An area of a country treated as outside its customs territory for import duties and taxes, where goods can be stored, processed and re-exported without paying duty.

Do goods in a UAE free zone pay customs duty?

Not while they stay in the zone or are re-exported. Goods moved into the UAE mainland become subject to customs duty — in Dubai generally 5% of the CIF value — under a customs declaration.

Is a US foreign-trade zone the same as a free zone?

It works on the same principle: goods in the zone are outside US customs laws until they enter US customs territory, when duty applies.

Term

Free zone

A free zone is an area inside a country that customs treats as outside its customs territory for import duties and taxes: goods can enter, be stored, processed and re-exported without paying duty. Duty falls due when goods leave the zone for the local market — in Dubai, generally 5% of the CIF value.

Also called free trade zone, FTZ, foreign-trade zone, UAE free zoneUpdated 12 October 2026

The definition

The World Customs Organization's Revised Kyoto Convention defines a free zone as part of a country's territory where goods are generally regarded, for import duties and taxes, as being outside the customs territory. National law then sets the duty on goods taken from the zone into home use.

In the UAE

Goods imported into a UAE free zone pay 0% customs duty, and become subject to duty only if moved into the mainland market (UAE government portal).
In Dubai, duty is generally 5% of the CIF value — 50% for alcohol and 100% for cigarettes — and a free-zone company selling to the mainland must file a customs declaration for it.
Jebel Ali Free Zone (Jafza) reports more than 11,000 businesses and USD 190 billion of trade in 2024, with 0% import and re-export duties.

In the US: foreign-trade zones

US law works the same way: merchandise may enter a foreign-trade zone without being subject to the customs laws, and becomes subject to them when it is sent into US customs territory.

Worked example: re-export or local sale

A distributor in a Dubai free zone imports goods with a CIF value of USD 1,000,000, re-exports 70% to other markets and sells 30% into the UAE mainland.

Duty = 5% × (30% × 1,000,000) = USD 15,000 · Imported to the mainland first: 5% × 1,000,000 = USD 50,000

The zone defers duty to the point of local sale and removes it from re-exports — it does not remove it from goods sold locally.

The mistake people make

Treating anything in a free zone as duty-free. Goods sold into the local market pay duty as they leave the zone, under a declaration filed for that sale; the saving is on what is re-exported or held, not on what is sold next door.

FAQ

Free zone: common questions

What is a free zone?: An area of a country treated as outside its customs territory for import duties and taxes, where goods can be stored, processed and re-exported without paying duty.
Do goods in a UAE free zone pay customs duty?: Not while they stay in the zone or are re-exported. Goods moved into the UAE mainland become subject to customs duty — in Dubai generally 5% of the CIF value — under a customs declaration.
Is a US foreign-trade zone the same as a free zone?: It works on the same principle: goods in the zone are outside US customs laws until they enter US customs territory, when duty applies.