What if a freeport's status is challenged?

On 7 December 2022, the Free Zone (Customs Site No 1 Liverpool) Designation Order 2022 (SI 2022/1294) was made designating a freeport customs site (known as a free zone) within the Liverpool City Region Freeport.

Free zones are designated areas, which benefit from a more favourable customs regime than otherwise applies. No import duty will usually be chargeable until the 'imported' goods enter into free circulation in the UK. If the goods are re-exported without entering into free circulation, no import duty is payable.

The EU has expressed concerns about the compatibility of these free zones with the EU-UK Trade and Cooperation Agreement, even though commentators do not think free zones will have a material impact on trade.  The UK’s independent spending watchdog, the Office for Budget Responsibility, has said that freeports were likely to cost the Treasury £50 million to fund tax breaks and would have little positive impact on the economy.

Yet the EU had a concern last year about the UK directing subsidies to new offshore wind farms that bought turbines partly made in the UK.  The EU took the matter to the WTO, but then dropped the case when the UK 'clarified' its position.  So the EU's concerns might result in changes that make free zones less attractive.

Those investing in free zones should ensure this risk of 'row-back' on the benefits they are seeking is included in their legal risk analysis.

The European Commission will raise its concerns over freeports in the trade partnership committee meeting


This information is for general information purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. Please contact us for specific advice on your circumstances. © Shoosmiths LLP 2024.



Read the latest articles and commentary from Shoosmiths or you can explore our full insights library.