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Supply Chain Vulnerabilities: Free Trade Zones

Free Trade Zones (FTZs) are special areas established within a country’s national territory to facilitate legitimate trade and attract foreign investment. Yet the same operational flexibility that supports trade also makes FTZs attractive to illicit actors. According to an OECD–EUIPO analysis, each additional FTZ increases illicit trade by approximately 5.9%. Criminal networks exploit FTZs to produce, store, repackage, transit, and transship illegal goods.

As part of its broader series on supply chain vulnerabilities, TRACIT identifies Free Trade Zones as a critical hotspot for illicit trade. Across a series of reports, TRACIT documents vulnerabilities that recur across sectors and regions, including:

• The systematic exploitation of FTZs in sectors such as tobacco, pharmaceuticals, pesticides, cosmetics, and consumer goods.
• Limited customs oversight within FTZs that enable storage, repackaging, and re-export of illicit goods.
• The routine movement of goods through multiple FTZs to obscure origin, ownership, and jurisdiction.

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Featured reports: Mitigating Illicit Trade in Free Trade Zones

Foundational report on supply chain vulnerabilities

​In TRACIT’s global report on supply chain vulnerabilities, Free Trade Zones are examined both as standalone hotspots and within multiple sector-specific chapters, demonstrating how the same governance gaps enable illicit trade across different product categories and regions.

Access the report

Illicit Trade in Free Trade Zones: Focus on UAE Zones
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The report examines how structural design features of Free Trade Zones—when paired with weak oversight—enable illicit trade at scale, using the Jebel Ali Free Zone (JAFZA) as a case study of systemic importance.

Access the report

Illicit Trade in Free Trade Zones: Focus on Central and South America
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​The report highlights how Free Trade Zones (FTZs) in Central and South America are being misused to facilitate illicit trade. With a focus on five key zones—Aruba, Belize, Chile, Curaçao, and Panama—the report identifies regulatory loopholes, weak enforcement, and a lack of transparency as major vulnerabilities. 

Access the report (English)
Acceder al informe (Español) 

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