In this episode of The Manufacturer podcast we sat down with Richard Parkinson, Port Director at Solent Gateway to discuss freeports and what benefits they will bring to manufacturers and the UK economic recovery pots-Covid.
This episode of The Manufacturer podcast explores all you need to know about freeports; reasons why manufacturers may want to utilise them and the wider benefits of freeports to the post-Covid UK economic recovery.
What exactly are freeports?
There are various definitions of freeports. In a traditional sense, a freeport is an area that is exempt from custom duties and tariffs, to enable added value processes to take place. And this is because duty is only paid on goods, when leaving the Freeport area as a finished product and entering the UK market. And no payment is due if goods are re-exported. So freeports in the UK, are effectively a series of government assigned, almost special economic zones, where customs rules and taxes do not apply until goods leave that specified zone. And the theoretical purpose of freeports is to encourage economic activity in the surrounding area and increase manufacturing.
What benefit are freeports to manufacturers and importers of products?
This is where it can get fairly complicated. Within a freeport zone, like the Solent freeport, for example, there are things called custom sites and there are things called tax sites. So there are different benefits associated with those. Let’s start with custom sites. And those likely to benefit the most from Freeport custom sites, will be manufacturing businesses with ambitious plans to export their products abroad. And that is because you can import raw ingredients into the ports duty free, make the finished product there and then export your goods without incurring any tariffs at all.
If you import raw material, manufacture your products in a freeport, and then your final product will be imported into the UK, the manufacturer will pay either the import duties of the component parts, or the import duties of the final product, whichever is cheaper. So there is a clear benefit when importing into the UK and manufacturing in a freeport zone. But I would say the use of the word manufacturers is interesting because it’s not just manufacturers who will benefit from custom sites. So importers of products will also benefit in that they can hold products in a freeport for more than 90 days without having to pay import duties. Whereas if stored in what you call what was called a temporary storage site, which is what most ports would be under Brexit, import duties have to be paid after 90 days, whether the goods remain in the port or leave the port. So this will benefit importers who may hold stock there for more than 90 days. And that could be importers of perhaps high value, low volume, slow moving products. And it also reduces the risk to importers that they don’t have to worry about and going over the 90 days and therefore having to pay import duties before they would want to which of course can create cash flow challenges for businesses.
Listen to the full podcast now.
For more on freeports see other recent Manufacturer articles ‘Freeports can spur the UK’s economic prospects’ and ‘Will freeports simply benefit industry giants at smaller UK manufacturer expense?’
What do you think about the reintroduction of freeports and are you planning on using them? Let us know on The Manufacturer Community
Images Courtesy Solent Gateway