What is an example of Free Trade Zone?

An electronics manufacturer sets up operations in Tijuana's border strip to benefit from the reduced 20% ISR rate and 8% VAT rate.

Logistics

Free Trade Zone

Also known as: Free zone, Special Economic Zone

A designated geographic area where goods can enter without paying duties, typically intended for manufacturing or re-export.

What Is a Free Trade Zone?

A Free Trade Zone (also known as a free zone or special economic zone) is a designated geographic area within a country where foreign goods can enter with preferential or zero tariff treatment. These zones are designed to attract investment, promote export manufacturing, and generate employment in strategic regions.

Free zones in Mexico

Mexico has historically maintained its northern border strip as a zone with special customs benefits. Currently, Special Economic Zones (ZEE) and strategic supervised facilities (recintos fiscalizados estratégicos) serve functions similar to traditional free trade zones. The Northern Border Region has enjoyed reduced ISR (20%) and VAT (8%) rates since 2019.

Northern border strip: preferential tax regime with reduced ISR and VAT rates
Special Economic Zones (ZEE): designated areas to boost regional development with tax and customs incentives
Strategic supervised facilities: function as micro free zones within concession-based installations
IMMEX program: acts as a virtual free zone, allowing duty-free temporary imports for export manufacturing

How it differs from other schemes

Unlike a bonded warehouse (which is a single storage facility), a free trade zone covers an entire geographic area where multiple economic activities can take place, including manufacturing, services, commerce, and logistics — all with tax benefits.

Examples

An electronics manufacturer sets up operations in Tijuana's border strip to benefit from the reduced 20% ISR rate and 8% VAT rate.
Under the strategic supervised facility scheme, an automotive plant assembles vehicles with imported components without paying duties during the manufacturing process.
An industrial developer promotes a park in a Special Economic Zone near the Isthmus of Tehuantepec, offering tax incentives to logistics and manufacturing companies.

Related terms

Logistics

Customs Regime

The legal-customs treatment applied to goods based on their intended purpose in the country, determining importer/exporter obligations.

Logistics

Bonded Warehouse (Depósito Fiscal)

Customs regime allowing foreign or domestic goods to be stored in authorized warehouses with suspension of duty payments.

Regulations

IMMEX (Maquiladora Program)

Mexican government program that allows temporary duty-free import of goods for manufacturing, assembly, or repair for export.

Trade

Temporary Import

Regime allowing foreign goods to enter for a limited period without duty payment, with the obligation to return them abroad.

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