Dear Subscriber,

A free trade zone is an area where trade barriers have been eliminated. In such selected areas goods may be landed, handled, manufactured or reconfigured, and re-exported without the intervention of the customs authorities.

Free-trade zones are usually located around major seaports or international airports and the Nigerian Government through the Nigeria Export Processing Zones Authority (The Authority) has so far licensed about 33 Free Trade Zones located in different parts of the Country. Examples are the Lekki Free Trade Zone , The LADOL Free Zone,  , Calabar Free Trade Zone etc.

In recent years, Export Processing Free Trade Zones have emerged as an effective instrument to boost the export of manufactured products as it allows for interested persons to set up industries and businesses within demarcated zones principally with the objective of exporting the goods and services manufactured or produced within the zones and to provide an internationally competitive duty free environment for export production at low costs.

REASONS TO LOCATE YOUR BUSINESS IN A FREE TRADE ZONE  

-Complete holiday from all Federal, State and Local Government Taxes, Rates, and Levies
-Duty free importation of capital goods, machinery/components, spare parts, raw materials and consumable items in the zones.
-100% foreign ownership of investments.
-100% repatriation of capital, profits and dividends.
-Waiver of all imports and export licenses.
-Waiver on all expatriate quotas.
-One-stop approvals for permits, operating license and incorporation papers.
-Permission to sell 100% of goods into the domestic market (However, when selling into the domestic market, applicable customs duty on imported raw material shall apply).
-For prohibited items in the custom territory, free zone goods are allowed for sale provided such goods meet the requirement of up to 35% domestic value addition.
-Waiver on all expatriate quotas for companies operating in the zones.
-Minimize delays in the movement of goods and services.
-Rent free land during the first 6 months of construction (for government owned zones).

REQUIREMENTS FOR LOCATING YOUR BUSINESS IN A FREE TRADE ZONE 

-Complete an application form which can be downloaded online or collect from the administration of the free zone or from NEPZA HQ in Abuja, with a non-refundable fee of US$500 or its Naira equivalent.
-Submit completed application form to the Zone Administration or NEPZA Office in Abuja along with required Project Plan/Feasibility Study. Application will be reviewed and either approved or returned with observations within five (5) working days.
-On approval of application, an Operating License (OPL) will be issued by the Free Zone Administration. Being licensed by the Authority constitutes registration and no further registration is required with the Corporate Affairs Commission (CAC). It is at this point that the Free Zone -Administration will discuss your site location and assign or reserve a space for you.
-Remit your investment capital through banks located in the zones which will in turn issue a Certificate of Capital Importation.
-Prepare your building or warehouse space. Investors who are constructing their own buildings must submit four (4) copies of full architectural drawings for approval by Zone Management according to established building codes. Built-up spaces should not exceed 70% of the leased land, and construction should start within three (3) months after execution of agreement.
-Move in and operate. Government has designed the process to be as streamlined and user friendly as possible. Some companies may have some additional procedure to follow such as obtaining permission for their foreign nationals and employees which can be done at the immigration desk offices in the free zones.

CHECKLIST FOR ESTABLISHING A FREE TRADE ZONE

For companies that intend to set up a Free Trade Zone for personal or commercial purposes, the following are the requirements:

Application letter indicating interest to establish a Free Zone, and its location in the country
Payment of USD $1,000- Processing Fee
Submission of the following documents:

-Acquisition and issuance of Certificate of Occupancy for the proposed site
-Perimeter and Topographic survey of the site
-Survey plan for the site with beacon numbers o Master plan of the proposed site (4 Copies)
-Environmental Impact Assessment report (EIA, 4 Copies)
-Detailed feasibility study (4 Copies) – study guideline:
-Brief description of the project clearly defining the scope of business and the objective for the establishment of the zone.
-Names and resume of the Promoter and detailed definition of Zone Management structure.
-Location and size of the zone as well as evidence of unencumbered title ie compensation plan/ evidence of payment for compensation for existing inhabitants and farm lands and other economic value already present on the land.
-Location of the Site
-Proximity of the proposed zone to existing infrastructures/ facilities. (E.g. Airport, Road, Rail, Seaport, Power, settlements around etc) if any. Alternatively, plans for the provision and development of support infrastructure that would attract and sustain investment in the zone.
-Inventory of existing infrastructural facilities on the proposed yard for the Zone, if any.
-Economic Viability
-Any other information such as Agreements, MOU and Concessions that will assist in the consideration of the proposal.

Upon receipt of these documents, the Authority will conduct  a due diligence to evaluate the legitimacy of the proposed venture . In the event that the due diligence report is positive, the promoters of the Free Trade Zone will be required to pay the licensing and operating fees before final approval is issued.

CONCLUSION

All over the world, Free Trade Zones have become incubators of economic growth and development with their attractive package of incentives which invariably attracts foreign direct investment and global competitiveness. It is encouraging that the Nigerian Government has introduced crucial economic reforms to ease doing business and it is suggested that special attention be paid to Free Trade Zones to position them within the ambits of modern global practices of doing business.

Read On Blog: http://ioclaw.com/doing-business-in-nigeria-what-you-need-to-know-about-free-trade-zone-scheme-2/

The content of this document is solely for information purposes only and should not in any way be construed as a legal opinion. If you require specific legal advice on any of the matters covered in this article please contact a professional.