FOREIGN TRADE ZONES 67

All European countries appear to have recognized that the essential
function of the free port is to facilitate transshipment and reconsignment
 trade, and that manufacturing when permitted is a secondary
purpose. The operations which are essential to the success of the free
zone are those which are necessary to receive, store, and sort goods,
and to prepare and repack them for distribution to various markets.
The demands of various markets as to kind and grade or quantity of
commodities differ, as do also their requirements as to packing.
Full cargoes of certain commodities such as rice may be brought
into a free port, and there cleaned, graded, and polished. The grades
required for the home markets can be brought into customs territory,
and the remainder shipped to other markets. The refining of sugar,
washing and cleaning of wool, shelling and roasting of coffee, extraction
 of vegetable oils, tanning of skins, canning of food products, and
refining of edible oils are representative of the operations often permitted
 in free ports. At Copenhagen there is a proviso that no difficulties
 shall be offered to the manufacturer or sale of articles destined
for export or for the provisioning of vessels.
Goods entering customs territory from the free zone are generally
subject to duties on the finished products which exceed the duty
which would have been assessed on the raw materials. Hence, manufacturing
 in the free zone is attractive only when the products are
destined mainly for export. In manufactures where the raw materials
are obtained wholly or almost wholly from abroad, the free port
would offer advantages which might be sufficient to stimulate additional
 exports in competition with foreign industries and without
injury to domestic producers. The matter so greatly concerns the
welfare of our industries, however, that it would appear to be advisable
to withhold any general authorization for manufacturing in free zones.
If, after careful investigation in cooperation with the business interests
 affected, it is found that a particular industry might be established
 in the free zones of the United States, under conditions which
would avoid injury to establishments located within customs territory,
 specific authority therefor should be given by Congress. Pend-Ing
 such investigations and authorizations, it would seem best to limit
these activities within the free zone to packing, repacking, changing
of containers, cleaning, sorting, grading, mixing and dividing, and
similar operations which do not alter the nature of the commodity.
6. EFFECTS OF FREE PORTS OR FOREIGN TRADE ZONES
ON MERCHANT MARINE AND SHIPPING
IMMEDIATE ETFECTS OF ELIMINATING CUSTOMS FORMALITIES
The elimination of customs formalities as applying to especially
segregated zones for foreign trade would confer immediate advantages
On the vessels engaged in this trade as well as on the cargo. The
Immediate advantages to vessels may be briefly stated as follows: