In the past decades Free Trade Zones (FTZ) have been established at a record rate to attract new business and foreign investment. As a result of FTZ proliferation in the dynamic context of globalisation, they have come to play a central role in business for many countries and leading manufacturers.
OECD analysis documents that a lack of monitoring, oversight and transparency about activities conducted in numerous FTZ enables the production, movement, storage and smuggling of illicit goods.
Policy response – OECD Recommendation and a Public Private Partnership
The OECD Recommendation on Countering Illicit Trade: Enhancing Transparency in Free Trade Zones (“the Recommendation”) was developed to support transparency in FTZs and is framed as part of the broader effort to counter illicit trade.
The Recommendation calls on Members and non-Members having adhered to it (the “Adherents”) to encourage FTZs to adopt and implement a voluntary Code of Conduct for Clean Free Trade Zones (the “Code of Conduct”) set out in the Annex to the Recommendation. The mechanism developed (The Certification Scheme) was devised as a Public Private Partnership, between the OECD, Free Trade Zones and the TIC Industry.
The main purpose of the Certification Scheme and Process and Criteria for the Selection of Certification Bodies is to assess and monitor compliance of FTZs with the provisions of the Code of Conduct. For FTZs, a certificate confirming such compliance would be a clear signal of their highest transparency standard, which would not only result in improved compliance with the requirements by enforcement authorities, but would also greatly enhance the FTZ’s attractiveness for investors, financial markets, etc.
The proposed mechanism offers numerous benefits for other stakeholders than the FTZs, including governments of countries that host FTZs, enforcement authorities, financial industry, logistics industry, trade associations, etc.
Two phases will follow the establishment of the Certification Scheme mechanism. The first phase, the initial rollout, will take for about two years, and will be followed by the full implementation phase.
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