05 Sep Colombia’s flexible legal frame in Free Trade Zones operations
Colombia is categorized by the ANDI (National Association of Colombian Businessmen) as the country with most free trade zones in south America, 28 permanent free zones and 62 special permanent free zones, with a total of 100 free trade zones (FTZ) functioning throughout the country. During 2016, it was estimated that 817 companies operate in FTZ.
The main sectors of activities found in free zones under Colombia’s legislation are:
- Industrial with a 53% of the total share
- Services with 34%
- Agro-industry sector with 13%
According to the ANDI, 2,432 million USD were registered in imported goods and 2,108 million USD for exports, generating 62,732 direct jobs and 164,742 indirect jobs per year during 2015 and 2016. The data presented above shows that Colombia is a very competitive country in different economic areas. For this reason, Colombian legislation has classified free trade zones as economic development platforms to attract investment and generate employment.
The special economic areas have been created with three main purposes:
- To generate development by promoting competitiveness in the regions where they are established.
- To develop highly productive and competitive industrial processes under the concepts of security, transparency, technology, clean production and good business practices.
- To promote economies of scale within the country by simplifying procedures for trade in goods and services.
Colombian legislation has created a meticulous legal system describing specifically the processing in free zones. Decree 2147 of 2016 has permitted partial processing, that is when the operator user authorizes the temporary exit of goods (and services) such as raw materials, inputs and intermediate goods to the rest of the territory, with the ultimate purpose of taking part of the industrial process in the rest of the national customs territory.
While the partial processing is executed, the user in a FTZ can manufacture only 40% of the total product outside the free zone headquarters. Once the departure of the good to the national custom territory is authorized, the company must inform the time the good would be outside the free zone for its production to the customs authority of the FTZ jurisdiction, this time must not exceed six (6) months.
It is very important to mention that the re-entry of raw materials, inputs and intermediate goods that were authorized for the temporary exit, does not constitute export.
The partial processing is an excellent mechanism to make production of raw materials more flexible, even reducing the prices to the final consumer. In addition, it generates indirect jobs outside the FTZ and reaches small independent micro-entrepreneurs who specialize in jobs that companies in free trade zones do not develop.
With the partial processing and operations mechanism implemented in the decree 2147 of 2016, the purpose of the government is to increase the productivity and competitiveness of the free zones in Colombia and improve external sales.
To conclude, investment in FTZ in Colombia has many advantages for investors. Also, two of the Colombian FTZ have been awarded as the best Free trade zones in Latin América in 2017, these are Bogotá Free trade zone and Santander Free trade zone.
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Jose A. Abusaid