Freight association remains unconvinced by UK freeports concept

UK freight forwarding body the British International Freight Association (BIFA) said it remains unconvinced about the benefits of freeports, despite a report yesterday by the UK parliament’s International Trade Committee and the UK government’s push to develop freeports as part of an intended post-Brexit trade boost.

The report follows the announcement last month of the locations of eight new ‘freeports’ in England following a rapid analysis of up to 40 bids, with the winning bids for the new economic zone status going to Thamesport, Felixstowe and Harwich, Humberside, Liverpool City, Plymouth, Solent, Teeside, and East Midlands Airport. A further two freeports in the devolved administrations of the UK are still to be announced.

Commenting on yesterday’s publication of the International Trade Committee’s report on UK freeports, BIFA said that the report’s findings “will do little to change the indifference to the freeports concept felt by the majority of its members”.

Robert Keen, director general of BIFA, commented: “From a purely Customs viewpoint, the benefits of freeports are marginal and provide very few new advantages compared to the existing Customs Special Procedures, which since 1 January 2021 have no longer needed a guarantee to operate. The report also acknowledges the security risks that accompany freeports and any BIFA member that is considering setting up in one of the eight freeports that has been announced to date, should bear in mind that long term storage is prohibited, and there is also a lack of clarity regarding customs regimes.”

Keen concluded: “Clearly, if the freeports scheme succeeds in increasing international trade and investment, it will be of benefit to BIFA members that handle a large percentage of the UK’s visible international trade, but that remains to be seen.”

In yesterday’s report on UK freeports by the International Trade Committee, the committee highlighted that the UK government had announced its intention to establish freeports in the UK, describing freeports as “designated areas which enjoy various concessions on customs and other benefits”.

Despite being within a country’s geographical borders, freeports are effectively outside a country’s customs borders. This means goods imported into a freeport are generally exempt from customs duties until they leave the freeport and enter the domestic market. No duty is payable if they are re-exported.

The report examines the objectives of the freeports policy, the package of measures available within the chosen sites, and the overall implementation of the policy.

While the Committee commended the government’s ambition to increase trade and investment across the UK, “it remains to be seen how successful freeports will be at achieving this objective”, the report noted.

It noted that the package of incentives associated with the UK freeports policy “distinguishes it from the traditional freeports model, and the Committee welcomes the range of measures the Government has committed to. The Committee notes that freeports focused solely on tariff benefits would be unlikely to be successful in the UK.”

Impact assessment and evaluation

As freeport locations in England have now been announced by the Government, the Committee recommended that HM Treasury promptly publish an impact assessment for the policy. This should include estimates for economic growth, increased trade and investment, and job creation, as well as an analysis of the impact on different sectors, it said.

The Committee also recommends that the Government commission a full, independent evaluation of the implementation of the freeports policy within five years of the establishment of the first freeports.

Departmental oversight

It noted that, in light of the disagreement between HM Treasury and the Department for International Trade about which department was best-placed to submit evidence to the inquiry, the Committee said it was “concerned that the necessary cross-departmental collaboration and clear accountability required to implement the policy is absent”.

The Committee recommends that the Government set out how it will ensure effective accountability and collaboration in the implementation of the freeports policy; and that the Department for International Trade has oversight of the policy, as well as the administration of freeports, to support businesses to grow internationally.

Economic displacement

On the question of economic displacement, the committee said: “It is not possible to eradicate fully the risk of economic displacement associated with freeports. To minimise it, the Government will need to be careful to distinguish between new economic activity and economic activity moving to a freeport from elsewhere.

“The Committee recommends that the Government, or the cross-Whitehall governance body, devise a framework for assessing economic activity occurring at freeports, distinguishing between that which is new and that which is relocated.”

Security risks

The Committee notes the security risks that accompany freeports and welcomes the steps taken so far to address these. “These risks will require ongoing monitoring and enforcement, and the Committee recommends that the Government set out how it will seek to do this in its response to the Report,” the committee noted.

Devolved administrations

The Committee said it supports the Government’s intention to establish a freeport in each of the devolved nations but acknowledges that this is a decision for each of the devolved governments.

The Report highlights the importance of freeports in the devolved nations not being disadvantaged due to the way in which funding is allocated. The Committee calls on HM Treasury to ensure that funding available to freeports in the devolved nations corresponds with awards in England.

Angus Brendan MacNeil MP, the Chair of the International Trade Committee, said: “We welcome the Government’s ambition to increase international trade and investment through its freeports policy. However, it remains to be seen how successful freeports will be in achieving this objective.

“Now that the Government has announced where freeports will be located in England, we are calling on HM Treasury to publish an impact assessment for the policy so that we have estimates for economic growth and job creation. The Government should also commission an independent evaluation of the implementation of the freeports policy, within five years of the establishment of the first freeports.

“Of course, the operation of freeports will continue to be of interest to my Committee, and an area we will watch closely.”