Freeports
Date published:
Throughout the last year, freeports have made national news with many, in the areas in which they are to be established excited over their benefits and uses. But what exactly is a freeport, and what do they actually do?
Freeports are designated areas within the UK where different economic regulations apply that allow for tariff free trade. Freeports can have an overall area of up to 45km in diameter. They are a point of entry and exit for goods that remains within the geographical land border of the country, but not within its Customs border. The below diagram demonstrates this:
Freeports are part of the government’s levelling up agenda, as mechanism to aid regeneration by providing economic opportunities designed to encourage new trade, employment and innovation.
Where have they been announced in the UK?
The eight locations that have been granted freeport status are as follows:
- Teesside – Teesport/Hartlepool/Teesside Airport
- Thames – London Gateway/Port of Tilbury
- Freeport East – Port of Felixstowe/Harwich International Airport
- Liverpool – Liverpool Waters/Wirral Waters
- Humber – Port of Immingham/Port of Hull/Port of Grimsby/Goole
- Solent – Port of Southampton/Southampton Airport/Portsmouth International Airport
- East Midlands – East Midlands Airport
- Plymouth – Devonport
What are the benefits of freeports?
There are two parts to be aware of when discussing the benefits of freeports.
- Tax zones
- Customs zones
Tax zones
Tax sites promote inward investment into the region. Businesses set up within these zones will have the potential to benefit from business rates relief, enhanced capital allowances and structures and building allowance along with the possibility of employer NIC relief for employees in working within the freeport. Tax site benefits are scheduled to expire or be renewed after 5 years.
Customs zones
Customs zones promote manufacturing and processing activities by utilising customs regimes include the opportunities to utilise simplified customs procedures and allow the deferral or any customs duties or import VAT.
For a business to benefit from the opportunities of a tax and customs zone the designated area that they are established in must be both an authorised tax and customs zone. Within the Teesside freeport there are currently two areas that are benefit from being both customs and tax zones. Further information about the zones within Teesport can be found here.
Existing tax and customs mechanisms will be utilised to help businesses claim relief.
This means that the benefits of a business operating in a freeport customs zone can be replicated outside of a free port by utilising existing customs regimes for example, a business claiming Inward Processing Relief in Newcastle, would experience similar benefit to one based in a freeport.
In the 2021 Autumn budget it was announced that there will be a freezone exit charge when goods are released from the freezone into the UK to ensure that businesses do not gain an unintended tax advantage.
TVCA diagram showing Teesside Freeport areas.
What does using a freeport mean for my goods?
Even if you imported your goods through a freeport, once they cross the Customs border into the UK Customs zone, they are still subject to the same VAT, Duty and Tariff obligations as usual. Freeports are not free in the sense that they do away with tax obligations. Customs relief procedures can allow for the payment of reduced duty/VAT on imports, but these are only usable in certain situations. Chamber members interested in using Customs relief procedures can get in touch with us via [email protected] for additional support and information.
Business will still have to follow the correct customs procedures of international trade when utilising the freeport. Simplified declarations will be able to be used for goods being imported into a freeport zone which requires less data to be declared in comparison to a full declaration.
On export from the freeport full declarations will need to be made whether exporting from the UK or importing the goods into the UK past the UK’s customs border, information will also need to be provided to the Freeport operator to allow their records management system for the central record of all goods on site to be kept up to date and the site remain compliant.
Businesses should also be aware that utilising duty drawback may risk the ability to claim preferential origin when goods are re-exported from a freeport under existing Free Trade Agreements with some countries.
Duties may still be due on the freeport product when it is sent to the next destination, even if it is being returned to the same destination.
Laws governing what can and cannot be legally traded internationally also still stand. So do the usual licensing requirements for certain goods, as well as any trade embargos and sanctions against trading with certain countries.
Teesport
Billed as the largest of the proposed freeports areas, the Tees Valley Combined Authority (TVCA) Freeport was the first to be operational. However, details are still being finalised on how it will work.
The Chamber’s next International Trade Forum, is being held on Tuesday 12 July, we will explore the role and usage of freeports to give members a better understanding of it’s opportunity for the region.
Nolan Gray, Director of TVCA Freeport will discuss the potential of Teesside freeport for the North East, Peter Snaith of Womble Bond Dickinson, will explore how businesses can practically use and benefit from freeport policy and our host’s, AV Dawson’s Port of Middlesbrough who are within a customs zone in the freeport.
The International Trade Forum is also an opportunity for our global members to share their recent international trade experiences, successes, and challenges, receive policy and trade updates from the Chamber. Participation in these sessions helps shape Chamber policy and activity by ensuring our members needs are truly represented.