What is a freeport?
A freeport is a type of special economic zone that is designed to encourage trade and investment by offering tax and other incentives to businesses that locate there. Freeports are typically located near ports or airports, and are designed to facilitate the import, export, and processing of goods.
In the UK, freeports are designated areas that are subject to special customs procedures which allow goods to be imported, stored, and exported without the payment of tariffs. This can make freeports attractive locations for businesses that are involved in international trade, as it can help to reduce the costs and complexities associated with importing and exporting goods.
The UK government has announced plans to establish new freeports around the country as part of its post-Brexit trade strategy.
Where are there freeports in the UK?
Freeports were originally introduced on a small scale in the 1980s and operated until 2012, when their licences were not renewed. Shortly after the 2019 election, plans were announced for ten freeports to be set up by 2021 with regions bidding for free status. 40 bids were received and during the 2021 budget, then Chancellor of the Exchequer, Rishi Sunak, announced that 8 freeports would be created across the UK.
These are planned for:
● Thames (London Gateway, Port of Tilbury, Ford Dagenham)
● Freeport East (Port of Felixstowe, Harwich International Port)
● Liverpool (Liverpool Waters, Wirral Waters)
● Humber (Port of Immingham, Port of Hull, Port of Grimsby, Goole)
● Teesside (Teesport, Hartlepool, Teesside Airport)
● Solent (Port of Southampton, Southampton Airport, Portsmouth International Port)
● East Midlands (East Midlands Airport)
● Plymouth (Devonport)
In early December 2022 the Government announced Plymouth, Solent and Teesside are the first of eight English Freeports to secure full approval. Each region will receive £25m to kick-start the process.
The Liverpool City Region Freeport is a major step closer to being open for business with government approval of SSO International Freight Forwarding as the freeport’s first Customs Site Operator. This means that the Liverpool freeport is set to officially launch as soon as the government has accepted the final action points from the full business. This will then trigger the release of £25m to be spent locally.
Liverpool was one of the original 1980s freeport sites, but the new plans are more ambitious and cover a wider area. Rather than just focused on the port itself it will encompass multiple locations across the city region and beyond.
LCR Freeport’s primary customs sites are the Port of Liverpool in Seaforth and at Liverpool John Lennon Airport. It stretches to Port Salford at the other end of the Manchester ship canal.
Once fully open, it is estimated that the new freeport could create more than 14,000 new highly skilled jobs, deliver £800m of investment and generate an additional £850m of GVA for the Liverpool City Region’s economy.
SSO International Freight Forwarding and Liverpool Freeport
SSO International Freight Forwarding has been appointed as the first Customs Site Operator for Liverpool City Region Freeport. This means that SSO International Freight Forwarding will also operate a designated customs site consisting of a brand new 50,000 square foot secure warehouse in Haydock, with easy access to the M62 and M6, as well as to Liverpool and Manchester airports, and the Port of Liverpool.
This relocation to the Haydock warehouse in 2021 was supported with a £125,000 loan from the Liverpool City Region Combined Authority’s Flexible Growth Fund.
Freeport customs sites are run by an operator, otherwise known as a Customs Site Operator (CSO), who will be responsible for the security of the site and keeping records about goods moving in, around and out of the site, and activities undertaken.
A Customs Site Operator (CSO) is a company or organisation that is authorised by HM Revenue and Customs (HMRC) to operate a Customs Site Operation (CSO) within a freeport in the United Kingdom. A CSO is a specialised facility within a freeport that is responsible for handling customs procedures and processes related to the import, export, and transit of goods.
The role of a CSO at a UK freeport is to ensure compliance with customs regulations and to facilitate the smooth and efficient movement of goods in and out of the freeport. This may include activities such as preparing and submitting customs declarations, tracking the movement of goods within the freeport, and providing information and assistance to customs authorities and other stakeholders.
What is the inverted duty structure?
UK freeports will act as designated zones within the country where customs duties and taxes will be significantly reduced. This is designed to create a business-friendly environment, making it cheaper for companies to import raw materials and components. Businesses will then be able to use those materials to manufacture goods and then export the finished goods to other countries without incurring significant duties and taxes.
An inverted duty structure will be applied to facilitate this. This is a term that’s used to describe a situation where the duties and taxes that are applied to imported raw materials and components which are used in the production of goods are lower than those applied to the finished products when they are exported. This can occur when the finished goods are subject to higher duties and taxes because they are classified in a different tariff category than the raw materials and components used to produce them.
In effect, it removes some of the cost barriers that can reduce the potential return on exporting goods, making it easier for companies to expand their export operations. As a result of this inverted duty structure, freeports are likely to become highly attractive places for a business to locate their operations.
How can a business become a freeport warehouse?
Freeport warehouses offer a number of advantages for businesses involved in international trade, including reduced customs duties and taxes, simplified customs procedures, and the ability to store goods temporarily without incurring import duties or taxes. These benefits can help businesses to reduce their costs and increase their competitiveness in global markets.
An authorised freeport excise business is approved to operate a freeport excise warehouse. A freeport excise warehouse is a place of security for the deposit, and the keeping and securing of excise goods in a freeport procedure.
A freeport activity is an activity that falls within the description in regulation 3(2)(c) of the Customs (Special Procedures and Outward Processing) (EU Exit) Regulations 2018.
The application process
To be authorised as a freeport excise business and to operate a freeport excise you will need to apply to use the freeports customs special procedure. The application form must be completed and signed by a responsible person within the business, such as a sole proprietor, partner, director, or company secretary.
The application will need to include copies of plans showing details of the proposed warehouse area, as well as a copy of the health and safety risk assessment for the premises. HMRC may request further information such as business plans and may make a pre-approval visit.
For your application to be granted you will need to prove you are a fit and proper person to carry out excise activities in the freeport.
For HMRC to consider approving your freeport excise warehouse you must meet a range of criteria:
● Demonstrate a genuine need for freeport excise warehouse storage facilities in the area.
● Supply a guarantee if HMRC decides one is necessary.
● Ensure that the premises are secure.
● Ensure that the premises allow HMRC safe access to all approved areas as well as duty suspended stock.
● Ensure that the systems you use allow HMRC to carry out an audit as well as any other checks.
● Meet all of the conditions that HMRC set out in their guidance as well as any other conditions that they may impose on your approval.
How SSO International Forwarding can help
At SSO International Forwarding, we are currently developing a consultancy service to help businesses through the application process to become a freeport warehouse. We will publish more detailed information about this as soon as it is available.