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UK freeports plan would have been feasible within the EU

Far from being against freeports, the European Union allows for even more benefits than a traditional freeport can offer. But if the UK will explore new possibilities and renew the concept of a free zone, it could be very interesting for Europeans

The EU is not set against the free zones, despite what those around UK prime minister Boris Johnson may have argued, says Clecat, the European association for forwarding, transport, logistics and customs services. It is still possible — it’s simply that the concept is not popular

UK Prime Minisiter Boris Johnson’s contention during the Conservative Party election campaign that European Union membership was preventing the UK establishing freeports appears to be another one of the former journalist’s dalliances with fake news.

“The EU is not set against the free zones,” said Dominique Willems, senior manager of customs and indirect taxation at Clecat, the European association for forwarding, transport, logistics and customs services. “It is still possible. However, the concept has gone a bit out of fashion in recent years.”

The UK announced this week that it was moving ahead with plans to creating a new Freeports Advisory Panel to advise the government on setting freeports up in areas such as Teesside, Aberdeen, and Belfast. The government aims to create the first new freeports after the UK leaves the EU and claims they will “turbo charge” growth and ensure towns and cities across the UK benefit from a Brexit trade boost.

Such plans would have been perfectly possible, however, should the UK have not decided to leave the EU, according to Clecat.

Modern customs legislation, including the Union Customs Code and other related legislation provided other, better possibilities to achieve the same benefits, said Mr Willems.

“Customs possibilities such as Temporary Storage or Customs Warehousing also allow the storage of goods without importing them or paying duties,” Mr Willems said.

The European Union, in fact, allows for even more benefits than a traditional freeport can offer.

“Procedures such as inward and outward processing allow, for example, for parts to be imported from outside the customs territory, incorporated into a new product and exported again without paying import duties on the parts,” Mr Willems said. “It is also possible to move goods between those facilities, even for different locations of different companies. An additional benefit in comparison to free zones, is that there is not necessarily a geographical limitation. Goods can move between storage facilities that are hundreds of miles away from each other.”

A free zone, as the name implies is a geographically limited zone of a few miles.

Nevertheless, Clecat acknowledges that the freeport concept offers some benefits.

“The benefits can be that goods are more easily transhipped within those ports,” Mr Willems said. “If goods remain in a free zone, they can enter the customs territory, remain there for a while or even be processed or traded, without paying the taxes. The main benefit is in financial liquidity. An additional benefit can be less administrative work, because, in principle, less customs declarations are needed, but this is largely theoretical as the amount of administration for a free zone can be even more complex than a regular customs procedure.”

But any benefits accruing will depend on how the UK develops its own customs legislation in the coming years.

“The more open those agreements are and the more intense the co-operation is, the less need there will be for free zones,” Mr Willem said.

He added that Clecat welcomed any improvement that leads to more trade facilitation and easier movement of goods, but warned that it did not see much benefit in the current form.

“Other, better possibilities provide the exact same benefits,” Mr Willems said. “However, if the UK will explore new possibilities and renew the concept of a free zone, it could be very interesting.”

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