positive correlation between the size of FTZs – in terms of employment and numbers of firms – and the value of illicit trade in counterfeits.”