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I was just curious as to what federal laws prevent the establishment of an economic zone similar to how Ireland's "Shannon Free Zone" operated in the past?

We already have legislation in place which allows "Foreign Trade Zones" to be established under certain conditions in which, for example, were a manufacturing company to construct a factory in an established Foreign Trade Zone, they would be charged a single tariff on the completed product instead of on the individual components imported into the Zone and utilized to manufacture that product. So we already have FTZ laws on the books (19 U.S.C. 81a-81u, 15 CFR Pt.400 and 19 CFR Pt.146) which allow, to some degree, some flexibility in regards to how tariffs are applied.

My thought was to have a "Free Zone" implemented under similar conditions as apply to Foreign Trade Zones but also with some conditions similar to how Opportunity Zones under the 2017 Tax Cuts and Jobs Act are defined (in order to ascertain that these Zones are developed in distressed communities which could benefit most), along with some of the capital gains benefits that Opportunity Zones offer as well as a means to stimulate economic growth in underdeveloped areas (potentially drawing in private investment capital).

In other words...an economic zone where tariffs are applied with significant reduction, with the same requirements relative to Foreign Trade Zones in an area which also meets some of the metrics required to be designated an Opportunity Zone. I'm certain that plenty of people would argue against such a development as taking the teeth out of the tariff increases which were put in place to drive up domestic productivity, but given that some of China's growth in the early 1980's mirrored Shannon Free Zone's legal architecture, I'd think it'd be an interesting way to compete with China using one of its own strategies.

There are plenty of companies out there who just cannot make a profit without importing some components from overseas; whether it be because EPA standards hamper the production of such components in the USA or whatever other myriad reasons...

I'm merely curious as to what specific legal hurdles would impede the creation of economic zones like the one I'm hypothetically describing.

ohwilleke
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Congress passes a law. If you are an audio visual learner, this classic PBS civics lesson explains how this is done. The Treasury Department writes some regulations (and possibly the Homeland Security Department as well) once it is passed. And voila, you have a tariff free zone.

It needs to be passed like any other law, but arguably has to be introduced in the House initially, since it pertains to taxation.

Ideally, it would be made a part of the annual Congressional budget document first, and then implemented with a law that is tailored to have revenue effects consistent with the amount of revenue impact budgeted for in the Congressional budget for the year.

If you are kind, you give the federal government bureaucrats charged with implementing it a heads up of a few months before it takes effect, so that everything goes smoothly.

As the question notes, this has been done before, so previous efforts could be used as statutory drafting models for the law that Congress would pass and the relevant regulations.

Congress has exclusive tariff authority in the U.S. system of government (for all practical purposes), so it can't be done at the state and local government, or by private individuals. Trade treaties often prohibit tariffs that are too high, but rarely prohibit tariffs that are lower than those allowed by the treaty.

ohwilleke
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The Constitution

s 99 of the Commonwealth Constitution says:

The Commonwealth shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another State or any part thereof.

In addition, s 51(3) allows Parliament to introduce uniform bounties on production or export, s 51(2) allows uniform taxation, and s 88 requires that customs and duties become uniform within 2 years of the establishment of the Commonwealth, that is, by 1 January 1903.

The High Court has held that the restriction here is on the face of the law and not on its practical effect. So, for example, a uniform tax on lithium mining is fine even if only one or two states have lithium deposits.

There is an anomaly in that since 1945 there has been a Zone Tax Offset that applies to some parts of Northern Australia. The High Court opined in obiter dicta in Commissioner of Taxation v Clyne that this was probably unconstitutional but the matter was decided on other points and so they did not strike it down; no one has challenged it since so it’s still in effect.

What about territories?

All of the terms above explicitly relate to the States; not to Territories.

It’s arguable that they don’t apply to the territories and that a “free port” within a Commonwealth territory is possible.

Dale M
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