free port

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free port,

port, or section of a port, exempt from customs regulations (see tarifftariff,
tax on imported and, more rarely, exported goods. It is also called a customs duty. Tariffs may be distinguished from other taxes in that their predominant purpose is not financial but economic—not to increase a nation's revenue but to protect domestic industries
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). Goods may be landed at a free port for storage and handling, and they may even be processed into manufactured goods. Duty is charged only if the goods are moved from the free port into the adjacent territory. Free ports originated in the late Middle Ages, when the burdensome tariffs charged by many petty states threatened the reemerging maritime commerce. The high tariffs later levied in the period of mercantilismmercantilism
, economic system of the major trading nations during the 16th, 17th, and 18th cent., based on the premise that national wealth and power were best served by increasing exports and collecting precious metals in return.
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 necessitated additional free ports. In the 19th cent. the danger of smuggling caused the closing of many free ports. In Europe, Copenhagen, Danzig, and Hamburg were free ports until 1939; in East Asia, Hong Kong and Singapore still are. In the United States, bonded warehouses serve some of the functions of the free port, permitting goods to be stored and processed in specially licensed warehouses if a bond exceeding the amount of the customs duties is first posted. In 1934 the Foreign Trade Zones Act authorized the establishment of free ports in the United States, but with a prohibition on manufacturing. The first American free port was opened in New York City in 1937, and others have since been added. Many international airports have free ports.

Free Port

 

a part of a port (including water basins, piers, and adjoining sites with warehouses), separated from the remaining port territory by a customs barrier. Free ports were organized in several countries during the last quarter of the 19th century for delivery and warehousing of goods conveyed by sea from abroad, for the purpose of developing international trade and creating favorable conditions for the reexportation and transit of these goods. Retail sale and consumption of goods on which duties had not been paid were not permitted in the free port; only repacking, sorting, and cleaning of the goods and conclusion of credit agreements and of wholesale trade deals for sale and resale of the foreign goods brought in were allowed. Free ports were used to im-prove the competitive position of a given port with nearby foreign ports. The organization of a free port was preceded by establishment of a so-called porto franco, with the pur-pose of concentrating marine commerce in a certain seaport that would serve as a point of delivery for goods not yet sold and which would later be conveyed to the final destination to the buyers. The lack of customs formalities in the free ports shortened the demurrage of the ships and expedited the turn-over of commercial capital.

One of the first free ports was organized in Genoa in 1876. The free ports of Hamburg (since 1882) and Trieste (since 1891) and also those of Rotterdam, Antwerp, Venice, and Alexandria were well’known. Several free ports were established in the Scandinavian countries in Copenhagen, Malmo, Göteborg, and Stockholm. Free ports were also set up in the USA, where they were called foreign trade zones. The New York free port was opened in 1937. In some free ports of the USA there are warehouses administered by the customs office, where foreign goods brought in may be stored without hindrance against the obligation of subsequent payment of customs duty. Under present conditions of international trade the free ports have lost their significance.

A. D. KEILIN

free port

[′frē ‚pȯrt]
(civil engineering)
An isolated, enclosed, and policed port in or adjacent to a port of entry, without a resident population.
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