FREE PORTS. A term applied to ports, or more usually zones within ports, in which vessels can load or unload, and commercial and even manufacturing businesses can be carried on, without any active control by the fiscal authorities. In a free port no import or export duties are levied, the only charges being for services rendered, i.e., wharf dues, etc. ; it is only when goods pass from the free port area into the hinterland for consumption that import duty is payable. But when goods have been worked up in the free zone, duty is in some cases only payable on the raw material as originally imported and not on the finished product as crossing the customs frontier.
During the middle ages certain cities granted foreign merchants various privileges which approached freedom of trade. With the rise of the mercantile system, however, such restrictions were in general laid on foreign imports that some device was found necessary to prevent the entire collapse of foreign commerce. With this object certain maritime towns were exempted from the restrictions and were placed outside the customs frontier of the country in which they were situated. Thus Leghorn was made a free port in 1547 and became an important centre for the Levan tine trade, while other Italian cities were afterwards granted similar privileges. In the north the Hanse towns, including Ham burg, Bremen and Lubeck, had from very early times maintained such a system, and they became the trading centres in the north of Europe corresponding to Venice and Genoa in the Mediter ranean.
With the movement towards national unity in the first half of the 19th century, the existence of these extra-territorial units became increasingly inconvenient. Other maritime towns in the country complained of the unfair advantages possessed by the free ports, while the State considered that customs revenue was lost, not only by the duty-free facilities of the port, but by smuggling from the free port into the customs area. On the other hand, in some cases the products of the free ports had to pay duties on crossing the customs frontier, thus penalizing manufac turers in the free port as compared with competitors within the customs territory.
Thus the privileges were gradually withdrawn, although in some cases the creation of a free zone, as at Hamburg and Bre men, served an entrepot trade. Recourse was now had to the bonded warehouse system for the ordinary re-export trade, and to systems of "drawback" or "temporary importation" under which duties paid (or covered by bond) were refunded, wholly or in part, on the exportation of goods composed of dutiable imported raw materials.
In Europe the principal free ports are Copenhagen, Danzig and Hamburg.
The free port of Copenhagen was opened in Nov. 1894 and has since been extended till, in 1927, the area of the land territory is 51.8 hectares and the water area 33.4 hec tares, while the quays total 4,773 metres. The owning company undertakes the warehousing, storing and transport of goods within the limits of the port, at rates controlled by the Danish Govern ment. Merchants can rent sites for offices, warehouses and fac tories, the only stipulation being that manufacturing can only be carried out in the free port with the sanction of the minister of public works ; such sanction, however, is readily obtained, though the available space at the end of 1927 was nearly all occupied. Warehouse warrants are issued by the free port company free of stamp duty, thus facilitating the financing of the re-export trade. Owing to the installation of up-to-date machinery and appliances, it is claimed for the free port of Copenhagen that it is the quickest and cheapest port of call in northern Europe and forms the most convenient centre for the Baltic trade, consignments to the smaller ports being transhipped there and goods from those ports concentrated for shipment thence on ocean-going vessels.
The free zone at Danzig was established in 1898 to compete with Copenhagen as a centre for the Baltic trade. The existence of this free zone was continued by the Treaty of Versailles, which provided for the incorporation of the free city and territory of Danzig (q.v.), apart from this free zone, in the Polish customs union. The unloading, loading, warehousing, re packing, sorting, etc., of goods takes place within the free zone without any customs control, and there is no limit to the time the goods may remain stored. Manufacturing or any process which changes the form of the goods is, however, prohibited. Customs examination is only required if and when goods leave the free zone for the customs territory, and customs offices are situated in the free zone to facilitate the clearance of such goods. Before the World War the principal use of the free zone was the storage of excisable goods of German origin prior to export, a drawback being payable on arrival in the zone without waiting till the goods were actually shipped. A considerable portion of Polish trade passes through the zone, both inwards and outwards, while there is an important re-export trade. The existence of the free zone enables importers to send goods into Poland or to reship them, as market conditions may dictate without any customs formalities.
The free port at Hamburg is a survival of the freedom of trade which existed under the Hanseatic League. Hamburg is a sovereign State, and as such entered the German empire when this was formed in 1871, but stipulated that the port should not enter the customs union. However, in 1888, in view of the fact that goods manufactured in Hamburg had to pay duty on entering the customs area, while those from other German towns were only charged with the duty, if any, on the raw mate rials used, the city joined the customs union. At the same time, however, the larger portion of the port was fenced off and estab lished as a free port. This extra-territorial free port includes land on both banks of the Elbe and the main river itself for a con siderable distance and is surrounded by a customs line guarded by customs officials. Merchandise can be brought into the free port free of duty and customs examination, and stored, repacked, sorted, etc., at will, and then either reshipped or sent into Ger many as the conditions of the market may suggest. In Hamburg alone among German free ports is manufacturing permitted, but this is no great advantage except for ship-repairing and certain trades working almost entirely for re-export (as rice-milling and oil-milling), for which the situation of the works in the immediate neighbourhood of the waterway reduces costs. As no one is allowed to live in the free port, the transport of workers involves special arrangement. The total area of the free port is 2,5ooac. of which 1,576ac. are water.
The bulk of the trade of Hamburg passes through the free port, where freedom from customs control makes the handling of goods much simpler and speedier than under a bonded warehouse system. The issue of warehouse warrants by the free port warehouse company enables trade to be financed if necessary. At the same time the rapidity of handling and the concentration of shipping, both sea and river, makes the free port an exceptionally advan tageous centre for the transhipment trade.
Other free ports or free zones exist in Germany at Bremen, Bremerhaven, Brake, Cuxhaven, Geeste munde, Emden and Stettin. Since the War free harbours have been established in Sweden at Stockholm (1919) , Gothenburg (192 2) and Malmo (1922), while in Finland a free harbour was in course of construction at Hango in 1927. Trieste was a free port from 1719 to 1891, since when a free zone has existed. When Trieste passed to Italy this zone was continued.
Fiume was also a free port till 1891, since when a free zone has existed. When under the Peace Treaties, Fiume formed a free State, the only duties levied were on spirits, tobacco and similar luxuries, but on the establishment of the Italian sover eignty over the port, the Italian customs tariff was applied from March 1, 1924. The free zone, however, was continued, although a portion of it was allocated to Yugoslavia. Since then an exten sion has been authorized to accommodate the timber trade, the old timber harbour at Porto Barros having passed to Yugoslavia. Proposals were afoot in 1928 to provide free zones in other principal Italian ports.
Sulina at the mouth of the Danube is a free port, but consump tion duties are levied on articles of "colonial produce," etc., landed at the town for local consumption. As the town is inaccessible by land owing to marshes, smuggling into the customs territory is impossible ; all vessels proceeding up the Danube to inland ports are treated as coming from abroad.
In the British empire, Hongkong, Singapore and Penang are free ports and are important transhipment centres, while the Portuguese have a free port at Macao, off the Chinese coast.
(H. CR.)
