What is an example of Free Trade Zone?

A merchant in Tijuana imports appliances under the free zone regime, paying reduced tariffs that do not apply to importers in Mexico City.

Customs

Free Trade Zone

Also known as: Free zone, Border zone, Zona libre

A designated area within a country where foreign goods can enter without payment of foreign trade taxes, under specific conditions established in customs legislation.

What Is a Free Trade Zone?

A free trade zone (zona libre) is a geographically defined area within a country where special fiscal and customs conditions apply. In Mexico, free zones have historically been located along the northern and southern border strips, allowing the import of certain goods with reduced or exempt tariffs to promote economic development in those regions.

Legal basis

Free trade zones are regulated by Mexico's Customs Law (Articles 135-145) and various presidential decrees establishing fiscal incentives for border regions, including reduced VAT and income tax rates.

Key characteristics

Reduced or exempt tariffs on certain products
Preferential VAT rate (8% on the northern border vs. 16% standard)
Simplified customs procedures for border residents
Restrictions on moving goods into the rest of the country
Residency requirements for goods entered under the free zone regime

It is important to distinguish a free trade zone from a special economic zone (SEZ) and a bonded warehouse. The free zone applies to a broad geographic region with general benefits, while bonded warehouses are specific facilities authorized to store goods under customs control.

Examples

A merchant in Tijuana imports appliances under the free zone regime, paying reduced tariffs that do not apply to importers in Mexico City.
A company in Ciudad Juárez takes advantage of the 8% VAT rate applicable in the northern border strip to reduce the cost of imported inputs.
When moving goods imported under the free zone regime to the interior of the country, the importer must pay the tax difference and comply with applicable non-tariff regulations.

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.

Logistics

Supervised Customs Facility (Recinto Fiscalizado)

An area authorized by customs authorities for the storage, custody, loading, unloading, and clearance of foreign trade goods.

Trade

Definitive Import

Customs regime allowing foreign goods to enter and remain indefinitely in the country after payment of all applicable duties and taxes.

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