free-trade zone

Quick Reference

An area of a country where national tariffs are not applied. This is intended to encourage industries which rely largely on producing goods for export using large amounts of imported inputs. Having the inputs duty-free saves on the interest costs of having money tied up by tariffs, and avoids the administrative expense of claiming tariff drawbacks on the exports. National tariffs have to be paid on goods shipped from a free-trade zone to the rest of the national economy.

Subjects: Earth Sciences and Geography — Economics.

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