New report addresses illicit crimes in free trade zones

10 December 2020

ICC’s Business Action to Stop Counterfeiting and Piracy (BASCAP) initiative has released a 2020 update of its 2013 publication examining the balance of facilitation and control required to combat illicit trade in Free Trade Zones.

Paris, 10 December 2020

The updated paper Controlling the zone: Balancing facilitation and control to combat illicit trade in the world’s Free Trade Zones sheds light on the trends of counterfeiting and other forms of illicit trade facilitated through free trade zones (FTZs).

Specifically, the report addresses how criminals use transit or transhipment of goods, through multiple, geographically diverse FTZs for no other purpose than to disguise the illicit nature of the products. The report also underpins the important role that Customs play in guarding FTZs from illicit operators and furnishes case studies of successful enforcement actions by Customs across the world.

Another key feature of the updated report, is the inclusion of extensive case studies serving to illustrate not only FTZ vulnerabilities but also to provide current approaches, best practices and standards that have been successful in mitigating the use of FTZs as vehicles to conduct crime. In this context, measures implemented by national governments and recent private sector initiatives are also showcased.

Commenting on the report, BASCAP Director Sophie Peresson said:

“This updated document not only addresses the impact that counterfeiting in FTZs has on company’s supply chains and business operations, but also recognises the impact of the COVID-19 outbreak and the vulnerabilities it has created within FTZs. As was the case in previous BASCAP FTZ publication, this version presents current solutions developed by national governments, private entities and intergovernmental organisations to mitigate those vulnerabilities.”

The 2020 report promotes a set of specific policy and legislative recommendations on how to preserve and expand the benefits of FTZs for legitimate traders and protect the public and honest businesses from predatory practices. The recommendations are based on a review of the international and national legal frameworks governing FTZs, including how they are implemented and enforced. Balancing trade facilitation and controls in FTZs starts with an understanding that: (1) FTZs are part of the national territory; (2) FTZs are physical locations for goods in a particular status or regime for Customs purposes; and (3) Simplified regulation does not mean impunity.

The report also delineates specific recommendations for action by the World Customs Organization, World Trade Organization, national governments and FTZ operators. Effective implementation of the measures delineated for each of these bodies will go a long way in securing FTZs from illicit traders.

At the virtual launch event, BASCAP Policy Advisor Suriya Prabha Padmanaabhan presented the findings of the report followed by a conversation with Lars Karlsson, Managing Director of KGH Global Consulting representing the World Free Zone Organization, Anton Moiseienko, Research Fellow, Royal United Services Institute Centre for Financial Crime and Security Studies, and Piotr Stryszowski, Senior Economist, The Organisation for Economic Co-operation and Development.

On the importance of the report and the role of FTZs as a contributor to the global economy, OECD Senior Economist Piotr Stryszowski said:

“In the aftermath of the COVID-19 pandemic, we will critically need clean trade to stimulate economic recovery. Free Trade Zones will be an essential factor in these processes, but we need to ensure they will not be abused by criminals that run illicit trade networks.”

The 2020 update benefited from consultation from supporting BASCAP members, intergovernmental organisations – including the World Customs Organisation (WCO) and Organisation for Economic Co-operation and Development (OECD) – not-for-profits such as the Pharmaceutical Security Institute and the World Free Trade Zone Organization, and other associations including the ICC World Chambers Federation and the International Trademark Association.

2021-02-28T18:24:07+00:00